Calcutta High Court
Damodar Valley Corporation vs Reliance Infrastructure Limited on 29 September, 2023
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IN THE HIGH COURT OF JUDICATURE AT CALCUTTA
ORIDINARY ORIGINAL CIVIL JURISDICTION
ORIGINAL SIDE
RESERVED ON: 09.08.2023
DELIVERED ON: 29.09.2023
PRESENT:
THE HON'BLE MR. JUSTICE SHEKHAR B. SARAF
AP 40 of 2020
DAMODAR VALLEY CORPORATION
VERSUS
RELIANCE INFRASTRUCTURE LIMITED
Appearance:
Mr. Ratnanko Banerjee, Sr. Adv.
Ms. Vineeta Meharia, Adv.
Mr. Amit Meharia, Adv.
Ms. Urmila Chakraborty, Adv.
Mr. Kanishk Kejriwal, Adv.
Ms. Paramita Banerjee, Adv.
Ms. Subika Ray, Adv.
Mr. Sayan Dey, Adv. ..... for the Petitioner
Mr. Harish Salve, Sr. Adv.
Mr. J.J. Bhatt, Sr. Adv.
Mr. Tilak Bose, Sr. Adv.
Mr. Anuj Singh, Adv.
Ms. Anjali Chandurkar, Adv.
Mr. Atanu Roychaudhrui, Adv.
Mr. Paritosh Sinha, Adv.
Ms. Shreyashee Das, Adv.
Mr. Rohit Banerjee, Adv.
Mr. Pushan Majumdar, Adv. ..... for the Respondent/Claimant
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INDEX
Serial
Content Paragraph No. Page Nos.
No.
1 Facts 2 4 to 10
2 Issues Framed By The 4 10 to 26
Arbitral Tribunal
3 Contentions By The Petitioner 5 26 to 41
4 Contentions By The 6 42 to 66
Respondent
5 Analysis and Conclusion 7 66 to 148
6 Scope Of Interference Under 7.1 66 to 80
Section 34 Of The Act
7 Patent Illegality - 'On The 7.2 80 to 90
Face of The Award'
8 1940 Act and 1996 Act 7.3 91 to 100
9 Discussion On Price 7.4 100 to 117
Escalation
10 Letter Dated February 03, 7.5 118 to 139
2017
11 Severance Of Arbitral Awards 7.6 139 to 148
12 Issues No. 1,3,4,5 and 6 - 8 148 to 157
Land - 150 to 151
BRH - 152 to 153
NDCT - 153 to 154
Insulation Material 154 to 155
Coal And Water - 155 to 156
Other Issues On Delay - 156 to 157
13 Issues No. 2 Read With 12, 9 157 to 158
13, And 14
Page 2 of 255
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Serial
Content Paragraph No. Page Nos.
No.
14 Issues No. 7,8,9,10, And 11 10 159
15 Issue No. 15 11 159 to 160
16 Issue No. 16 12 160 to 161
17 Issue No. 17 13 161 to 163
18 Issue No. 18 14 163 to 165
19 Issue No. 19 15 165 to 166
20 Issue No. 20 16 166
21 Issue No. 21 17 167 to 168
22 Issue No. 24 18 168 to 195
23 Issue No. 25 19 195 to 197
24 Issue No. 27 20 198 to 225
25 Issue No. 36 21 225 to 233
26 Issue No. 37 22 233 to 234
27 Issues No. 38 And 39 23 234
28 Issues No. 40 And 41 24 235
29 Issue No. 42 25 236
30 Issues No. 43 and 44 26 237
31 Issue No. 45 27 237 to 238
32 Issues No. 46 And 48 28 238 to 239
33 Issues No. 35 And 47 29 239 to 240
34 Issue No. 49 30 240
35 Issue No. 50 31 241
Page 3 of 255
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Serial Content Paragraph No. Page Nos.
No.
36 Principles 33 242 to 248
37 Epilogue 34 249 to 253
38 Conclusion and Directions 35 253 to 255
JUDGMENT
Shekhar B. Saraf, J.:
1. The award debtor Damodar Valley Corporation (hereinafter also
referred to as the 'petitioner') has preferred this application
being A.P. 40 of 2020 under Section 34 of the Arbitration &
Conciliation Act, 1996 (hereinafter referred to as 'the Act')
against the arbitral award dated December 21, 2019 passed by
the arbitral tribunal comprising of Mr. Ganendra Narayan Ray
(Presiding Arbitrator), Mr. Indrajit Chatterjee (Co-Arbitrator),
and Mr. Ronojit Kumar Mitra (Co-Arbitrator). The award
holder/claimant in the instant application is Reliance
Infrastructure Limited (hereinafter also referred to as the
'respondent').
2. Facts
2.1 I have outlined the facts leading to the instant application
below:-
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2.1.1 The award debtor is a statutory corporation constituted under
the provisions of the Damodar Valley Corporation Act, 1948.
The award holder is a company within the meaning of the
Companies Act, 2013.
2.1.2 A Notice Inviting Tender (NIT) was floated by the award debtor
on May 18, 2007, as part of the process of international
competitive bidding for the construction of Phase - 1 of a power
plant comprising two units of 600 MW each near Raghunathpur
in the district of Purulia, West Bengal.
2.1.3 Pre-bid meetings were held by and between the award debtor
and various bidders, including the award holder. Eventually,
the award holder remained the only surviving bidder and
submitted a composite proposal/bid for the said work. The
award debtor accepted the said bid of the award holder and
subsequently, a Letter of Acceptance (LoA) was issued by the
award debtor on December 11, 2007. The total contract price as
stipulated included a rupee component of INR 2271.70 crores
(Rupees two thousand two hundred seventy-one crores and
seventy lakhs only) and a Euro component of €271.895 million.
2.1.4 The date of commencement of work ('Zero Date') was slated to
be December 14, 2007. Post the Zero Date, parties were to take
certain steps towards the completion of the said project. Three
Letters of Intent (LoIs) were issued to the respondent in respect
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of the said project - i) For supply of indigenous equipment; ii)
For supply of foreign equipment (by Shanghai Electric
Corporation, China), and iii) For rendering of services in respect
of the construction of the said power plant by the award holder.
2.1.5 Three detailed contracts in respect of the said power plant were
executed between the award holder and the award debtor on
December 6, 2008. The Zero date for both the Units was
stipulated to be December 14, 2007 and the Completion Date
for Unit No. 1 was stated to be November 14, 2010 and for Unit
No. 2 to be February 14, 2011. It is to be noted that both the
Units could not be completed within the stipulated period.
During the period of construction which continued beyond the
stipulated period, applications were made by the respondent for
extensions. The same were granted by the petitioner, without
prejudice, for completion of its work. Finally, Unit No. 1 was
handed over by the respondent on May 15, 2015 whereas Unit
No. 2 was handed over on February 23, 2016.
2.1.6 The award holder requested for payment of the outstanding
dues as well as return of bank guarantees along with other
consequential reliefs. In response, vide its letter dated February
3, 2017, the award debtor sought to levy Liquidated Damages
on the award holder by attributing a delay of 468 days in
completion of Unit No. 2 only.
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2.1.7 By a letter dated April 3, 2017, the award holder requested the
award debtor to nominate an adjudicator under Clause 6.1 of
the General Conditions of Contract ('GCC') read with Clause 1 of
the Special Conditions of the Contract ('SCC'). An adjudicator
was appointed, but the said adjudication process could not
resolve the disputes between the parties. Subsequently, vide
letter dated June 15, 2017, the award holder invoked
arbitration in terms of Clause 6.2 of the GCC and nominated
one arbitrator. The award debtor vide its letter dated July 12,
2017 also appointed one arbitrator and thereafter, the two
arbitrators, so appointed, requested the Presiding Arbitrator to
constitute the Tribunal. The Presiding Arbitrator constituted the
Tribunal and intimated the constitution to the parties by a letter
dated August 5, 2017.
2.1.8 Amongst the issues framed by the arbitral tribunal, the award
holder did not press issues no. 22, 29, 31 to 33 in the arbitral
proceedings. Similarly, the award debtor did not argue issues
no. 5(e), 6(c) and 6(d). Hence, these issues were not dealt with
by the arbitrators.
2.1.9 On December 21, 2019, the arbitral tribunal published the
award wherein the following issues were awarded in favour of
the award holder:-
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a. In Issues No. 2 and 12 to 14, INR 137,18,67,733/- and
€13,791,641 with simple interest @ 10% p.a. from August
21, 2017 till the date of award was awarded in the favour of
the claimant.
b. In Issue No. 15, INR 1,84,51,773.80/- with simple interest
@ 10% p.a. from February 20, 2017 till the date of award
was awarded in favour of the claimant.
c. In Issue No. 16, INR 4,28,30,000/- with simple interest @
10% p.a. from November 11, 2016 till the date of award was
awarded in favour of the claimant.
d. In Issue No. 17, INR 3,83,32,062.63/- with simple interest
@ 10% p.a. from February 20, 2017 till the date of award
was awarded in the favour of the claimant.
e. In Issue No. 18, INR 12,00,000/- with simple interest @
10% p.a. from February 09, 2016 till the date of award was
awarded in the favour of the claimant.
f. Issue No. 19, INR 6,10,000/- with simple interest @ 10%
p.a. from November 28, 2015 till the date of award was
awarded in the favour of the claimant.
g. In Issue No. 20, INR 28,12,832/- with simple interest @
10% p.a. from November 28, 2015 till the date of award
was awarded in the favour of the claimant.
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h. In Issue No. 21, INR 33,20,000/- with simple interest @
10% p.a. from November 28, 2015 till the date of award
was awarded in the favour of the claimant.
i. In Issue No. 23 INR 12,04,88,400/- with simple interest @
10% p.a. from August 26, 2010 till the date of award was
awarded in the favour of the claimant.
j. In Issue No. 24, INR 183,40,27,812/- and €4,767,801.75
with simple interest @ 10% p.a. from August 23, 2017 till
the date of award was awarded in the favour of the
claimant.
k. In Issue No. 25, INR 29,03,09,091.86/- with simple interest
@ 10% p.a. from August 23, 2017 till the date of award was
awarded in the favour of the claimant.
l. In Issue No. 27, INR 126,10,84,834/- and €9,750,000 with
simple interest @ 10% p.a. from August 23, 2017 till the
date of award was awarded in the favour of the claimant.
m. In Issue No. 28, INR 2,49,89,529/- without any interest
was awarded to the claimant.
n. In Issue No. 50, the petitioner was directed to release all
the BGs of the Claimant within a month from the date of
award. In default, simple interest @ 15% p.a. till realization
of the entire sum.
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2.1.10 Only one counterclaim of the award debtor was allowed:-
a. In Issue No. 42, the award debtor was permitted to deduct
a sum of INR 6,00,00,000/- (Six crores only) from the
amount payable by the award debtor to the award holder.
3. Being aggrieved by the aforesaid arbitral award dated December
21, 2019 the award debtor filed this application on January 21,
2020 under Section 34 of the Act praying for setting aside of the
entire award.
4. Issues Framed By The Arbitral Tribunal
4.1 Having perused the arbitral award, I have reproduced the issues
framed and dealt with by the arbitral tribunal below:-
Issue No. 1:- Whether the Claimant is entitled to extension of
time for completion of the Contract, if yes, to what extent.
Issue No. 2:- If the answer to Issue No. 1 is in the affirmative,
(i) whether the Claimant is entitled to a declaration that the
Award Debtor cannot withhold any amount whatsoever
towards purported levy of Liquidated Damages and (ii) whether
the Award Debtor is liable to pay to the Claimant INR
137,10,67,733/- and €13,791,641/- or any other amount as
claimed by the Claimant as per Particulars of Claim.
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Issue No. 3:- Whether the Claimant is liable for breach of
contract for each of the following: a) Breaching the minestrone
based completion schedule; b) Executing the work with defects;
c) Wilfully delaying the rectification of the defective works; d)
Refusing to rectify the defective works.
Issue No. 4:- Whether the Claimant delayed the completion of
works as per the completion schedule despite land being
available for completion of such works on the land handed over
by the Award Debtor to the Claimant.
Issue No. 5:- Whether the Claimant caused delay in project
execution on account of, inter alia, each of the following
activities at site:-
a) Delay in lifting of boiler drums;
b) Delay in segregation of usable insulation material from
unusable insulation material;
c) Delay in replacement of damaged insulation material;
d) Delay in achieving the hydro test milestone;
e) Delay in submission of proper drawings1;
f) Delay in project commissioning.
1 This sub- issue was not pressed before the arbitral tribunal and hence, the Court has not
adjudicated the same.
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Issue No. 6:- Whether the Claimant committed breach of
contract by executing inter alia each of the following works
with defects:-
a) Supplying defective bottom ring headers at the site;
b) Causing damage to insulation material at site by improper
storage;
c) Erecting defective Turbine Generator foundation bolts in
deviation of approved drawings2;
d) Installing defective Motor Driven Boiler Feed Pump3;
e) Constructing the Natural Draft Cooling Tower for Unit No. 1
in serious deviation from the contract;
f) Installing defective Electrostatic Precipitators at site.
Issue No. 7:- Whether the Claimant caused delay in the
rectification of the aforesaid defects, thereby causing breach of
contract.
2 This sub- issue was not pressed before the arbitral tribunal and hence, the Court has not
adjudicated the same.
3 This sub- issue was not pressed before the arbitral tribunal and hence, the Court has not
adjudicated the same.
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Issue No. 8:- Whether the Claimant caused breach of contract
by refusing to replace the damaged insulation material with
material as specified under the Contract.
Issue No. 9:- Whether the aforesaid acts and/or omissions on
the part of the Claimant constitute criminal negligence and/or
wilful misconduct.
Issue No. 10:- Whether the Claimant caused breach of
contract by delaying the sectional completion of the various
activities which were milestones under the Contract.
Issue No. 11:- Whether the Claimant has established any just
cause for entitlement to any extension of time under the
Contracts for any particular project milestone under the L-1
and/or L-2 Schedule? If so, what extension of time is the
Claimant entitled to for such particular milestone activity
under the L-1 and/or the L-2 Schedule in the Contract.
Issue No. 12:- Whether the Award Debtor is entitled to a
declaration to recover Liquidated Damages to the tune of INR
212.80 crores in terms of Section 9 of the SCC.
Issue No. 13:- Whether the Award Debtor is entitled to an
award for recovery of a sum of INR 212.80 crores along with
interest.
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Issue No. 14:- Whether the Award Debtor is entitled to set-off
its Liquidated Damages claim of INR 212.80 crores against the
retention money under the Contract.
Issue No. 15:- Whether the additional site works carried out by
the Claimant after Completion of Facilities ('hereinafter referred
to as COF') set out by the Claimant in paragraph 19.2 is
beyond its scope as specified in the Contract.
If so, whether the Claimant is entitled to the said amount of
INR 2,86,80,183.40/- as per Particular of Claim annexed as
Annexure 'J' to the SOC with further interest on the sum of
INR 2,65,75,554.27/- from August 1st, 2017 till payment or
realization.
Issue No. 16:- Whether the additional bays in the switchyard
provided by the Claimant as set out in paragraphs 19.3 is
beyond its scope as specified in the Contract.
If so, whether the Claimant is entitled to the said amount of
INR 5,79,35,260.93/- as per Particulars of Claim annexed as
Annexure 'K' to the SOC with further interest on the sum of
INR 5,13,96,000/- from August 1, 2018 till payment or
realization.
Issue No. 17:- Whether the expenses incurred for additional
lead to dispose of excavated earth by the Claimant as set out in
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paragraph 19.4 is beyond its scope as specified in the
Contract.
If so, whether the Claimant is entitled to the said amount of
INR 5,05,80,754.77/- as per Particulars of Claim annexed as
Annexure 'L' to the SOC with further interest on the sum of
INR 5,51,98,171.20/- from August 1, 2017 till payment or
realization.
Issue No. 18:- Whether the expenses incurred for extra work of
various system of the main plant package by the Claimant as
set out in paragraph 19.5 is beyond its scope as specified in
the Contract.
If so, whether the Claimant is entitled to the said amount of
INR 25,15,66,262.38/- as per Particulars of Claim annexed as
Annexure 'M' to the SOC with further interest on the sum of
INR 19,88,17,092/- from August 1, 2017 till payment or
realization.
Issue No. 19:- Whether the expenses incurred for supply of Air
Handling Unit (AHU) by the Claimant as set out in paragraph
19.6 is beyond its scope as specified in the Contract.
If so, whether the Claimant is entitled to the said amount of
INR 9,52,562.63/- as per Particulars of Claim annexed as
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Annexure 'N' to the SOC with further interest on the sum of
INR 7,32,000/- from August 1, 2017 till payment of realization.
Issue No. 20:- Whether the expenses incurred on account of
additional mandatory spares by the Claimant as set out in
paragraph 19.7 is beyond its scope as specified in the
Contract.
If so, whether the Claimant is entitled to the said amount of
INR 43,92,456.80/- as per Particulars of Claim annexed as
Annexure 'O' to the SOC with further interest on the sum of
INR 33,75,398.40/- from August 1, 2017 till payment or
realization.
Issue No. 21:- Whether the expenses for providing advanced
technology relays in switchgear by the Claimant as set out in
paragraph 19.8 is beyond its scope as specified in the
Contract?
If so, whether the Claimant is entitled to the said amount of
INR 51,84,439.23/- as per Particulars of Claim annexed as
Annexure 'P' to the SOC with further interest on the sum of
INR 39,84,000/- from August 1, 2017 till payment of
realization.
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Issue No. 224:- Whether the expenses for providing Fire
Detection and Protection System as set out in paragraph 19.9
is beyond its scope as specified in the Contract.
If so, whether the Claimant is entitled to the said amount of
INR 5,48,40,907.40/- as per Particulars of Claim annexed as
Annexure 'Q' to the SOC with further interest on the sum of
INR 4,11,60,000/- from August 1, 2017 till payment or
realization.
Issue No. 23:- Whether there has been a delay in
disbursement of advance towards 10% of the Contract Price in
foreign currency, i.e. Euros being the difference in the
conversion rate existing on the date on which the payment was
due and the date on which payment was made.
If so, whether the Claimant is entitled to an amount of INR
27,08,77,730/- as per Particulars of Claim annexed as
Annexure 'R' to the SOC with further interest on the sum of
INR 12,04,88,400/- from August 1, 2017 till payment or
realization.
Issue No. 24:- If the answer to Issue No. 1 is in the affirmative
and if the delay is held not to be on account of the Claimant,
whether the Claimant is entitled to an increase in the price of
4 This issue was not pressed before the arbitral tribunal and hence, the Court has not
adjudicated the same.
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the Contract by reason of extension of the period for achieving
COF of Units 1 and II.
If so, whether there has been an increase in the price of the
Contract.
If so, whether the Claimant is entitled to such increase in cost
being a sum of INR 437,53,01,238/- and €9,995,875 as per
Particulars of Claim annexed as Annexure 'S' to the SOC with
further interest on the sum of INR 251,63,59,768/- and
€6,357,069 from August 1, 2017 till payment of realization.
Issue No. 25:- Whether the Claimant is entitled to any
additional costs towards construction of Ash Dyke.
If so, whether the Claimant is entitled to the said amount of
INR 70,65,06,124.50/- on account of additional cost as per
Particulars of Claim annexed as Annexure 'T' to the SOC with
further interest on the sum of INR 29,71,07,396.31/- from
August 1, 2017 till payment or realization.
Issue No. 26:- Whether there has been a delay in payment of
the Claimant's bills by the Award Debtor.
If so, whether the Claimant is entitled to interest on such
delayed payment of its bills.
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If so, whether the Claimant is entitled to a sum of INR
36,39,16,953/- and €3,428,739 on account of interest on
delayed payment of the Claimant's bills as per Particulars of
Claim annexed as Annexure 'U' to the SOC.
Issue No. 27:- If the answer to Issue No.1 is in the affirmative
and if the delay is held not to be on account of the Claimant,
whether the Claimant is entitled to overstay compensation for
such duration beyond CoF as well as completion of PG Tests.
If so, whether the Claimant is entitled to a sum of INR
210,64,59,626 and €21,000,088 on account of overstay by the
Claimant at the Project Site as per Particulars of Claim
annexed as Annexure 'V' to the SOC with further interest on
the sums of INR 168,14,46,445/- and €13,000,000 from
August 1, 2017 till payment or realization.
Issue No. 285:- If the answer to Issue No. 1 is in the affirmative
and if the delay is held not to be on account of the Claimant,
whether the Claimant is entitled to a sum of INR
32,91,36,859/- and INR 2,49,89,529/- on account Extension
of
5 This issue has not been argued in this application and hence, not dealt by this Court.
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(1) Securities provided under the Contract, i.e., Advance Bank
Guarantee ('ABG'); Contract performance Bank Guarantees
('CPBG'); JDU Bank Guarantees ('JDUBG'), and
(2) Insurance Policies taken out by the Claimant during the
execution of the Contract as per Particulars of Claim annexed
as Annexure 'W' and W-1 to the SOC with further interest on
the sums of INR 27,46,36,121/- from August 1,2017 till
payment or realization.
Issue No. 296:- If the answer to Issue No. 1 is in the affirmative
and if the delay is held not to be on account of the Claimant,
whether the Claimant is entitled to a sum of INR 2,52,47,095/-
on account of extra expenditure incurred by the Claimant
under the West Bengal Tax on Entry of Goods into Local Areas
Act, 2012 w.e.f. April 1, 2012 as per Particulars of Claim
annexed as Annexure 'X' to the SOC with further interest on
the sums of INR 2,01,30,627/- from August 1, 2017 till
payment or realization.
6 This issue was not pressed before the arbitral tribunal and hence, the Court has not
adjudicated the same.
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Issue No. 307:- Whether the Claimant is entitled to expenses
incurred on account of Fuel consumed for Reliability Trial Run
('RTR').
If so, whether the Claimant is entitled to a sum of INR
9,44,81,950.68/- for such fuel expenses as per Particulars of
Claim annexed as Annexure 'Y' to the SOC with further interest
on the sum of INR 7,69,50,000/- from August 1, 2017 till
payment or realization.
Issue No. 318:- Whether the Claimant is entitled to expenses
on account of idling of resources as a result of Stoppage of
works.
If so, whether the Claimant is entitled to a sum of INR
59,75,304.80/- on account of such expenses from the Award
Debtor as per Particulars of Claim annexed as Annexure 'Z' to
the SOC with further interest on the sum of INR
46,16,42,649.65/- from August 1, 2017 till payment or
realization.
Issue No. 329:- If the answer to Issue No. 1 is in the affirmative
and if the delay is held not to be on account of the Claimant,
7 This issue has not been argued in this application and hence, not adjudicated by this
Court.
8 This issue was not pressed before the arbitral tribunal and hence, the Court has not
adjudicated the same.
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whether the Claimant is entitled to interest charges on account
of delayed release of COF amounts as a result of extension of
Contract duration.
If so, whether the claimant is entitled to a sum of INR
65,95,27,000/- and €10,561,071 from the Award Debtor on
account of such interest charges as per Particulars of claim
annexed as Annexure '"AA"" to the SOC.
Issue No. 3310:- If the answer to Issue No. 1 is in the
affirmative and if the delay is held not to be on account of the
Claimant, whether the Claimant is entitled to interest charges
on account of delayed release of Retention amount payable on
issuance of Operational Acceptance Certificate (hereinafter
referred to as 'OAC') as a result of extension of Contract
duration.
If so, whether the Claimant is entitled to a sum of INR
71,99,73,461/- and €11,378,515 on account of such interest
charges as per Particulars of Claim annexed as Annexure 'AB'
to the SOC.
9 This issue was not pressed before the arbitral tribunal and hence, the Court has not
adjudicated the same.
10 This issue was not pressed before the arbitral tribunal and hence, the Court has not
adjudicated the same.
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Issue No. 3411:- If the answer to Issue No. 1 is in the
affirmative and if the delay is held not to be on account of the
Claimant, whether the Claimant is entitled to expenses
incurred towards Extended Warranty and Guarantee in course
of extension of Contract duration.
If so, whether the Claimant is entitled to a sum of INR
74,14,93,994/- on account of such expenses as per Particulars
of Claim annexure 'AC' to the SOC with further interest on the
sum of INR 59,99,11,764/- from August 1, 2017 till payment
or realization.
Issue No. 35:- Whether the Claimant is entitled to any further
relief.
Issue No. 36:- Whether any Claim made by the Claimant is
barred by limitation.
Issue No. 37:- Whether any of the claims of the Claimant is
not arbitrable as contended by the award debtor in the SoD.
Issue No. 38:- Whether the Award Debtor is entitled to a sum
of INR 2423.27 crores towards additional interest paid to the
financial institutions/banks due to delayed completion of
works attributable to the Claimant.
11 This issue has not been argued in this application and hence, not dealt by this Court.
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Issue No. 39:- Whether the Award Debtor is entitled to a sum
of INR 318.05 crores being interest on such amount of INR
2423.27 crores from commercial operation date till February
16, 2018 being the finance cost incurred by the Award Debtor
in order to fund the additional interest paid on account of
Counter Claim II-a as reproduced above.
Issue No. 40:- Whether the Award Debtor is entitled to a sum
of INR 5781.81 crores towards loss of revenue from tariff due
to delay in completion of the project by the Claimant, delayed
execution of works and defective works carried out by the
Claimant.
Issue No. 41:- Whether the Award Debtor is entitled to a sum
of INR 1085.17 crores towards financial losses suffered by the
Award Debtor due to the revenue loss as mentioned in Issue
No. 40 above.
Issue No. 42:- Whether the award debtor is entitled to recover
the amount paid to the claimant to the tune of INR 44.71
crores in terms of the Contract for specific works/supplies
which was not done by the Claimant in accordance with the
terms of Contract? Whether the Award Debtor is entitled to set
off the said claim against the retention money retained by it.
Issue No. 43:- Whether the Award Debtor is entitled to a sum
of INR 84.93 crores towards loss of interest income for
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advances made to the Claimant for works to be completed
within the completion schedule, which the Claimant did not
complete.
Issue No. 44:- Whether the Award Debtor is entitled to a sum
of INR 4.39 crores on account of exchange rate loss on Euro
element of Contract Price due to the Claimant's delay in
completing the work.
Issue No. 45:- Whether the Award Debtor is entitled to a sum
of INR 688 crores on account of revenue loss from April 1,
2016 caused due to lower generation of power for defective
Electrostatic Precipitator in both units 1 and 2 installed by the
Claimant.
Issue No. 46:- Whether the Claimant is entitled to any interest
on its Counter Claim.
Issue No. 47:- What order?
Issue No. 48:- What costs?
Issue No. 49:- Whether the Claimant is entitled to a
declaration that the OAC has been issued as on April 13, 2017
and May 19, 2017 being the respective dates of notice being
given by the Claimant to the Award Debtor under Clause
25.2.4, GCC.
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Issue No. 50:- Whether the Claimant is entitled to an order
and direction directing the Award Debtor to release the Bank
Guarantees (BGS) furnished by the Claimant as per statement
submitted by the Claimant along with the amended SOC.
5. Contentions by the Petitioner
5.1 Mr. Ratnanko Banerjee, Senior Advocate and Ms. Vineeta
Meharia, Advocate appearing for the award debtor have made
the following arguments:-
5.1.1 The arbitral tribunal found that it is impossible to apportion
specific delay to one party with respect to Unit No. 2. Without
such apportionment, absolute liability could not be forced upon
the petitioner. This is a fundamental error and patent illegality
appearing on the face of the award.
5.1.2 The arbitral tribunal relied on the letter dated February 3, 2017
to come to the conclusion that the petitioner accepted its delay
with respect to Unit No. 1 and only attributed a delay of 468
days with respect to Unit No. 2. The arbitral tribunal could not
have relied on such a letter and construed a document used
only for negotiation as an instrument of admission. It was only
intended to settle the differences, without prejudice to the
petitioner's rights and contentions. On the other hand, following
the principle of approbate and reprobate, the averment with
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respect to Unit No. 1 cannot be taken at face value without
accepting the averment with respect to Unit No. 2 that assigned
delay to the respondent.
5.1.3 There is an inconsistent finding that the entire land had to be
handed over before any construction activity would commence.
The same is evident on the face of the award which records that
at least 31 activities were carried out before the entire land was
handed over as majority of the land was handed over without
delay.
5.1.4 The understanding as per the contractual provisions [Clause
11.2 and 40.1] and the rejection of RIL's letters dated February
27, 2008 and March 15, 2008, which wanted modification of the
contract by introduction of clauses favouring escalation
damages, was that the contract was a fixed price contract and
the only remedy provided was grant of extensions in cases of
delay.
5.1.5 In contracts with fixed price or barring price escalation, no price
escalation can be awarded. Reliance was placed on Associated
Engineering Co. -v- Government of Andhra Pradesh and
Another reported in (1991) 4 SCC 93, New India Civil
Erectors (P) Ltd. -v- Oil and Natural Gas Corporation
reported in (1997) 11 SCC 75, Rajasthan State Mines &
Minerals Ltd. -v- Eastern Engineering Enterprises and
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Another reported in (1999) 9 SCC 283 and State of Orissa -v-
Sudhakar Das reported in (2000) 3 SCC 27 to bolster the said
proposition.
5.1.6 When a remedy is provided in the contract, only that remedy
can be granted. In the present case, extension was the only
remedy for delay and hence, no compensation could have been
granted for delay. To support this contention, reliance was
placed on Ramnath International Construction (P) Ltd. -v-
Union of India reported in (2007) 2 SCC 453, Union of India -
v- Chandalavada Gopalakrishna Murthy and Others
reported in (2010) 14 SCC 633 and K. Marappan -v-
Superintending Engineering reported in (2020) 15 SCC 401
to strengthen the said argument.
5.1.7 Since the issue of firm price contract was so instrumental in
deciding the dispute between the parties and the grant of delay
and escalation charges (predominantly amounts awarded under
Issue No. 24, 25 and 27), it should have been discussed in the
award. But the arbitral tribunal has failed to discuss or even
aver to the same, which indicates lack of reasoning and non-
application of mind. The mandate under Section 31(3) of the Act
requires the arbitral award to have reasoning which is proper,
intelligible and adequate. If the award lacks such reasoning,
then the award falls prey to being set aside for being perverse
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and a result of non-application of mind. The Apex Court's
judgement in Dyna Technologies Private Limited -v-
Crompton Greaves Limited reported in (2019) 20 SCC 1 was
cited to strengthen the said argument.
5.1.8 A price escalation formula was relied upon by the arbitral
tribunal to award damages in Issue No. 24 and 25, which was
not provided for in the contract. In fact, price escalation in any
form (damages, compensation or otherwise) was barred by the
contract. Therefore, the imposition of a price escalation formula
upon the petitioner is unilateral and forceful. It should be set
aside as per the judgements in Ssangyong Engg. &
Construction Co. Ltd. -v- NHAI reported in (2019) 15 SCC
131, PSA Sical Terminal (P) Ltd. -v- Board of Trustees of
V.O. Chidambaranar Port Trust Tuticorin reported in 2021
SCC OnLine SC 508 and Chairman Board of Trustees for
Shyama Prasad Mookherjee Port Kolkata -v- Universal Sea
Port Private Ltd. reported in MANU/WB/1546/2022.
5.1.9 The award is also without jurisdiction, the claim of RIL all along
was for escalation of price due to delay, and issues framed were
also for price escalation, the evidence adduced is also for price
escalation, nonetheless, Arbitrators have awarded damages
against the claim of price escalation, being very well aware that
price escalation was not permitted under the contract, and
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hence allowed price escalation in the guise of damages, and by
doing so, the arbitrators awarded something indirectly, which
they cannot do directly, thereby, violating the provision of
Section 34(2)(a)(iv) of the Act.
5.1.10 The amount awarded under Issue No. 24, 25, and 27 of the
award is contrary to the terms of the contract and thus in
violation of Section 28(3) of the Act, in addition to being patently
illegal, perverse, and irrational.
5.1.11 The amount awarded under issues no. 24 and 27 have been
arrived at by the Tribunal by applying an arbitrary formula of
75% on the amount claimed and DVC was not given an
opportunity to deal with the arbitrary formula, thus, it is
perverse and irrational. Therefore, any amount awarded on this
head will be contrary to the terms of the contract and liable to
be set aside.
5.1.12 The finding in paragraph 34.3(j) of the award, that the petitioner
argued on the tenability of the claim but did not dispute the
quantum of the claim, is completely contrary to paragraph
34.4(i) of the award.
5.1.13 There is double recovery in Issues No. 24 and 25, as price
escalation is awarded for the entire plant in Issue No. 24, but it
is also separately granted for the ash-dyke portion of the plant.
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5.1.14 Issue No. 27 was allowed on the basis that the CA certificate
was that of a statutory auditor's certificate. However, this is
contrary to the express disclaimer provided in the certificate
that the CA did not prepare it in the role of a statutory auditor,
but merely for the purposes of the arbitration. The other
additional reasons given for refuting the claim awarded under
Issue No. 27 are:-
a. Mere reference to SRS 4400 model does not make the CA
certificate sacrosanct.
b. CW2 has not proved the 19,000 pages which were relied
upon by the CA for preparation of the certificate.
c. The CA certificate is only for Rs. 100 crores as against the
claim of Rs. 168 crores and is still lesser than the amount
awarded under this sub-head, that is, 126 crores
approximately. Therefore, this is indicative of non-
application of mind.
d. The Euro component of 13 million for SEC personnel was
never proved, but merely based on a pro-rata calculation.
e. Respondent relied on the CA certificate without producing
the CA as a witness to prove the certificate, and in so doing,
did not allow the other side to cross-examine the CA.
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5.1.15 There is repetitive recovery amongst Issues No. 24, 25 and 27
because:-
a. As per statement of claim of RIL, Issue 24 is on account of
'material and the cost towards manpower' of main plant,
Issue 25 is on account of 'raw material, labour, petroleum
products, etc.' of ash plant and Issue 27 is on account of
'manpower, salaries and overhead expenses including office
expenses, transportation expenses, etc. for main plant and
ash pond.
b. Overhead is part of the unit rate reflected in Billing Break-
Up (hereinafter referred to as 'BBU') has been admitted by
CW2.
c. Overhead is part of the fixed coefficient reflected in the
formula applied by the respondent for the escalation price.
5.1.16 The arbitral tribunal has committed a fundamental error and
patent illegality in finding that no Demineralised (hereinafter
referred to as 'DM') water was available before August 9, 2013
because from the face of the award it is evident that three
milestones requiring DM water were achieved prior to August 8,
2013. The arbitral tribunal committed a further fundamental
error and patent illegality in recording that DVC delayed the
supply of DM water due to delay in completion of the cross
country pipeline. From the face of the award it is evident that
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about ten milestones requiring DM water were achieved prior to
completion of Cross-Country Pipeline (hereinafter referred to as
'CCP') in December, 2015.
5.1.17 The petitioner's specific case that RIL had supplied unstamped
Bottom Ring Headers (hereinafter referred to as 'BRHs') as was
statutorily required and upon testing the BRHs (8 in number) of
both the Unit No. 1 & 2 were found to be defective (cracks) is
recorded in the award. The defective BRHs had a cascading
effect on COF of both Unit No. 1 & 2, causing huge delay in the
hydrotest of almost 3 years in Unit 1 and 4 years in Unit 2.
However, the award records that DVC did not allege breach
regarding BRH problems causing delay in Unit 2. This is a
patent illegality on the face of the award.
5.1.18 It was the petitioner's specific case that the National Draught
Cooling Tower (hereinafter referred to as 'NDCT') of Unit 1 was
defective. The petitioner directed NDCT 1 to be dismantled on
October 27/28, 2013, but the respondent dismantled it on
November 16, 2013. In the meantime, the milestones of Unit 1
had to be achieved by connecting NDCT 2 to NDCT 1. Defective
NDCT of Unit I had a cascading effect on COF of both Unit 1
and 2. However, the award records that DVC did not allege
breach regarding NDCT causing any delay in Unit 1.
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5.1.19 As per terms of contract, insulation to be supplied by the
respondent was to be imported. The material which was
imported got damaged. The petitioner asked the respondent to
replace the same but the respondent delayed the same.
Ultimately, the respondent supplied indigenous insulation. The
delay in replacing the damaged insulation had a cascading
effect of COF of both Unit 1 and 2.
5.1.20 The arbitral tribunal held there was a Force Majeure period
(October 1, 2009 to January 30, 2010) but totally ignored this
period while granting escalation and overstay claims.
5.1.21 The tribunal erred in denying the petitioner of its liquidated
damages in Issues No. 12, 13 and 14 by severing the letter
dated February 3, 2017 and deriving a part understanding that
no delay was attributable to the respondent with respect to Unit
No. 1.
5.1.22 The petitioner further claimed that the Hon'ble Tribunal made a
wrong approach and erred in assuming that the protocol which
contained the data, recorded the achievement of the
performance guarantee. Thus, the purported award on this
score is based on a wrong assumption and contrary to the terms
of the contract. It has been recorded to be proved in the award,
with the reasoning that the petitioner did not contest it.
However, it was for the respondent to prove it, rather than the
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petitioner to disprove it. Furthermore, there is correspondence
to indicate that the PG Tests were unsuccessful and work is still
pending, which has been completely ignored by the arbitral
tribunal. Therefore, the finding in Issue No. 49, which has a
direct bearing on Issue No. 2 and Issue No. 50, is perverse.
5.1.23 Additionally, with respect to Issue No. 49, 2 and 50, the award
is contrary to the terms of the contract and thus violative of
Section 28(3) of the act, in addition to being patently illegal,
perverse, and irrational. As per the terms of the contract, OAC
(Operational Acceptance Certificate) is to be issued upon
successful achievement of COF and successful completion of
Guarantee Test (GT) and meeting of Functional Guarantee (FG).
Therefore, the respondent is not entitled to issuance of deemed
or actual OAC as it did not satisfy any of the conditions.
5.1.24 With regard to Issues No. 2, 14 and 33, it is argued that the
release of retention money has no link with the onus of delay or
with the validity of the extension of time for completion of the
contract. As per the terms of the contract, the release of
retention money is solely linked to the actual completion of
works without defects (i.e. completion of facility and issuance of
OAC). The arbitral tribunal, by linking retention money with the
onus of delay and validity of EOT, has misconstrued the terms
of the contract. Thus, the award directing the release of
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retention money is contrary to the terms of the contract and
violative of Section 28(3) of the Act.
5.1.25 The respondent is not entitled to the release of the Bank
Guarantee because the work is not completed. COFs issued are
provisional with the list of pending work and OACs were not
issued by the petitioner. It is also claimed that the award by
linking the release of BG to the onus of delay and validity of the
extension of time for completion and not to the terms of the
contract has violated Section 28(3) of the Act.
5.1.26 The arbitral tribunal ignored the fact that the incomplete items
mentioned in the COF remained unsupplied and incomplete
even on the date of passing of the award. Furthermore, the
respondent did not prove or contend that deficiencies mentioned
in the COF were removed or completed, during the arbitration
proceeding.
5.1.27 The delay in completion of Unit No 2 would have been 3232
days up to the date of the award instead of 1835 days as
wrongly held by the Tribunal. Moreover, as on date, the
respondent is yet to complete the supply of mandatory spare
parts.
5.1.28 The Tribunal committed an error of jurisdiction by holding that
the delay was of 1835 days instead of 3232 days in respect of
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Unit 2 as list of pending work was not completed even at the
time of passing of the award.
5.1.29 The Performance Guarantee Test in respect of Unit No. 1 and 2
was not carried out for the below listed components:-
a. Unit No 1- (steam generator, turbine generator, coal mill,
electrostatic precipitator, cooling tower, total auxiliary
power consumption)
b. Unit No 2 - (steam generator, turbine generator, coal mill,
electrostatic precipitator, cooling tower, total auxiliary
power consumption).
c. The protocol mentioned in the award records the
measurement of different parameters of the Units, but did
not record as to whether they had attained the guaranteed
parameters.
5.1.30 Since the performance guarantee parameters remain
incomplete, the respondent is not entitled to issuance of
Operational Acceptance Certificate and is also not entitled to the
release of 2.5% of the FOB & Ex- works price each for Unit No 1
& 2. Moreover, the tribunal did not take into account the
protocols of performance guarantee parameters that were being
provided by the petitioner. Nonetheless, it was the duty of
Reliance/ respondent to prove the successful Performance
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Guarantee Test and achievement of parameters, without which
OAC could not have been issued. However, the Tribunal could
not and did not record any finding with this regard.
5.1.31 The arbitral tribunal while awarding the amount under Issue
No. 15 ignored that several works done by the respondent were
defective and required repair and fixing. These were within the
scope of the contract and not done for operation or
maintenance.
5.1.32 The amount in Issue No. 16 was granted in view of claim
towards additional bays in the switchyard. Drawings were
provided to the respondent and accepted without the latter
raising any additional claims, thus accepting modification of
specification. While the petitioner offered, vide letter dated
February 3, 2017, to pay Rs. 1.04 crores for the purposes of
reconciliation, the remaining claim was denied. Such work was
within the scope of work under the contract.
5.1.33 Claim towards excavation, disposal of earth and area grading
was entirely under the respondent's scope of work as per the
contract. Any additional cost incurred by the respondent will
have to be absorbed by them, therefore Issue No. 17 has been
wrongly decided. Also, no bills, invoices or proof of payment
were disclosed by the respondent.
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5.1.34 With respect to Issue No. 18, the respondent failed to produce
any bills, invoices or proof of payment, but were still awarded
the amount. Furthermore, no written objection was given under
Clause 39.2.3 of GCC.
5.1.35 The respondent submitted a design basis report without any
cost implication, as per which supply was a natural
consequence for improved operability of the plant. Therefore, the
claim allowed under Issue No. 19, was barred under Clause
7.3.1.5 of the GCC.
5.1.36 Relays formed part of the bill of materials for respective
equipment. The respondent did not raise any claim for
additional cost towards such spares. No claim was raised even
within 30 days as required under Clause 7.3.1.5 of the GCC of
the Contract. Therefore, Issue No. 20 has been wrongly decided.
5.1.37 The claim towards providing newer technology relays is barred
by Clause 39.1.1 of GCC, Clause 4.03.00 Vol. IIA, Sec VII
Technical Specifications and Clause 7.3.1.5 of GCC. The newer
technology had become industry standard by the time the
portion of the plant was constructed. Claim is not based on
proof of expense or payment by the respondent. The arbitral
tribunal has awarded the same in Issue No. 21, without
considering the above grounds. This could also not be awarded
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on account of delay as there is specific finding in the award that
both sides have delayed.
5.1.38 Issue No. 38, 39, 40, 41, 43 and 44 have been rejected by the
arbitral tribunal on the basis (a) that there was no delay on
behalf of the respondent and (b) Clause 30.1[a] prohibits it.
Such finding is perverse and contradictory with the other
finding of the arbitral tribunal that both the parties have
committed delay.
5.1.39 The arbitral award while dealing with Issue No. 45 does not take
into account Clause 27 of GCC, which covers the Defect Liability
Period (hereinafter referred to as 'DLP'). Despite the same being
raised, the arbitral tribunal relied on Clause 30.1 of GCC, which
has no manner of application in respect of this claim. The award
is contrary to the terms of the contract. Defects in respect of
ESP surfaced and grievance was raised by the petitioner within
the DLP. Therefore, the award also ignored vital evidence.
5.1.40 Despite the petitioner's repeated rejection of the escalation and
other claims of the respondent, the respondent continued to
work, thereby abandoning any right to claim escalation or
alleged overstay. Every period of extension constitutes a new
agreement and claims up to that period, if not made, will stand
extinguished in terms of Section 55 of the Contract Act, 1872.
Limitation period for the claims of the respondent arising out of
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each extension period would start from the day when the
respondent sought extension of the period of contract. Thus, all
claims of the respondent arising out of extensions from 2011
onwards would be barred by limitation and particularly since
the claim for escalation of price and idling charges, which are
really the basis for Issue No. 24, 25 and 27 were all rejected by
the petitioner on March 7, 2013. Therefore, these delay claims
which are subject of Issue No. 24, 25 and 27 were required to be
made within three years from March 7, 2013.
5.1.41 The arbitral tribunal has wrongly rejected amounts in Issue No.
38, 39, 40, 41, 43 and 44 as (i) there was no delay on part of the
respondent and (ii) by placing reliance on Clause 31.1(a) of the
G.C.C.
5.1.42 In terms of Section 43 of the Act, the provisions of Limitation
Act, 1963 would be applicable to arbitrations 'as it applies to
proceedings in court'. Therefore, the Apex Court's judgement in
State of Gujarat -v- Kothari & Associates reported in (2016)
14 SCC 761 is applicable in the instant case.
5.1.43 The arbitral tribunal failed to get into the merits of the counter
claims of the petitioner with respect to Issue No. 42 and also
failed to refer to the matters of record. Hence, as the award
ignores vital evidence, the same is perverse for being patently
illegal.
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6. Contentions By The Respondent
6.1 Mr. Harish Salve and Mr. Tilak Bose, Senior Advocates have
made the following submissions in favour of the award holder:-
6.1.1 The petition filed by the petitioner does not disclose nor does it
make out any ground whatsoever as set out in Section 34 of the
Act which would entitle the petitioner to the reliefs prayed for in
the petition including setting aside of the Arbitral Award dated
December 21, 2019. Furthermore, the contentions of the
petitioner are alleged factual appellate grievances and do not
satisfy the test of the well-settled principles of challenge against
an Arbitral Award laid down under Section 34 of the Act.
6.1.2 The arbitral tribunal has come to a specific finding that there
was delay on part of the petitioner in handing over land. It is
also denied that the entire land was not required for setting up
of the two Units. The scope of work of the respondent under the
contract was to carry out the work in the entire area.
6.1.3 Merely because the respondent sought extension of time under
clause 40 of the GCC, the said clause in no manner bars the
respondent from making any claim for compensation/damage
by reason of delay on the part of the petitioner in complying
with its obligations.
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6.1.4 The purported contention of the petitioner, that the COF
certificates issued by the petitioner on June 10, 2015 for Unit 1
(effective from May 15, 2015) and on February 24, 2016 for Unit
2 (effective from February 23, 2016) were partial, was raised for
the first time in the present proceedings. This was not the case
of the petitioner before the arbitral tribunal. The purported
contention of the petitioner is contrary to Clause 24 of the GCC
relating to "Commissioning and Completion of the Facilities".
Once the COF Certificate is issued by the Project Manager, the
Unit is commissioned. Furthermore, upon completion, the
Employer, that is the petitioner, is responsible for care and
custody of the Facilities together with the risk of loss or damage
thereto and thereafter takes over the Facilities. The said clause
clearly provides for outstanding items to be completed after the
COF. There is no concept of partial COF under the Contract.
The said provision of the Contract clearly provides for items
which are in the nature of punch list items to be completed after
issuance of Completion Certificate. It is denied that the COF
Certificates were partial as alleged or that they record
competition of only part of the Facilities.
6.1.5 Documents enclosed from pages 495 to 499 (Vol. IV of the
Petition) appear to be documents which were not a part of the
record of the arbitral proceedings. Documents enclosed at page
500 (Vol. IV, Petition) appears to be an internal email of the
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petitioner dated January 13/14, 2020 which cannot be a part of
the record of the arbitral proceedings. Documents enclosed at
page 501 (Vol. IV, Petitioner) also do not appear to be a part of
the record of the arbitral proceedings. Furthermore, the
Documents from pages 502 to 608 were enclosed as Exhibits to
the Affidavit of Evidence filed by the petitioner's witness, RW-2
and are not a part of the COF Certificates of either Unit 1 or
Unit 2 as is sought to be insinuated by the petitioner.
6.1.6 The petitioner had not at all argued or pressed their alleged
contentions with regard to the alleged inferior quality of
components of the Coal Mill before the arbitral tribunal in
respect of which documents at page 502 to 509 have been
annexed as a part of Annexure I. Documents at pages 510 to
609 relate to the alleged counter claim of the petitioner on the
alleged ground that the respondent had supplied a defective
ESP. The said counterclaim, the counsel submitted, has been
rejected by the arbitral tribunal after elaborate discussion, and
on appreciation of evidence.
6.1.7 While the respondent is not aware of and does not admit to any
letter purportedly issued by the Ministry of Power to the
petitioner on March 24, 2009 it appears from the record of the
proceedings before the arbitral tribunal that no such alleged
letter has been either referred to or relied upon by the petitioner
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before the arbitral tribunal. The petitioner is not entitled to refer
to any facts or documents which do not form a part of the
record of proceedings before the arbitral tribunal. Without
prejudice to the respondent's contention, the counsel
submitted, there can be no re-appreciation of evidence.
6.1.8 Under the Provisions of Contract (Clause 26, GCC read with
Clause 9, SCC), petitioner would be entitled to Liquidated
Damages only for delay in the successful Completion of
Facilities. The said clauses clearly show that on achieving COF,
the right of the petitioner to levy Liquidated Damages comes to
an end and thus the contention of the petitioner that the works
were incomplete, is on a complete misinterpretation and is
based on misreading of the punch list items enclosed along with
the COF certificate issued in accordance with the provisions of
the contract.
6.1.9 There were 2 issues raised in the pleadings before the arbitral
tribunal, viz. A claim for alleged revenue loss with effect from
April 1, 2016 caused allegedly by lower generation of power from
alleged defective supply of Electrostatic Precipitator (ESP) in
both Units 1 and 2 installed by the respondent. The arbitral
tribunal came to a finding that the petitioner is not entitled to
any claim under the aforesaid head for reasons elaborated in
paragraph 23.3 of the award. The only other issue raised by the
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petitioner was the alleged supply of defective Coal Mill before
the arbitral tribunal. Though the respondent responded to the
allegations contained in paragraphs 2.16 and 2.18 of the
Statement of Defence and argued the same, the said issue was
not at all argued by the petitioner nor did the petitioner respond
to the respondent's arguments before the arbitral tribunal.
Accordingly, the arbitral tribunal has not ruled on the same.
6.1.10 The contentions by the petitioner in various paragraphs relating
to PG tests are contradictory and inconsistent. In any event, it is
denied that the respondent had failed to carry out or achieve the
required PG parameters. The arbitral tribunal has considered
the entire documentary and oral evidence on record and
thereafter arrived at a finding that the respondent is entitled to
a declaration that OAC has been issued as on April 13, 2017
and May 19, 2017, being the respective dates of notice given by
the Respondent to the petitioner under Clause 25.2.4 of GCC.
The counsel submitted that in this regard, documents referred
to by the petitioner have already been considered and ruled
upon by the arbitral tribunal.
6.1.11 It is denied that the award of the amounts set out therein with
interest at the rate of 10% p.a. from August 20, 2017 till the
date of the award is without jurisdiction as alleged. The arbitral
tribunal has held that while the actual difference between
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contractual completion date and actual completion date is 1643
days and 1835 days in respect of Units of 1 and 2, the petitioner
has accepted that there is no delay on part of the respondent for
completion of Unit No. 1 and has carved out a period of only
468 days as being allegedly attributable to the respondent in
Unit 2. On the aforesaid basis, it has been held by the arbitral
tribunal, that the calculation and basis for the said 468 days
assumes importance. It is denied that the reasoning given by
the arbitral tribunal is either perverse or contrary to records as
alleged or at all.
6.1.12 The Counsel denied that the respondent has left several items of
work incomplete and that there is no question of the Defect
Liability Period not being over as alleged. The Counsel further
submitted that the PG Tests were conducted after COF was
achieved in respect of both the Units and there is no question of
the items mentioned in the punch list set out in COF not being
attended to. The Counsel also submitted that Annexure J
contains new documents which are not a part of the record of
the arbitral tribunal and that the petitioner cannot refer to the
same.
6.1.13 The petitioner in the respectful submission of the respondent
has selectively referred to certain passages of the Award and
taken them out of context to argue that the Award purportedly
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holds that both the petitioner and the respondent had failed to
adhere to the timelines.
6.1.14 It was not the case of the petitioner before the arbitral tribunal
that there was any delay on part of the respondent in
completion of Unit - 1. The delay alleged with regard to Bottom
Ring Header, NDCT and Insulation Material, admittedly related
to Unit - 2 and not Unit 1. The contention of the petitioner with
regard to alleged breach of the Contract was restricted to the
aforesaid three issues. Apart from these, the Petitioner has not
contended that there was any delay in achieving COF of Unit-1
on any other ground. The arbitral tribunal has ruled the issues
in favour of the respondent. On the contrary, the entire case of
the petitioner in respect of which it had led evidence was that it
was levying Liquidated Damages for delay in completion of Unit
2, which the arbitral tribunal held it could not prove.
6.1.15 The arbitral tribunal has come to a categorical finding that the
issues regarding Bottom Ring Header, NDCT and Insulation
Material did not assist the petitioner in support of its claim for
liquidated damages which is only for Unit - 2. It is further clear
that even with regard to Bottom Ring Header, NDCT, and
Insulation Material, the respondent could have justifiable
grievances. Furthermore, the finding with regard to RTR of Unit-
1 is clear and categorical, which holds that the petitioner was
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not in a position to arrange inputs and had agreed to a
truncated RTR. A reading of the award also shows that no delay
could be attributable to the respondent with regard to COF of
Unit - 1 and even on the petitioner's own showing no delay
could be attributable to the respondent. After having so held,
the arbitral tribunal holds that delay 'if any' on the part of the
respondent is subsumed in delay on part of the petitioner. The
arbitral tribunal has referred to a letter dated February 3, 2017
wherein the petitioner actually offered compensation to the
respondent for delay on part of it in respect of Unit - 1 thereby
admitting responsibility for delay in achieving RTR of Unit - 1.
6.1.16 The Counsel submitted that the arbitral tribunal has come to a
categorical finding that the issues regarding BRH, NDCT and
Insulation Material did not assist the petitioner in support of its
claim for liquidated damages which is only for Unit 2. After a
perusal of paragraph of 14.3(m) of the Award, it is found that
there is a clear and categorical finding that RTR of Unit 1 was
delayed on account of the petitioner. This is a finding of fact on
appreciation of evidence. It is further evident from 14.3(n) that
even with regard to the BRH, NDCT, and Insulation Material,
the respondent could have justifiable grievances. The finding
with regard to RTR of Unit 1 is clear and categorical, which
holds that the petitioner was not in a position to arrange inputs
and had agreed to a truncated RTR. A reading of 14.3 (p) shows
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that no delay could be attributable to the respondent with
regard to COF of Unit 1 and even on the petitioner's own
showing no delay could be attributable to the respondent. After
having so held, the arbitral tribunal holds that the delay "if any"
is subsumed in delay on part of the petitioner. Reference is
made by the arbitral tribunal to the letter dated February 3,
2017 wherein the petitioner actually offered compensation to
the respondent for delay on the part of the petitioner in respect
of Unit 1 thereby admitting responsibility for delay in achieving
RTR of Unit 1.
6.1.17 The counsel submitted that insofar, as Unit- 2 is concerned, the
petitioner before the arbitral tribunal has referred to the letter
dated February 3, 2017 by which it purported to levy Liquidated
Damages on the respondent for alleged delay of 468 days in
completion of Unit - 2. The arbitral tribunal has found that
delay in RTR of Unit-2 was on the account of the petitioner and
the period of delay of 468 days claimed by the petitioner as
being to the account of the respondent cannot be established.
The petitioner is incorrect in contending that the arbitral
tribunal could not have relied upon the letter dated February 3,
2017 as the document had to be considered in its entirety and
not severed for part acceptance and part rejection. The
petitioner has itself relied upon the said letter in support of its
case that it was entitled to levy Liquidated Damages on the
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respondent for 468 days delay with regard to COF of Unit - 2.
Also, the Petitioner's counter claim before the Arbitral Tribunal
was based entirely on the letter dated February 3, 2017. The
petitioner cannot now contend that the letter dated February 3,
2017 was merely an offer. The arbitral tribunal has considered
the said letter which is a part of RW-5's evidence and has come
to finding, inter alia, in paragraph 6.3 as well as paragraph 34.4
of the Award. Such a finding based on
interpretation/appreciation of documentary and oral evidence,
are not subject to scrutiny under Section 34 of the Act. The said
letter contains various admissions on the factual aspects of the
matter, such as levy of Liquidated Damages on account of
alleged delay on part of the respondent of 468 Days as against
the actual delay of 1835 days in the completion of Unit 2 alone;
and no liquidated damages being levied for delay in completion
of Unit 1. The letter is in response to the respondent's claims
with regard to compensation, inter alia, for idling and overstay
by reason of delay in RTR of Unit - 1 as well as civil
construction with regard to the Ash Dyke. This was on the
specific basis that such delay was not on the account of the
respondent. The offer in any event is related to the quantum of
some of the respondent's claims being accepted by the petitioner
if the respondent gives up its other claims. In the submission of
the respondent, the petitioner in its preliminary notes has
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clearly stated that there were admissions on part of it,
contained in the letter dated February 03, 2017.
6.1.18 The rejection of the petitioner's counter claim for liquidated
damages by the arbitral tribunal is neither contrary to the terms
of the contract nor is patently illegal, perverse, and irrational as
has been argued by the petitioner. Furthermore, the rejection of
the counter Claim by the arbitral tribunal is based on
appreciation of evidence and after taking into account the terms
of the contract.
6.1.19 The argument of the petitioner that the alleged delay on part of
the respondent was not just 1835 days but was 3232 days on
the date of the Award, thereby contending that there was a
continuing breach on part of the respondent in any event
cannot stand. This was never agitated before the arbitral
tribunal and so cannot be pressed before this Court.
6.1.20 As per settled law of the Hon'ble Supreme Court, even in the
absence of an escalation clause it would be within the
jurisdiction of the arbitral tribunal to allow claims on account of
escalation of costs for work executed during the extended period
of contract. The Hon'ble Supreme Court in various judgments
has held that the arbitral tribunal is vested with authority to
compensate a party for extra cost incurred by such a party as a
result of failure of the other party to comply with its obligations
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and that when extension of time is provided for in the contract,
the same is an additional remedy, and damages could be
granted, including under Section 73 of the Indian Contract Act,
1872.
6.1.21 In view of respondent's entitlement as per settled law, it is not
necessary for the respondent to deal with the Petitioner's
contention that the respondent was purportedly aware of the
bar on escalation of price and had participated in the tender
process in spite of the same or the argument that the
respondent sought relaxation of bar of price escalation, both pre
and post award of the contract to it, but the same was rejected
by the petitioner.
6.1.22 The argument of the petitioner that price escalation claimed
under Issue No. 25 by the respondent amounts to double
recovery since price escalation on account of delay for the whole
project has been claimed under Issue No. 24 is incorrect. The
Letter dated February 03, 2017 written by the petitioner itself
treats the main plaint portion as well as Ash Dyke portion
separately and proposes to grant additional claims in respect of
the aforesaid two portions separately. The said argument of the
petitioner was not raised during arbitral proceedings.
6.1.23 The petitioner has contended that the remedy which was
provided under the contract for seeking extension of time has
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been availed of by the respondent and that as such the
respondent has not reserved its right to seek damages for price
escalation. It is submitted that contemporaneously with the
letters seeking time, the respondent has been agitating its
claims, inter alia, relating to Price Variation for Main Plant and
rate revision for Ash Dyke portion of the project by reason of
delay on account of the petitioner. While the petitioner rejected
such claims, eventually some portions of the respondent's
claims were also admitted by the petitioner in its letter dated
February 03, 2017. It is thus incorrect on the part of the
petitioner to contend that the respondent had not reserved its
right to seek damages or price escalation when the issue was
being consistently pursued by the respondent with the
petitioner.
6.1.24 Insofar as declaration of OAC is concerned, the arbitral tribunal
has referred to the evidence on record as well as further
supported its reasoning by CW1's Affidavit of Evidence. The
same was neither contradicted nor tested by the petitioner. The
arbitral tribunal records that the same do not form a part of the
record of the proceedings, but have drawn an adverse inference
that after RW3 was given the protocols, the petitioner has not
denied the correctness of such protocols nor has RW3. The
declaration given is from April 13, 2017 and May 19, 2017 when
notices were given under Clause 25.2.5 of the GCC. While under
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Section 34, the Court cannot re-appreciate evidence, even the
documents referred to by the petitioner show that the protocols
which were jointly signed were duly clarified by the respondent.
6.1.25 The arbitral tribunal has directed the petitioner to pay
restitution by way of payment of differential escalation amounts
and amounts incurred by it on account of delay being additional
costs incurred on a reasonable basis and on the basis of
evidence before it. Such computation is also not capable of
being challenged under Section 34 of the Act. The arbitral
tribunal has duly followed the amended provisions of Section
28(3) of the said Act and has duly taken into account the terms
of the contract (the said section having been amended w.e.f.
October 23, 2015). It is respectfully submitted that in terms of
the contract as well as in terms of the law laid down by the
Hon'ble Supreme Court, the grant of escalation or increase in
charges and other amounts as have been awarded by the
arbitral tribunal are perfectly within the law and there is no
error apparent or anything contrary to public policy in the
award of such amounts which would merit interference. There
is nothing in the award to show that the conclusion of the
arbitral tribunal is such that no reasonable or fair-minded
person could have reached it.
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6.1.26 Section 34(2A) of the Act contains the phrase "illegality
appearing on the face of the award". The predecessor act being
the Arbitration Act, 1940 in Section 16(c) as it then stood
contained a phrase "objection to the legality of the award is
apparent on the face of it". The phrase "apparent upon the face
of" fell for consideration of the Hon'ble Supreme Court in the
case of Jajodia Overseas (Pvt.) Ltd. -v- Industrial
Development Corporation of Orissa Ltd. reported in (1993) 2
SCC 106, with reference to the challenge to the Award under
Section 30 of the 1940 Act held that the error apparent on the
fact of the award is required to be shown.
6.1.27 In the case of M/s. Allen Berry & Co. Pvt. Ltd. -v- Union of
India reported in (1971) 1 SCC 295 the Hon'ble Supreme
Court ruled on "error apparent on the record". The Hon'ble
Supreme Court held that the error, if any, cannot be said to be
an error apparent on the face of the Award entitling the Court to
consider various documents placed in evidence before the
umpire, but not incorporated in the awards so as to form a part
of it and then make a search if they have been misconstrued by
him. The award was eventually upheld in the said decision. The
Court in Allen Berry (supra) relied on the decisions in the case
of Hodkinson -v- Fernie reported in 1857 (3) CB (NS) 189,
Union of India -v- Bungo Steel Furniture Pvt. Ltd. reported in
AIR 1967 SC 1032 and also referred to the decision in the case
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of Champsey Bhara and Co. -v- Jivraj Ballo Spinning and
Weaving Co. Ltd. reported in AIR 1923 PC 66, and Giacomo
Costa Fu Andrea -v- British Italian Trading Company Ltd.
reported in AIR 1923 PC 66 and Giacomo Costa Fu Andrea -
v- British Italian Trading Company Ltd. reported in 1962
(2) All ER 53. The Counsel relied on the paragraphs 4 to 10,
14, 15, and 26 of the judgment in Allen Berry (supra).
6.1.28 Instead of the phrase "...objection to the legality of the award is
apparent upon the face of it" in the 1940 Act, the phrase "patent
illegality appearing on the face of the award" is present in the
1996 Act. It is a well settled principle of law that use of same
words in similar connection in a later statute gives rise to a
presumption that they are intended to convey the same
meaning as an earlier statute. When words in an earlier statute
have received an authoritative exposition by a superior court,
use of the same words in similar context in a later legislation
will give rise to a presumption that parliament intends that the
same interpretation should also be followed for construction of
those words in a later statute.
6.1.29 Even the successor Act of 1996 has been subjected to several
amendments from time to time to narrow the scope of challenge
to an arbitral award. This exercise emanates from the report of
the Law Commission dated August 2014 (paragraphs 34 to 37
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at pages 21 to 22 thereof) and the Supplementary Report of
February 2015 (paragraphs 7 to 10 at pages 7 to 21 thereof).
Furthermore, the Counsel submit that the effect of narrowing of
the scope of challenge to an arbitral award under Section 34 is
discussed and adumbrated upon by the Hon'ble Supreme Court
in the case of Ssanyong Engineering and Construction Co.
Ltd. -v- National Highways Authority of India (NHAI)
reported in (2019) 15 SCC 131. Paragraphs 26, 27, 30, 37, 38,
39 and 41 of the said judgment were relied upon by the Counsel
in this regard.
6.1.30 What emerges from Ssyanyong Engingineering (supra) is the
various other grounds envisaged in ONGC -v- Saw Pipes,
reported in (2003) 5 SCC 705 falling under "public policy" are
all restricted grounds and should be construed narrowly for the
purpose of Section 34. "Perversity" is to be read in the context of
patent illegality on the face of the award. Even whether or not,
an award is patently illegal because of "lack of evidence" or
based on no evidence is to be judged on the basis of the ground
of "patent illegality appearing on the face of the award".
6.1.31 The petitioner is selectively relying upon Paragraph 10.4(f) of the
award relating to delay in supply of BRH. The petitioner is
misreading the award. Viewed from any angle, the contents of
Paragraph 10.4 (f) cannot be construed to mean that there was
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any delay on part of the respondent with regard to BRH. On the
contrary, the arbitral tribunal has come to a categorical finding
that the delay which could be singled out was delay on part of
the petitioner in giving land to the respondent in timely manner
and also supply of coal for conducting RTR. The arbitral
tribunal has also stated that failure to get DM water plant ready
to supply water in a timely manner was attributable to the
petitioner.
6.1.32 It is an admitted position that COF of both units was not
achieved as per the respective Scheduled Dates of Completion.
The contract between the parties, in the submission of the
respondent does not take away the right of the respondent to
claim damages for the extended period of the contract for
breach on account of the petitioner. It is settled law, as per
various decisions of the Hon'ble Supreme Court of India that
right is available to a party to claim damages if the Project gets
delayed by reason of breach on part of another party in
complying with its obligations. Delhi High Court in Rawla
Construction Company -v- Union of India, reported in ILR
(1982) 1 Delhi 44 quotes Hudson on "Building & Engineering
Contracts" which states that if the cause of delay is due to
breach of contract by the employer and there is also an
applicable power to extend the time, the exercise of the power
will not in absence of clearest possible language deprive the
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contractor of its right to damages for the breach. The Delhi High
Court held that otherwise a contractor would have no remedy,
however outrageous the conduct or behaviour of the employer
is.
6.1.33 The Hon'ble Supreme Court in the case of Assam State
Electricity Board & Ors. -v- Buildworth Pvt. Ltd. reported in
(2017) 8 SCC 146 has held that fixed price would not bind a
party beyond the scheduled date of completion. Furthermore,
the Hon'ble Supreme Court upheld the award wherein it was
held that the provision in the contract was applicable only
during the scheduled term of the contract and not in respect of
the extended period. The Hon'ble Supreme Court also held that
interpretation/construction of a term of the contract is within
the domain of the arbitral tribunal.
6.1.34 Reliance on the 1870 judgment of the Exchequer Chamber in
Roberts -v- The Bury Improvement Commissioners reported
in [L.R.] 5 C.P. 310 is placed to argue that no person can take
advantage of the non-fulfilment of a condition the performance
of which has been hindered by himself.
6.1.35 The contention of the petitioner that decisions under the 1940
Act would not be applicable is clearly misconceived in view of
the fact that the issue whether a contract is a fixed price
contract containing a bar from claiming damages is unrelated to
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whether the arbitration proceedings are under the 1940 Act or
the 1996 Act. In-fact, five of the decisions cited by the petitioner
were all rendered in a challenge to the Award under the 1940
Act.
6.1.36 Judgment of the Delhi High Court in the case Delhi
Development Authority -v- N.N. Buildcon Pvt. Ltd. reported in
2017 SCC OnLine Del 11494 was placed before this Court
wherein the Delhi High Court in the said case affirmed an award
under Section 34 of the 1996 Act even where the clause in the
agreement stipulated that no escalation could be paid for the
work done during the extended period.
6.1.37 The ground of challenge under Section 28(3) of the Act read with
Section 34(2)(a)(iv) of the Act has been deal with in SsangYong
Engineering (supra), wherein it was held that "submission to
arbitration" either refers to the arbitration agreement itself or
disputes submitted to arbitration and that so long as disputes
raised are within the ken of the arbitration agreement, they
cannot be said to be disputes which are either not contemplated
by or which fall outside the arbitration agreement. Further,
where matters are connected with matters in issue, they would
not readily be held to be matters that could be considered to be
outside or beyond the scope of submission. The Hon'ble
Supreme Court in Ssanyong Engineering (supra), while
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referring to State of Goa -v- Praveen Enterprises reported in
(2012) 12 SCC 581 has held that where an arbitral tribunal has
rendered an award which decides the matter either beyond the
scope of arbitration agreement or beyond disputes referred to
arbitral tribunal, as understood by Praveen Enterprises
(supra) , the arbitral award could be said to have dealt with the
decisions on matters beyond the scope of submissions to the
arbitral award. It has held inter alia that in the guise of
misinterpretation of the contract, and consequent "errors of
jurisdiction", it is not possible to state that the award would be
beyond the scope of submission to arbitration, if otherwise, the
aforesaid mis-interpretation (which would include going beyond
the terms of dispute) could be said to have been fairly
comprehended as "disputes" within the arbitration agreement or
which were referred to the decision of the arbitrators, as
understood by authorities quoted in the judgment. To bring in
by back door grounds relatable to Section 28(3) of the Act to be
matters beyond the scope of submission to arbitration under
Section 34(2)(a)(iv) of the Act would not be permissible, as this
ground must be construed narrowly and so construed must
refer only to matters which are beyond arbitration agreement or
beyond reference.
6.1.38 The ground sought to be urged before this Court was not the
case of the petitioner in any form before the arbitral tribunal viz.
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that the correspondence prior to the contract establishes that
the contract was a firm price contract (i.e. even irrespective of
there being any delay on part of the petitioner) and
consequently, the respondent cannot claim any loss or damages
for any delay howsoever long on the part of the petitioner in
fulfilling its obligations under the contract.
6.1.39 In support of its contention that the contract is a firm price
contract and no compensation can be awarded, the petitioner
has cited various judgements. The respondent proceeded to
distinguish each of the aforesaid judgments.
6.1.40 The Price Variation formula has been applied to claim the
incremental cost. The Price Variation formula itself specified the
source of the indices with regard to various coefficients
(Annexure 1 to Annexure 4 and 5 of CW2's evidence). For
example, published price indices of industrial machinery,
commodities, non-electrical machinery, industrial workers, etc.
have been taken by the respondent. The computation based on
the price variation formula taken by the respondent has been
proved by CW - 2. He has also deposed that the price variation
formula is a universal formula and applies to foreign as well as
Indian supplies. In so far as application of Indian indices to
incremental cost in foreign market is concerned, CW - 2 has
deposed that the Indian indices were applied as it was not
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known what would be the actual incremental cost in the foreign
market. The petitioner has neither shown nor demonstrated as
to how the price variation formula applied by the respondent
though not appearing in the contract is incorrect or ought not to
be followed by the arbitral tribunal. The values of the bills raised
which were based on Billing Break Up (BBU), on which the
formula was also applied have also not been disputed by the
petitioner. The computation has not been disturbed by the
petitioner in cross examination or by leading evidence of its
witnesses. The petitioner has not been able to demonstrate in
arbitration proceedings that the PV formula applied by the
respondent cannot be considered for granting incremental cost.
6.1.41 On Issue No. 24, the findings of the arbitral tribunal inter alia at
paragraph 34.4 (j) and (k) of the Award would show that the
evidence of CW-2 has been accepted by the arbitral tribunal and
that the quantum was not disputed, which in the submission of
the respondent is a finding of fact on appreciation of the
evidence in chief as well as cross examination. Insofar as Issue
No. 25 is concerned, the quantum of the claim is discussed in
paragraph 34.4(p) to (t) of the award. The arbitral tribunal has
appreciated the documentary and oral evidence and has
awarded the entire amount claimed towards price variation in
Ash Dyke.
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6.1.42 The Overstay claim (Issue No. 27) relates to the period from
February, 2011 (which is the scheduled date of completion) till
November, 2016 (respondent's activities relating to punch list
items and performance guarantee tests continued).
Furthermore, the claim for Overstay by the respondent had
been deposed by CW-2 in his evidence in chief. Out of the total
amount of INR 168,14,46,445/- claimed by the respondent,
CW-2 has produced an Auditor's Certificate of INR
100,87,95,334/-. The Auditor's Certificate which had been
referred to elaborately during the course of the respondent's
argument is as per Standard on Related Services (SRS) 4400
'Engagement to Perform Agreed-upon Procedures regarding
Financial Information' issued by the Institute of Chartered
Accountants. In Paragraph 5 of the Certificate, the Chartered
Accountants have stated that they have verified that the
amounts in respect of Raghunathpur Project and the amounts
are as per the Books of Accounts of the relevant period and
pertain to the period for which claim is made.
6.1.43 Judgments of the Hon'ble Supreme Court in Haryana Tourism
Limited -v- M/s. Kandhari Beverages Limited reported in
(2022) 3 SCC 237, Delhi Airport Metro Express Pvt. Ltd. -v-
Delhi Metro Rail Corporation reported in (2022) 1 SCC 131,
MMTC Limited -v- Vendata Limited reported in (2019) 4 SCC
163, Ssanyong Engineering and Construction Co. Ltd. -v-
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National Highways Authority of India (NHAI) (supra) outline
the extremely limited scope of interference with an arbitral
award permissible under Section 34 of the Act.
7. Analysis and Conclusion
7.1 Scope of Interference Under Section 34 of the Act
7.1.1 The scope of permitted interference allowed under Section 34 of
the Act needs deliberation before entering into the merits of the
instant dispute. Both sides have extensively cited case laws to
buttress their understanding of the law on Section 34, but this
Court must undertake a neutral and objective assessment of the
jurisprudence with respect to the same.
7.1.2 The Apex Court, in Ssangyong (supra) exhaustively dealt with
the import of the 246th Report of the Law Commission on the
Act and its subsequent influence on the law of setting aside.
Relevant portions are extracted below:-
"26. The Law Commission Report, when it came to setting
aside of domestic awards and recognition or enforcement of
foreign awards, prescribed certain changes to the 1996 Act
as follows:
* * *
35. It is for this reason that the Commission has
recommended the addition of Section 34(2-A) to deal with
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purely domestic awards, which may also be set aside by the
court if the court finds that such award is vitiated by "patent
illegality appearing on the face of the award". In order to
provide a balance and to avoid excessive intervention, it is
clarified in the proposed proviso to the proposed Section
34(2-A) that such 'an award shall not be set aside merely on
the ground of an erroneous application of the law or by
reappreciating evidence'. The Commission believes that this
will go a long way to assuage the fears of the judiciary as
well as the other users of arbitration law who expect, and
given the circumstances prevalent in our country, legitimately
so, greater redress against purely domestic awards. This
would also do away with the unintended consequences of
the decision of the Supreme Court in ONGC v. Saw Pipes Ltd.
[ONGC v. Saw Pipes Ltd., (2003) 5 SCC 705] , which,
although in the context of a purely domestic award, had the
unfortunate effect of being extended to apply equally to both
awards arising out of international commercial arbitrations
as well as foreign awards, given the statutory language of
the Act. The amendment to Section 28(3) has similarly been
proposed solely in order to remove the basis for the decision
of the Supreme Court inONGC v. Saw Pipes Ltd. [ONGC v.
Saw Pipes Ltd., (2003) 5 SCC 705] -- and in order that any
contravention of a term of the contract by the Tribunal should
not ipso jure result in rendering the award becoming capable
of being set aside. The Commission believes no similar
amendment is necessary to Section 28(1) given the express
restriction of the public policy ground.
* * *
39. To elucidate, para 42.1 of Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] ,
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namely, a mere contravention of the substantive law of
India, by itself, is no longer a ground available to set aside
an arbitral award. Para 42.2 of Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] , however, would remain, for if an arbitrator gives
no reasons for an award and contravenes Section 31(3) of
the 1996 Act, that would certainly amount to a patent
illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act
really follows what is stated in paras 42.3 to 45 in Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , namely, that the construction of the
terms of a contract is primarily for an arbitrator to decide,
unless the arbitrator construes the contract in a manner that
no fair-minded or reasonable person would; in short, that the
arbitrator's view is not even a possible view to take. Also, if
the arbitrator wanders outside the contract and deals with
matters not allotted to him, he commits an error of
jurisdiction. This ground of challenge will now fall within the
new ground added under Section 34(2-A).
41. What is important to note is that a decision which is
perverse, as understood in paras 31 and 32 of Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204] , while no longer being a ground for
challenge under "public policy of India", would certainly
amount to a patent illegality appearing on the face of the
award. Thus, a finding based on no evidence at all or an
award which ignores vital evidence in arriving at its decision
would be perverse and liable to be set aside on the ground of
patent illegality. Additionally, a finding based on documents
taken behind the back of the parties by the arbitrator would
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also qualify as a decision based on no evidence inasmuch as
such decision is not based on evidence led by the parties,
and therefore, would also have to be characterised as
perverse.
* * *
76. However, when it comes to the public policy of India,
argument based upon "most basic notions of justice", it is
clear that this ground can be attracted only in very
exceptional circumstances when the conscience of the Court
is shocked by infraction of fundamental notions or principles
of justice. It can be seen that the formula that was applied
by the agreement continued to be applied till February 2013
-- in short, it is not correct to say that the formula under the
agreement could not be applied in view of the Ministry's
change in the base indices from 1993-1994 to 2004-2005.
Further, in order to apply a linking factor, a Circular,
unilaterally issued by one party, cannot possibly bind the
other party to the agreement without that other party's
consent. Indeed, the Circular itself expressly stipulates that
it cannot apply unless the contractors furnish an
undertaking/affidavit that the price adjustment under the
Circular is acceptable to them. We have seen how the
appellant gave such undertaking only conditionally and
without prejudice to its argument that the Circular does not
and cannot apply. This being the case, it is clear that
the majority award has created a new contract for the
parties by applying the said unilateral Circular and by
substituting a workable formula under the agreement
by another formula dehors the agreement. This being
the case, a fundamental principle of justice has been
breached, namely, that a unilateral addition or
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alteration of a contract can never be foisted upon an
unwilling party, nor can a party to the agreement be
liable to perform a bargain not entered into with the
other party. Clearly, such a course of conduct would be
contrary to fundamental principles of justice as followed in
this country, and shocks the conscience of this Court.
However, we repeat that this ground is available only in very
exceptional circumstances, such as the fact situation in the
present case. Under no circumstance can any court interfere
with an arbitral award on the ground that justice has not
been done in the opinion of the Court. That would be an
entry into the merits of the dispute which, as we have seen,
is contrary to the ethos of Section 34 of the 1996 Act, as has
been noted earlier in this judgment."
Emphasis Added
7.1.3 In State of Jharkhand and Others -v- HSS Integrated SDN
and Another reported in (2019) 9 SCC 798, the Apex Court re-
iterated the assertions of law made in a catena of other
judgements. The pertinent portions are cited below:-
"6.1. In Progressive-MVR [NHAI v. Progressive-MVR (JV),
(2018) 14 SCC 688 : (2018) 4 SCC (Civ) 641] , after
considering the catena of decisions of this Court on the scope
and ambit of the proceedings under Section 34 of the
Arbitration Act, this Court has observed and held that even
when the view taken by the arbitrator is a plausible view,
and/or when two views are possible, a particular view taken
by the Arbitral Tribunal which is also reasonable should not
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be interfered with in a proceeding under Section 34 of the
Arbitration Act."
7.1.4 The Apex Court in Delhi Airport Metro Express (supra) again
re-iterated the same position of law in a different manner. The
apposite portions are replicated below:-
"29. Patent illegality should be illegality which goes to the
root of the matter. In other words, every error of law
committed by the Arbitral Tribunal would not fall within the
expression "patent illegality". Likewise, erroneous
application of law cannot be categorised as patent illegality.
In addition, contravention of law not linked to public policy or
public interest is beyond the scope of the expression "patent
illegality". What is prohibited is for Courts to reappreciate
evidence to conclude that the award suffers from patent
illegality appearing on the face of the award, as Courts do
not sit in appeal against the arbitral award. The permissible
grounds for interference with a domestic award under
Section 34(2-A) on the ground of patent illegality is when the
arbitrator takes a view which is not even a possible one, or
interprets a clause in the contract in such a manner which no
fair-minded or reasonable person would, or if the arbitrator
commits an error of jurisdiction by wandering outside the
contract and dealing with matters not allotted to them. An
arbitral award stating no reasons for its findings would
make itself susceptible to challenge on this account. The
conclusions of the arbitrator which are based on no evidence
or have been arrived at by ignoring vital evidence are
perverse and can be set aside on the ground of patent
illegality. Also, consideration of documents which are not
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supplied to the other party is a facet of perversity falling
within the expression "patent illegality".
* * *
49. Even assuming the view taken by the High Court is not
incorrect, we are afraid that a possible view expressed by
the Tribunal on construction of the terms of the Concession
Agreement cannot be substituted by the High Court. This
view is in line with the understanding of Section 28(3) of the
1996 Act as a ground for setting aside the arbitral award, as
held in Associate Builders [Associate Builders v. DDA, (2015)
3 SCC 49 : (2015) 2 SCC (Civ) 204] and thereafter upheld in
Ssangyong [Ssangyong Engg. & Construction Co. Ltd. v.
NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] . No case
has been made out by the High Court to establish violation of
Section 28(3). Having carefully examined the Concession
Agreement, the findings recorded by the Tribunal and the
findings recorded by the Division Bench, we are not in a
position to hold that the opinion of the Tribunal on inclusion
of Rs 611.95 crores under "equity" is a perverse view. It
cannot be said that the Tribunal did not consider the
evidence on record, especially the resolution dated 16-3-
2011 passed by DAMEPL's Board of Directors. We also do not
find fault with the approach of the Tribunal that the
understanding of the term equity as per the Companies Act,
2013 is not relevant for the purposes of determining
"adjusted equity" in light of the express definition of the term
in the Concession Agreement. As has been held in
Ssangyong [Ssangyong Engg. & Construction Co. Ltd. v.
NHAI, (2019) 15 SCC 131 : (2020) 2 SCC (Civ) 213] , mere
contravention of substantive law as elucidated in Associate
Builders [Associate Builders v. DDA, (2015) 3 SCC 49 :
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(2015) 2 SCC (Civ) 204] is no longer a ground available to set
aside an arbitral award. The support placed by the Division
Bench on the interpretation of Section 28(1)(a) of the 1996
Act as adopted in Associate Builders [Associate Builders v.
DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] is, therefore,
no longer good law. In view of the foregoing, we set aside the
findings of the High Court and uphold the award passed by
the Tribunal in respect of the computation of termination
payment under Clause 29.5.2."
7.1.5 The Apex Court in PSA Sical Terminal (P) Ltd. (supra) again
exposited upon the scope of interference and the powers of a
Court under Section 34 of the Act. The relevant paragraphs are
extracted herein below:-
"85. However, ignoring the stand of TPT, by the impugned
Award, the Arbitral Tribunal has thrust upon a new term in
the Agreement between the parties against the wishes of
TPT. The 'royalty payment method' has been totally
substituted by the Arbitral Tribunal, with the 'revenue-
sharing method'. It is thus clear, that the Award has created
a new contract for the parties by unilateral intention of
SICAL as against the intention of TPT.
* * *
87. As such, as held by this Court in Ssangyong Engineering
and Construction Company Limited (supra), the fundamental
principle of justice has been breached, namely, that a
unilateral addition or alteration of a contract has been
foisted upon an unwilling party. This Court has further held
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that a party to the Agreement cannot be made liable to
perform something for which it has not entered into a
contract. In our view, re-writing a contract for the parties
would be breach of fundamental principles of justice entitling
a Court to interfere since such case would be one which
shocks the conscience of the Court and as such, would fall in
the exceptional category.
* * *
89. It has been held that the role of the Arbitrator is to
arbitrate within the terms of the contract. He has no power
apart from what the parties have given him under the
contract. If he has travelled beyond the contract, he would be
acting without jurisdiction.
* * *
92. In that view of the matter, we are of the considered view,
that the impugned Award would come under the realm of
'patent illegality' and therefore, has been rightly set aside by
the High Court."
7.1.6 In Chairman Board of Trustees for Shyama Prasad
Mookherjee Port Kolkata (supra), I have thoroughly dealt with
the law on Section 34 of the Act, contractual interpretation and
restraints on the Court's and arbitrator's power. It is paramount
to reproduce the relevant extracts herein below:-
"22. The arbitrator is the ultimate authority of law and facts.
The symphony of an award can be composed by different
notes of contractual interpretation and trade usages,
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however, the tunes of trade usages cannot deafen or drown
out the chords of univocal understanding between the
parties. The legislative mandate and judicial
pronouncements have granted the arbitrator a wide mandate
to flirt around with interpretation of facts and law. However,
such flirtations are to be rejected when met with resistance
from the unequivocal understanding between the parties.
Such resistance has to be patently evident and must go to
the root of the matter.
* * *
30. Section 28(3) does lay down that an arbitral tribunal
should take into account the terms of the contract and the
trade usages applicable to the transaction. However, in my
understanding, from a reading of the law discussed above
and the section itself, 'terms of the contract' and 'trade
usages' are to be considered conjunctively. The latter may
assist in the understanding of the former, in situations
wherein the former is ambiguous or completely silent. But, at
the cost of repetition, explicit understanding of the parties as
emanating from the contract, that too which have a bearing
on the fundamental issues of dispute, cannot be ousted in
favour of considerations of 'trade usages'. Such an
understanding completely undermines party autonomy. It
could never be the legislative intent. Nor has it been allowed
by courts."
7.1.7 Most recently, in the case of Hindustan Construction
Company Limited -v- National Highways Authority of India
reported in 2023 SCC OnLine SC 1063, the Hon'ble Supreme
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Court reiterated the limited scope of interference available to the
Courts under Section 34 of the Act. I have extracted the relevant
paragraphs below:-
"26. The prevailing view about the standard of scrutiny- not
judicial review, of an award, by persons of the disputants'
choice being that of their decisions to stand-and not
interfered with, [save a small area where it is established
that such a view is premised on patent illegality or their
interpretation of the facts or terms, perverse, as to qualify for
interference, courts have to necessarily chose the path of
least interference, except when absolutely necessary]. By
training, inclination and experience, judges tend to adopt a
corrective lens; usually, commended for appellate review.
However, that lens is unavailable when exercising
jurisdiction under Section 34 of the Act. Courts cannot,
through process of primary contract interpretation, thus,
create pathways to the kind of review which is forbidden
under Section 34. So viewed, the Division Bench's approach,
of appellate review, twice removed, so to say [under Section
37], and conclusions drawn by it, resulted in displacing the
majority view of the tribunal, and in many cases, the
unanimous view, of other tribunals, and substitution of
another view. As long as the view adopted by the majority
was plausible-and this court finds no reason to hold
otherwise (because concededly the work was completed and
the finished embankment was made of composite,
compacted matter, comprising both soil and fly ash), such a
substitution was impermissible.
27. For a long time, it is the settled jurisprudence of the
courts in the country that awards which contain reasons,
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especially when they interpret contractual terms, ought not
to be interfered with, lightly. The proposition was placed in
State of UP v. Allied Constructions:
'[..] It was within his jurisdiction to interpret Clause 47 of the
Agreement having regard to the fact-situation obtaining
therein. It is submitted that an award made by an arbitrator
may be wrong either on law or on fact and error of law on
the face of it could not nullify an award. The award is a
speaking one. The arbitrator has assigned sufficient and
cogent reasons in support thereof. Interpretation of a
contract, it is trite, is a matter for arbitrator to determine (see
Sudarsan Trading Co. v. The Government of Kerala, (1989) 2
SCC 38 : AIR 1989 SC 890). Section 30 of the Arbitration Act,
1940 providing for setting aside an award is restrictive in its
operation. Unless one or the other condition contained in
Section 30 is satisfied, an award cannot be set aside. The
arbitrator is a Judge chosen by the parties and his decision
is final. The Court is precluded from reappraising the
evidence. Even in a case where the award contains reasons,
the interference therewith would still be not available within
the jurisdiction of the Court unless, of course, the reasons
are totally perverse or the judgment is based on a wrong
proposition of law'
28. This enunciation has been endorsed in several cases
(Ref McDermott International Inc. v. Burn Standard Co.
Ltd.18). In MSK Projects (I) (JV) Ltd v. State of Rajasthan19 it
was held that an error in interpretation of a contract by an
arbitrator is "an error within his jurisdiction". The position
was spelt out even more clearly in Associate Builders
(supra), where the court said that:
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'[..] if an arbitrator construes a term of the contract in a
reasonable manner, it will not mean that the award can be
set aside on this ground. Construction of the terms of a
contract is primarily 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.' "
7.1.8 Even in a case under the 1940 Act, the Hon'ble Supreme Court
in its judgment in S.D. Shinde Tr. Partner -v- Govt. of
Maharashtra and Ors. reported in 2023 SCC OnLine SC
1045, propounded that the Courts while considering a
challenge under Section 30 of the 1940 Act have to keep in
mind that the arbitrator is the sole judge of facts and unless an
error of law can be shown, interference with the arbitral award
should be avoided. Relevant portions of the aforesaid judgment
have been extracted below:-
"25. It is axiomatic that courts, while adjudging whether an
arbitration award calls for interference has to be conscious
that the arbitrator is the sole judge of facts; unless an error
of law is shown, interference with the award should be
avoided. In Bijendra Nath Srivastava v. Mayank
Srivastava11 it was observed,
'If the arbitrator or umpire chooses to give reasons in support
of his decision it would be open to the court to set aside the
award if it finds that an error of law has been committed by
the arbitrator umpire on the basis of the recording of such
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reasons. The reasonableness of the reasons given by the
arbitrator cannot, however, be challenged. The arbitrator is
the sole judge of the quality of the evidence and it will not be
for the court to take upon itself the task of being a judge of
the evidence before the arbitrator. The court should approach
an award with a desire to support it, if that is reasonably
possible, rather than to destroy it by calling it illegal. [See
Champsey Bhara & Co v. Jivraj Baloo Spq and Wvg. Co. Ltd.
(AIR 1923 PC 66); Jivrajbhai Ujameshi Sheth v.
Chintamanrao Balaji ((1964) 5 SCR 480); Sudarshan Trading
Co v. Govt of Kerala ((1989) 2 SCC 38); Raipur Development
Authority v. Chokamal Contractors ((1989) 2 SCC 721 :
(1989) 3 SCR 144); and Santa Sila Devi v. Dhirendra Nath
Sen ((1964) 3 SCR 410).'
26. It is also noteworthy that the scope of jurisdiction of a
court, under Section 30/33 of the Act, never extended
beyond discerning if the award disclosed an "error apparent
on the face of the award" which is an "error of law apparent
on the face of the award and not an error of fact. The error of
law can be discovered from the award itself or from a
document actually incorporated therein." (Refer to Trustees
of Port of Madras v. Engineering Constructions12). In the
facts of the present case, the award did not, facially disclose
any error of law; damages were awarded in accordance with
principles embodied in law, and the findings were based on
the evidence placed before the tribunal. The ruling of the trial
courts and the High Court is nothing short of intense
appellate review, which is impermissible in law and beyond
the courts' jurisdiction."
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7.1.9 The principle which emerges from the aforesaid discussion is
that the lens of examination under Section 34 of the Act is
extremely narrow. Courts should exercise their powers under
Section 34 of the Act as a matter of exception. Only if the
decision of the arbitral tribunal is so perverse that it would
shock the conscience of the court, or is so fundamentally
erroneous which no trained legal mind could have arrived at,
the award can be set aside under Section 34 of the Act. Courts
do not act as an appellate forum under Section 34, but as mere
watchdogs to ensure that there is no serious infirmity or
perversity within the arbitral award. In a catena of judgments as
discussed above, the Hon'ble Supreme Court has put the
spotlight on the extremely limited grounds that would invite the
courts to exercise their powers under Section 34 of the Act.
7.2 Patent Illegality - 'On The Face of The Award'
7.2.1 The respondent placed reliance upon the judgment of the Delhi
High Court in Rawla Construction Co. -v- Union of India
(supra), which elucidated that where an arbitrator has not
referred to any clause of the contract, the Court is not
empowered to "read the clause of the contract first and then to
arrive at the conclusion that the arbitrator has gone wrong in
construing terms of the contract.". Furthermore, the Delhi High
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Court also propounded that only when the arbitrator has
"impliedly incorporated" a provision of the contract into the
award, only then can the Court look into that provision.
Relevant portions from the aforesaid judgment have been
reproduced below:-
"11. There is one point of fundamental importance in this
case. The award is a non-speaking award. The arbitrator
has given no reasons. He has not invited us to read clauses
9, 11 and 63 of the Conditions of Contract which are the
mainstay of counsel's argument. With regard to non-
speaking awards the law is clear. In Allen Berry and Co. v.
Union of India, (1971) 1 SCC 295 : AIR 1971 SC 696 (3), the
Supreme Court has said:
'The question whether a contract or a clause of it is
incorporated in the award is a question of construction of the
award. The test is, does the arbitrator come to a finding on
the wording of the contract. If he does, he can be said to
have impliedly incorporated the contract or a clause in it
whichever be the case. But a mere general reference to the
contract in the award is not to be held as incorporating it.
The principle of reading contracts or other documents into the
award is not to be encouraged or extended. The rule thus is
that as the parties choose their own arbitrator to be the
judge in the dispute between them, they cannot, when the
award is good on the face of it, object to the decision either
upon the law or the facts. Therefore, even when an arbitrator
commits a mistake either in law or in fact in determining the
matters referred to him, but such mistake does not appear
on the face of the award or in a document appended to or
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incorporated in it so as to form part of it, the award will
neither be remitted not set aside notwithstanding the
mistake.'
12. The arbitrator has not referred to any clause of the
contract. There not been incorporated in the contract. There
is not permissible for the court to read the clause of the
contract first and then to arrive at the conclusion that the
arbitrator has gone wrong in construing terms of the
contract. This principle is now well settled. The court has
therefore no right to read the clauses of the contract and to
find fault with the arbitrator's by adopting a line of reasoning
of its own.
13. If the arbitrator says "On the wording of this clause I
hold so and so, then that clause is impliedly incorporated
into the award because he invites the reading of it" (Blaiber
& Co. v. Leopold Newborne (London Ltd., (1953) 2 Lloyd's
Rep 427 (4) at p. 429 per Denning LJ). But here there is no
reference to any specific provision of the contract on which
the arbitrator may be said to have based his decision. It is
quite impossible to say that he has incorporated the contract
in the award in the sense that he has invited those reading
the award to read the contract "The principle of reading
contracts or other documents into the award is not one to be
encouraged or extended." I am therefore not entitled, on an
award which is non-speaking, to look at the contract and
search it in order to see whether there is an error of law. The
award is delphic. The arbitrator has not given any reasons
why he has arrived at the conclusion he did. They will
always remain in the breast of the arbitrator. The route of
reasoning he adopted for himself the court will never know.
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The court has no means to enter his mind and to explore his
thought processes."
7.2.2 I feel it is prudent to talk about the judgment of the Privy
Council in Champsey Bhara and Company -v- Jivraj Balloo
Spinning and Weaving Company Limited (supra) upon which
reliance was placed by the respondent. The position of law
present at that time which emerges from the aforesaid judgment
is that an arbitration award could only be interfered with on the
ground of error of law on face of the award either in a case
where in the award or in a document which is incorporated
within the award, some legal proposition is found which is the
basis of the award and which is erroneous. I have extracted the
relevant paragraphs from the aforesaid judgment below:-
"The law on the subject has never been more clearly stated
than by Williams, J., in the case of Hodgkinson v. Fernie [3
C.B.N.S. 189 (1857).] :--
'The law has for marry years been settled and remains so at
this day, that, where a cause or matters in difference are
referred to an arbitrator, whether a lawyer or a layman, he
is constituted the sole and final judge of all questions both of
law and of fact .... The only exceptions to that rule are cases
where the award is the result of corruption or fraud, and one
other, which though it is to be regretted, is now, I think,
firmly established, viz., where the question of law
necessarily arises on the face of the award or upon some
paper accompanying and forming part of the award. Though
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the propriety of this latter may very well be doubted, I think
it may be considered as established.'
This view has been adhered to in many subsequent cases,
and in particular in the House of Lords in British
Westinghouse Company v. Underground Electric Bailways
Company [[1912] A.C. 673.].
The question to be decided is: Does the error in law appear
on the face of the award? In the British Westinghouse case
[[1912] A.C. 673.], it clearly did. The arbitrator had stated a
special case and got an opinion of the Divisional Court; in
making his award he stated that opinion and founded his
award upon it. The opinion as given was held to be
erroneous, and so there was an error in law on the face of
the award. In Landauer v. Asser [[1905] 2 K.B. 184.] , the
state of affairs was different. The question was as to liability
and interest on a policy of insurance effected by sellers for
and on account of buyers, and the arbitrator framed his
award thus:--
'I decide that as the parties to the contract dated the 3rd
November, 1903, were by the terms thereof principals
thereto, their interest and liability in insurance is defined to
be the value of the invoice plus 5 per cent and that the
buyers are therefore entitled to and only to the said amount,
the balance one way or the other being due from or to the
sellers.'...
Now the regret expressed by Williams, J., in Hodgkinson v.
Fernie [3 C.B.N.S. 189 (1857).] has been repeated by more
than one learned Judge, and it is certainly not to be desired
that the exception should be in any way extended. An error
in law on the face of the award means, in their Lordships'
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view, that you can find in the award or a document actually
incorporated thereto, as for instance, a note appended by the
arbitrator stating the reasons for his judgment, some legal
proposition which is the basis of the award and which you
can then say is erroneous. It does not mean that if in a
narrative a reference is made to a contention of one party
that opens the door to seeing first what that contention is,
and then going to the contract on which the parties' rights
depend to see if that contention is sound. Here it is
impossible to say, from what is shown on the face of the
award, what mistake the arbitrators made. The only way
that the learned Judges have arrived at finding what the
mistake, was is by saying: "Inasmuch as the arbitrators
awarded so and so, and inasmuch as the letter shows that
the buyer rejected the cotton, the arbitrators can only have
arrived at that result by totally misinterpreting cl. 52." But
they were entitled to give their own interpretation to cl. 52 or
any other article, and the award will stand unless, on the
face of it, they have tied themselves down to some special
legal proposition which then, when examined, appears to be
unsound. Upon this point, therefore, their Lordships think
that the judgment of Pratt, J. was right and the conclusion of
the learned Judges of the Court of Appeal erroneous."
7.2.3 It was argued that, in M/s. Allen Berry & Co. Pvt. Ltd -v-
Union of India (supra), the Hon'ble Supreme Court held that
even an "error apparent on the record" would not entitle the
Court to consider documents which were placed before the
umpire i.e. the arbitrator, but which do not a form a part of or
are incorporated into the award and make a search if those
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documents have been misconstrued by the umpire i.e. the
arbitrator.
7.2.4 In Jaljodia Overseas (Pvt.) Ltd -v- Industrial Development
Corporation of Orissa Ltd reported in (1993) 2 SCC 106, the
Hon'ble Supreme Court while dealing with a challenge to an
arbitral award under Section 30 of the 1940 Act held that for
the Courts to interfere with an arbitral award an "error apparent
on the face of the award" must be shown. Relevant paragraphs
have been extracted below:-
"9. That the arbitrator merely referred to the pleadings filed
before him does not mean that the pleadings are
incorporated in the award. As was said in the context of a
contract, in a passage quoted by this Court with approval in
Allen Berry and Co. v. Union of India [(1971) 1 SCC 295 : AIR
1971 SC 696] from the judgment of Diplock, L.J. in Giacomo
Costa Fu Andrea v. British Italian Trading Co. Ltd. [(1962) 2
All ER 53, 62] : (SCC p. 300, para 8)
'It seems to me, therefore, that, on the cases, there is none
which compels us to hold that a mere reference to the
contract in the award entitles us to look at the contract. It
may be that in particular cases a specific reference to a
particular clause of a contract may incorporate the contract,
or that clause of it, in the award. I think that we are driven
back to first principles in this matter, namely, that an award
can only be set aside for error which is on its face. It is true
that an award can incorporate another document so as to
entitle one to read that document as part of the award and,
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by reading them together, find an error on the face of the
award.'
The question whether a contract or a clause of it is
incorporated in the award is a question of construction of the
award. The test is, does the arbitrator come to a finding on
the wording of the contract. If he does, he can be said to
have impliedly incorporated the contract or a clause in it
whichever be the case. But a mere general reference to the
contract in the award is not to be held as incorporating it."
The arbitrator merely referred to the fact that parties had
"filed their statements" before him and that he had given
"careful consideration to all the written statements,
documents and evidence and the arguments". This is not
such a reference as can be said to incorporate the pleadings
before him in the award.
* * *
11. Even assuming the incorporation of the agreement, an
error apparent upon the face of the award had to be shown.
We may refer with advantage to this Court's judgment in
Bungo Steel Furniture Pvt. Ltd. v. Union of India [(1967) 1
SCR 633 : AIR 1967 SC 378] . The court quoted the well-
known passage from the judgment of Lord Dunedin in
Champsey Bhara and Co. v. Jivraj Balloo Spinning and
Weaving Co. Ltd. [50 IA 324 : AIR 1923 PC 66] thus:
'An error in law on the face of the award means, in their
Lordships' view, that you can find in the award or a
document actually incorporated thereto, as for instance a
note appended by the arbitrator stating the reasons for his
judgment, some legal proposition which is the basis of the
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award and which you can then say is erroneous. It does not
mean that if in narrative a reference is made to a contention
of one party, that opens the door to seeing first what that
contention is, and then going to the contract on which the
parties' rights depend to see if that contention is sound.'
It went on to observe:
'An award may be set aside by the court on the ground of an
error of law apparent on the face of the award but an award
is not invalid merely because by a process of inference and
argument it may be demonstrated that the arbitrator has
committed some mistake in arriving at his conclusion.' "
7.2.5 While the Rawla Construction (supra) judgment was an
unsuccessful attempt on the part of the respondent to shut the
eyes of this Court from peeking into the contract, I nevertheless
want to clarify, that even on the face of it, the aforesaid
judgment holds no influential value in the instant case. Firstly,
the judgment was delivered in a case where the award in
challenge was a non - speaking one delivered under the 1940
Act, which had no statutory requirement for the arbitrators to
provide reasons for their findings unless the parties had agreed
otherwise. However, in the 1996 Act by virtue of Section 31(3),
and as affirmed by the Hon'ble Supreme Court in Dyna
Technologies (supra), reasons have to mandatorily accompany
the findings in an arbitral award unless the parties have agreed
otherwise. (which is not the case here, reference is made to
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Clause 6.2.9 of GCC). Secondly, while the Courts cannot
embark upon a journey to interpret the terms of the contract
themselves, a job which squarely falls within the domain of the
arbitral tribunal, they are nonetheless empowered under
Section 34 of the Act, to ensure that the arbitrators have not
ventured beyond the explicit understanding between the parties
contained in the contract. Finding their genesis in the contract
itself, an arbitral tribunal is not entitled to venture beyond the
contract. The creation cannot act against its creator.
7.2.6 While the governing law on arbitration has evolved since Allen
Berry (supra), the jurisprudence on the scope of interference
with arbitral awards has also evolved even though the
underlying principle of limited and restrictive interference
remains the same. Arbitral awards can only be interfered with
in certain exceptional cases as outlined in Section 34 of the Act
and further espoused by the Hon'ble Supreme Court in various
judgments as discussed. But, in a fundamental shift from the
principle outlined in Allen Berry (supra), Courts are now
empowered under Section 34 of the Act to ascertain if a
document placed in evidence before the arbitral tribunal has
been fallaciously interpreted or if while arriving at its finding,
arbitral tribunal has not taken into account vital evidence which
was placed before it and was a part of the record of arbitral
proceedings.
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7.2.7 It is a well-established principle of law that the scope of
examination under Section 34 of the Act is extremely limited
and the Courts cannot interfere with arbitral awards in a casual
and insouciant manner. Nobody is perfect and neither are
arbitral awards. While arbitral awards cannot be held to the
similar standards as Courts orders or judgments, there are
certain principles of judicial propriety that they are expected to
adhere to. To say that the courts under Section 34 can only look
at the award and a document incorporated within the award, in
my humble opinion, would be a fallacious reading of the law. In
my view, even if a document has not been incorporated or
referred to in the award, but was a part of the record of arbitral
proceedings, and was within the knowledge of the arbitral
tribunal, the same can be taken into account by the Court while
adjudicating a challenge under Section 34. If an arbitral award
has been rendered on a completely perverse interpretation of
evidence presented before it, or vital evidence has not been paid
heed to, then such an award would not be able to pass muster
under Section 34. However, I must also clarify that no
additional evidence, beyond what was before the arbitral
tribunal and was a part of the record of arbitral proceedings will
be ordinarily taken into account by a Court under Section 34 of
the Act.
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7.3. 1940 Act and 1996 Act
7.3.1 Since several judgments relied upon by the parties were
delivered under the 1940 Act, this Court considers it integral to
talk about the evolution of the jurisprudence on the challenge to
an arbitral award on the grounds of patent illegality as it existed
then and as it exists now. Under the 1940 Act, Section 30 of the
said Act dealt with the grounds on which arbitral awards could
be challenged. The said section has been extracted below:-
"30. Grounds for setting aside award.-- An award shall
not be set aside except on one or more of the following
grounds, namely--
(a) that an arbitrator or umpire has misconducted himself or
the proceedings;
(b) that an award has been made after the issue of an order
by the Court superseding the arbitration or after arbitration
proceedings have become invalid under Section 35;
(c) that an award has been improperly procured or is
otherwise invalid."
In addition to Section 30, Section 16 of the 1940 Act permitted the
Courts to remit the award back to the arbitrator on certain
grounds. I have extracted the said section below:-
"16. Power to remit award.--(1) The Court may from time
to time remit the award or any matter referred to arbitration
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to the arbitrators or umpire for reconsideration upon such
terms as it thinks fit--
(a) where the award has left undetermined any of the
matters referred to arbitration, or where it determines any
matter not referred to arbitration and such matter cannot be
separated without affecting the determination of the matters
referred; or
(b) where the award is so indefinite as to be incapable of
execution; or
(c) where an objection to the legality of the award is
apparent upon the face of it."
Emphasis Added
7.3.2 After the enactment of the Act of 1996, challenge to an arbitral
award is dealt under Section 34 of the Act, including the power
of the Courts to remit the matter back to an arbitrator. I have
extracted the said section below for ease of reference:-
"34. Application for setting aside arbitral award.--(1)
Recourse to a Court against an arbitral award may be made
only by an application for setting aside such award in
accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if--
(a) the party making the application establishes on the basis
of the record of the arbitral tribunal that--
(i) a party was under some incapacity; or
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(ii) the arbitration agreement is not valid under the law to
which the parties have subjected it or, failing any indication
thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper
notice of the appointment of an arbitrator or of the arbitral
proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contemplated
by or not falling within the terms of the submission to
arbitration, or it contains decisions on matters beyond the
scope of the submission to arbitration:
Provided that, if the decisions on matters submitted to
arbitration can be separated from those not so submitted,
only that part of the arbitral award which contains decisions
on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral
procedure was not in accordance with the agreement of the
parties, unless such agreement was in conflict with a
provision of this Part from which the parties cannot derogate,
or, failing such agreement, was not in accordance with this
Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being in
force, or
(ii) the arbitral award is in conflict with the public policy of
India.
[Explanation 1.--For the avoidance of any doubt, it is
clarified that an award is in conflict with the public policy of
India, only if,--
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(i) the making of the award was induced or affected by fraud
or corruption or was in violation of Section 75 or Section 81;
or
(ii) it is in contravention with the fundamental policy of
Indian law; or
(iii) it is in conflict with the most basic notions of morality or
justice.
Explanation 2.--For the avoidance of doubt, the test as to
whether there is a contravention with the fundamental policy
of Indian law shall not entail a review on the merits of the
dispute.]
(2-A) An arbitral award arising out of arbitrations other than
international commercial arbitrations, may also be set aside
by the court, if the court finds that the award is vitiated by
patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the
ground of an erroneous application of the law or by
reappreciation of evidence."
Emphasis Added
7.3.3 Furthermore, Section 28(3) and 31(3) of the Act have also been
extracted below:-
"28. Rules applicable to substance of dispute.--(1)
Where the place of arbitration is situated in India,--
[(3) While deciding and making an award, the arbitral
tribunal shall, in all cases, take into account the terms of the
contract and trade usages applicable to the transaction.]
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31. Form and contents of arbitral award.--
(3) The arbitral award shall state the reasons upon which it
is based, unless--
(a) the parties have agreed that no reasons are to be given;
or
(b) the award is an arbitral award on agreed terms under
Section 30."
7.3.4 What is evident from a reading of the 1940 Act and the 1996 Act
is the common usage of the term "patent illegality appearing
on the face of the award" (1996 Act) and "objection to the
legality of the award is apparent upon the face of it." (1940
Act). In Lennon -v- Gibson and Howes reported in AIR 1919
PC 142, Lord Shaw propounded that use of same words in
similar connect in a later statute gives rise to a presumption
that they are intended to convey the same meaning as in the
earlier statute. In H.L. D'Emden -v- F. Pedder reported in 1
C.L.R. 91, it was held that:-
"When a particular form of legislative enactment, which has
received authoritative interpretation, whether by judicial
decision or by a long course of practice, is adopted in the
framing of a later statute, it is a sound rule of construction to
hold that the words so adopted were intended by the
Legislature to bear the meaning which has been so put upon
them."
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What can be inferred from the usage of similar words in a later
enactment by the Legislature on the same subject can be that
those words are intended to convey similar meaning as used in
the earlier statute. However, another factor in consideration is
how the usage of those words have evolved over time and how
those words have been interpreted by the Courts over time. A
reading of judgments delivered on 1940 Act and 1996 Act,
would make it evident that while the basic intent to restrict
judicial interference with arbitral awards on the ground of
patent illegality to "an error apparent on the face of the award"
remains the same, the scope of examination available to the
Courts has been narrowly expanded. While under the 1940 Act,
scope of examination was restricted to the award and the
documents incorporated within the award only, under the 1996
Act, while adjudicating on whether an award delivered in a
domestic arbitration has been vitiated by "patent illegality"
Courts can take into account even those documents which,
although not incorporated within the award, were a part of the
record of the arbitral proceedings.
7.3.5 Moreover, when a subsequent legislative enactment on a
similar issue is propounded by the legislature, changes and
additions made in the later legislation also need to be taken
into account when inferring the meaning of similar words
used in both the earlier and the later legislations. This is
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so, because a statute has to be read as a whole, and not in
parts. Every section of a particular statute has to be read in
consonance and harmony with the other sections.
While the usage of the term "patent illegality" appearing on
the face of the award remains similar in both the 1940 Act
and the 1996 Act, Section 28(3) and Section 31(3) have also
been incorporated within the 1996 Act. While Section 28(3)
mandates the arbitral tribunal to follow the terms of the
Contract, Section 31(3) requires reasons to accompany the
findings in an arbitral award.
7.3.6 The Apex Court's decision in Dyna (supra) sheds light on the
requirement of giving reasons, explains the requisite
characteristics of such reasons in an arbitral award and lists
out the resulting consequence of it being set aside under
Section 34 of the Act. The paragraphs which are germane are
reproduced below:-
"34. The mandate under Section 31(3) of the Arbitration Act
is to have reasoning which is intelligible and adequate and,
which can in appropriate cases be even implied by the courts
from a fair reading of the award and documents referred to
thereunder, if the need be. The aforesaid provision does not
require an elaborate judgment to be passed by the
arbitrators having regard to the speedy resolution of dispute.
35. When we consider the requirement of a reasoned order,
three characteristics of a reasoned order can be fathomed.
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They are: proper, intelligible and adequate. If the reasonings
in the order are improper, they reveal a flaw in the decision-
making process. If the challenge to an award is based on
impropriety or perversity in the reasoning, then it can be
challenged strictly on the grounds provided under Section 34
of the Arbitration Act. If the challenge to an award is based
on the ground that the same is unintelligible, the same would
be equivalent of providing no reasons at all. Coming to the
last aspect concerning the challenge on adequacy of reasons,
the Court while exercising jurisdiction under Section 34 has
to adjudicate the validity of such an award based on the
degree of particularity of reasoning required having regard to
the nature of issues falling for consideration. The degree of
particularity cannot be stated in a precise manner as the
same would depend on the complexity of the issue. Even if
the Court comes to a conclusion that there were gaps in the
reasoning for the conclusions reached by the Tribunal, the
Court needs to have regard to the documents submitted by
the parties and the contentions raised before the Tribunal so
that awards with inadequate reasons are not set aside in
casual and cavalier manner. On the other hand, ordinarily
unintelligible awards are to be set aside, subject to party
autonomy to do away with the reasoned award. Therefore,
the courts are required to be careful while distinguishing
between inadequacy of reasons in an award and
unintelligible awards."
7.3.7 The Hon'ble Supreme Court in Indian Oil Corpn. Ltd. -v-
Shree Ganesh Petroleum reported in (2022) 4 SCC 463
propounded that the arbitral tribunal cannot act beyond the
terms of the contract under which it has been constituted.
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Relevant paragraph from the said judgment has been extracted
below:-
"43. An Arbitral Tribunal being a creature of contract, is
bound to act in terms of the contract under which it is
constituted. An award can be said to be patently illegal
where the Arbitral Tribunal has failed to act in terms
of the contract or has ignored the specific terms of a
contract."
Emphasis Added
7.3.8 What emerges from the aforesaid discussion is that
although while looking for "patent illegality" in a challenge
to an arbitral award under 1940 Act, courts were not
empowered to go beyond the text of the award and the
documents explicitly incorporated within it, the same is not
the case while dealing with the challenge to an arbitral
award under the 1996 Act. While dealing with the challenge
to an arbitral award under Section 34 of the Act, if a
challenge has been raised that the award is contrary to
Section 28(3) and Section 31(3) of the Act, Courts cannot be
stopped from going beyond the mere text of the award and
the documents which have been incorporated within the
award. Since, in Associate Builders (supra), it has already
been held that any award which is in violation of the
provisions of the Act cannot be sustained, Courts are duty
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bound under Section 34 to ensure that the award is in
compliance of the provisions of the Act. As a result,
sometimes Courts would have to venture beyond what is
just contained in the award and can look at the entire
record of arbitral proceedings.
7.3.9 The proposition that emerges is that the arbitrator's decision on
the facts and interpretation of the contract are final and should
not be unsettled, even if alternative views are possible or more
legally sound. However, if the contractual understanding is very
explicit in its expression and the award goes astray, so to say,
against clear provisions of the contract, then the award can be
set aside. For example, if the contract is silent or ambiguous on
a point, the arbitrator's approach in dealing with such silences
are not to be interfered with on the grounds of patent illegality,
unless they fall under other sub-heads provided under Section
34 of the Act.
7.4 Discussion on Price Escalation
7.4.1 At this juncture, it would be appropriate to set out the plethora
of judgements along with their relevant portions wherein the
Apex Court has set aside awards in cases where price escalation
was awarded since it is one of the primary grounds on which
challenge has been raised by the award debtor (petitioner) to the
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arbitral award dated December 21, 2019. The cases and their
relevant portions cited by the award debtor are herein produced
below:-
a) Associated Engineering Company (supra) :
"21. These four claims are not payable under the contract.
The contract does not postulate -- in fact it prohibits --
payment of any escalation under claim No. III for napa slabs
or claim No. VI for extra lead of water or claim No. IX for
flattening of canal slopes or claim No. II for escalation in
labour charges otherwise than in terms of the formula
prescribed by the contract. This conclusion is reached not by
construction of the contract but by merely looking at the
contract. The umpire travelled totally outside the permissible
territory and thus exceeded his jurisdiction in making the
award under those claims. This is an error going to the root
of his jurisdiction : See Jivarajbhai Ujamshi Sheth v.
Chintamanrao Balaji [(1964) 5 SCR 480 : AIR 1965 SC 214] .
We are in complete agreement with Mr Madhava Reddy's
submissions on the point.
* * *
25. An arbitrator who acts in manifest disregard of the
contract acts without jurisdiction. His authority is derived
from the contract and is governed by the Arbitration Act
which embodies principles derived from a specialised branch
of the law of agency (see Mustill and Boyd's Commercial
Arbitration, 2nd edn., p. 641). He commits misconduct if by
his award he decides matters excluded by the agreement
(see Halsbury's Laws of England, Volume II, 4th edn., para
622). A deliberate departure from contract amounts to not
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only manifest disregard of his authority or a misconduct on
his part, but it may tantamount to a mala fide action. A
conscious disregard of the law or the provisions of the
contract from which he has derived his authority vitiates the
award."
b) New India Civil Erectors (supra) :
"10. Claim 9: The appellant claimed an amount of Rs
32,21,099.89p under this head, against which the
arbitrators have awarded a sum of Rs 16,31,425. The above
claim was made on account of escalation in the cost of
construction during the period subsequent to the expiry of
the original contract period. The appellant's claim on this
account was resisted by the respondent-Corporation with
reference to and on the basis of the stipulation in the
Corporation's acceptance letter dated 10-1-1985 which
stated clearly that "the above price is firm and is not
subject to any escalation under whatsoever ground till
the completion of the work". The Division Bench has
held, and in our opinion rightly, that in the face of the said
express stipulation between the parties, the appellant could
not have claimed any amount on account of escalation in the
cost of construction carried on by him after the expiry of the
original contract period. The aforesaid stipulation provides
clearly that there shall be no escalation on any ground
whatsoever and the said prohibition is effective till the
completion of the work The learned arbitrators, could not
therefore have awarded any amount on the ground that the
appellant must have incurred extra expense in carrying out
the construction after the expiry of the original contract
period. The aforesaid stipulation between the parties is
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binding upon them both and the arbitrators. We are of the
opinion that the learned Single Judge was not right in
holding that the said prohibition is confined to the original
contract period and does not operate thereafter. Merely
because time was made the essence of the contract and the
work was contemplated to be completed within 15 months, it
does not follow that the aforesaid stipulation was confined to
the original contract period. This is not a case of the
arbitrators construing the agreement. It is a clear case of the
arbitrators acting contrary to the specific
stipulation/condition contained in the agreement between
the parties. We, therefore, affirm the decision of the Division
Bench on this count as well (claim 9).'
Emphasis Added
c) Rajasthan State Mines (supra) :
'21. Despite the admission by the contractor, it is apparent
that the arbitrator has ignored the aforesaid stipulations in
the contract. In the award, the arbitrator has specifically
mentioned that he has given due weightage to all the
documents placed before him and has also considered the
admissibility of each claim. However, while passing the
award basic and fundamental terms of the agreement
between the parties are ignored. By doing so, it is apparent
that he has exceeded his jurisdiction.
22. Further, in the present case, there is no question of
interpretation of clauses 17 and 18 as the said
clauses are so clear and unambiguous that they do not
require any interpretation. It is both, in positive and
negative terms by providing that the contractor shall
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be paid rates as fixed and that he shall not be entitled
to extra payment or further payment for any ground
whatsoever except as mentioned therein. The rates
agreed were firm, fixed and binding irrespective of any fall or
rise in the cost of the work covered by the contract or for any
other reason or any ground whatsoever. It is specifically
agreed that the contractor will not be entitled or justified in
raising any claim or dispute because of increase in cost of
expenses on any ground whatsoever. By ignoring the said
terms, the arbitrator has travelled beyond his jurisdiction as
his existence depends upon the agreement and his function
is to act within the limits of the said agreement. This
deliberate departure from the contract amounts not only to
manifest disregard of the authority or misconduct on his part
but it may tantamount to mala fide action.
* * *
45. In view of the aforesaid law and the facts stated above,
it is apparent that the award passed by the arbitrator is
against the stipulations and prohibitions contained in the
contract between the parties. In the present case, there is no
question of interpretation of clauses 17 and 18 as the
language of the said clauses is absolutely clear and
unambiguous. Even the contractor has admitted in his letter
demanding such claims that the contract was signed with
the clear understanding that the rate under the contract was
firm and final and no escalation in rates except in case of
diesel would be granted. Hence, by ignoring the same, the
arbitrator has travelled beyond his jurisdiction. It amounts to
a deliberate departure from the contract. Further, the
reference to the arbitrator is solely based upon the
agreement between the parties and the arbitrator has stated
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so in his interim award that he was appointed to adjudicate
the disputes between the parties arising out of the
agreement. No specific issue was referred to the arbitrator
which would confer jurisdiction on the arbitrator to go
beyond the terms of the contract. Hence, the award passed
by the arbitrator is, on the face of it, illegal and in excess of
his jurisdiction which requires to be quashed and set aside."
Emphasis Added
d) State of Orissa (supra) :
"2. It is not disputed that the arbitration agreement
contained no escalation clause. In the absence of any
escalation clause, an arbitrator cannot assume any
jurisdiction to award any amount towards escalation. That
part of the award which grants escalation charges is clearly
not sustainable and suffers from a patent error. The decree,
insofar as the award of escalation charges is concerned,
cannot, therefore, be sustained.'
e) Ramnath International (supra):
"11. Clause 11 of the General Conditions of Contract relates
to time, delay and extension. We extract below the portions
of clause 11 relevant for our purpose:
'11. Time, delay and extension.--(A) Time is of the essence of
the contract and is specified in the contract documents or in
each individual works order.
As soon as possible, after contract is let or any substantial
work order is placed and before work under it is begun, the
GE and the contractor shall agree upon the time and
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progress chart. The chart shall be prepared in direct relation
to the time stated in the contract documents or the works
order for completion of the individual items thereof and/or
the contract or works order as a whole. It shall include the
forecast of the dates for commencement and completion of
the various trades, processes or sections of the work, and
shall be amended as may be required by agreement
between the GE and the contractor within the limitation of
time imposed in the contract documents or works order. If
the work be delayed:
(i) by force majeure, or
(ii) by reason of abnormally bad weather, or
(iii) by reason of serious loss or damage by fire, or
(iv) by reason of civil commotion, local combination of
workmen, strike or lockout, affecting any of the tradesmen
employed on the work, or
(v) by reason of delay on part of nominated sub-contractors,
or nominated suppliers which the contractor has, in the
opinion of GE, taken all practicable steps to avoid, or reduce,
or
(vi) by reason of delay on the part of contractors or
tradesmen engaged by the Government in executing work
not forming part of the contract, or
* * *
(viii) by reason of any other cause, which in the absolute
discretion of the accepting officer is beyond the contractor's
control;
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then in any such case the officer hereinafter mentioned may
make fair and reasonable extension in the completion dates
of individual items or groups of items of works for which
separate periods of completion are mentioned in the contract
documents or works order, as applicable.
* * *
(B) If the works be delayed:
(a) by reason of non-availability of government stores in
Schedule B or
(b) by reason of non-availability or breakdown of government
tools and plant listed in Schedule C;
then, in any such event, notwithstanding the provisions
hereinbefore contained, the accepting officer may in his
discretion, grant such extension of time as may appear
reasonable to him and the same shall be communicated to
the contractor by the GE in writing. The decision so
communicated shall be final and binding and the contractor
shall be bound to complete the works within such extended
time.
(C) No claim in respect of compensation or otherwise,
howsoever arising, as a result of extensions granted under
Conditions (A) and (B) above shall be admitted.'
12. Clause (C) provides that where extensions have been
granted by reason of the delays enumerated in clause (A)
which were beyond the control of the contractor, or on
account of the delays on the part of the employer specified in
clause (B), the contractor is not entitled to make any claim
either for compensation or otherwise, arising in whatsoever
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manner, as a result of such extensions. After enumerating
certain delays, sub-clause (viii) of clause (A) specifically
mentions delay on account of any other cause beyond the
control of the contractor. The causes for delays specified in
clause (A), thus, encompass all delays over which the
contractor has no control. This will necessarily include any
delays attributable to the employer or any delay for which
both the employer and the contractor are responsible. The
contract thus provides that if there is any delay, attributable
either to the contractor or the employer or to both, and the
contractor seeks and obtains extension of time for execution
on that account, he will not be entitled to claim compensation
of any nature, on the ground of such delay, in addition to the
extension of time obtained by him. Therefore, the claims for
compensation as a consequence of delays, that is Claim 24
of the Hangar Contract and Claims 13 to 16 of the Road
Contract are barred by clause 11(C).
13. We are fortified in this view by several decision of this
Court. We may refer to two of them. In Associated Engg. Co.
v. Govt. of A.P. [(1991) 4 SCC 93] this Court was concerned
with an appeal which related to similar claims based on
delays in execution. The High Court had held (State of A.P. v.
Associated Engg. Enterprises [AIR 1990 AP 294 : (1989) 2 An
LT 372] ) thus: (AIR p. 304, para 26)
'26. Applying the principle of the above decision to the facts
of the case before us, it must be held that clause 59 bars a
claim for compensation on account of any delays or
hindrances caused by the department. In such a case, the
contractor is entitled only to extension of the period of
contract. Indeed, such an extension was asked for, and
granted on more than one occasion. (The penalty levied for
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completing the work beyond the extended period of contract
has been waived in this case.) The contract was not avoided
by the contractor, but he chose to complete the work within
the extended time. In such a case, the claim for
compensation is clearly barred by clause 59 of the A.P. DSS
which is admittedly, a term of the agreement between the
parties.'
14. This Court noticed that the claims were set aside by the
High Court on the ground that those claims were not
supported by any agreement between the parties, and that
the arbitrator had travelled outside the contract in awarding
those claims. This Court held that the said claims were not
payable under the contract and that the contract does not
postulate, in fact prohibits, payment of any escalation under
those heads. It affirmed the decision of the High Court
setting aside the award of those claims."
7.4.2 Before I proceed to deal with these judgments, it will be prudent
to reproduce the firm price clause present in the instant case.
Clause 11.1 of the GCC, which deals with firm price, reads as
follows:-
"11.1 The Contract Price shall be on firm price basis."
7.4.3 Judgments cited by the petitioner to my mind, do not help its
case for the reasons as discussed:-
(a) In, Associate Engineerings (supra), a reference to
paragraph 21, makes it evident that the Contract explicitly
prohibited payment of any escalation. Since there was an
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explicit prohibition in the contract, the award of escalation
was completely outside the jurisdiction of the arbitrator.
However, in the instant case, the clause does not explicitly
prohibit award of escalation.
(b) In, New India Civil Erectors (supra), the stipulation
between the parties was that "the above price is firm and is
not subject to any escalation under whatsoever ground till
the completion of the work." In such a case, the arbitrators
erred in awarding escalation even though the construction
extended beyond the original contract period.
But, in a situation, where the contract itself provides that
the contract shall be on a firm price basis, but is silent on
escalation, then if the work extends beyond the period
which the contract originally stipulated, arbitral tribunal
will be empowered to award escalation costs, in its own
wisdom.
(c) In, Rajasthan State Mines & Minerals Ltd (supra),
Clause 18(c) of the Contract clearly stated that "(c) The
rates shall remain firm, fixed and binding irrespective of
any fall or rise in the cost of mining operations of the work
covered by the contract or for any other reason
whatsoever." However, in the instant case there is no such
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stipulation prohibiting escalation for any reason
whatsoever.
(d) In, Ramnath International (supra), it was provided that
"No claim in respect of compensation or otherwise,
howsoever arising, as a result of extensions granted under
Conditions (A) and (B) above shall be admitted." In the
instant case, there is no such provision.
7.4.4 In NTPC Limited -v- Deconar Services Pvt. Ltd. reported in
2021 SCC OnLine SC 498, the decision in State of Orissa -v-
Sudhakar Das (Dead) by Lrs (supra) was distinguished as
follows:-
"23. In State of Orissa v. Sudhakar Das (Dead) by Lrs,
(2000) 3 SCC 27, this Court was not seized of the issue of
grant of escalation charges beyond the period of the contract
or with respect to delay. As such, it has limited applicability
to the present case."
Furthermore, the Hon'ble Supreme Court in Para 25 clarified
that:-
"25. It is clear from the above analysis that any decision
regarding the issue of whether an arbitrator can award a
particular claim or not, will revolve on the construction of the
contract in that case, the evidence placed before the
arbitrator and other facts and circumstances of the case. No
general principle can be evolved as to whether some claim
can be granted or not. The judgments placed on record by
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the appellant, wherein claim for escalation was denied, have
to therefore be read in the context of their facts, and cannot
be read in isolation. It is clear that all the judgments cited by
the appellant can be distinguished on facts."
7.4.5 It was argued in its judgment in Assam State Electricity
Board and Ors. -v- Buildworth Private Limited (supra), the
Hon'ble Supreme Court had held that price escalation would not
bind a party beyond the scheduled date of completion. I have
extracted the relevant portions from the said judgment below:-
"13. The arbitrator has taken the view that the provision for
price escalation would not bind the claimant beyond the
scheduled date of completion. This view of the arbitrator is
based on a construction of the provisions of the contract, the
correspondence between the parties and the conduct of the
Board in allowing the completion of the contract even beyond
the formal extended date of 6-9-1983 up to 31-1-1986.
Matters relating to the construction of a contract lie within
the province of the Arbitral Tribunal. Moreover, in the present
case, the view which has been adopted by the arbitrator is
based on evidentiary material which was relevant to the
decision. There is no error apparent on the face of the record
which could have warranted the interference of the court
within the parameters available under the Arbitration Act,
1940. The arbitrator has neither misconducted himself in the
proceedings nor is the award otherwise invalid.
14. The view which has been adopted by the arbitrator is in
fact in accord with the principles enunciated in the
judgments of this Court. In P.M. Paul v. Union of India [P.M.
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Paul v. Union of India, 1989 Supp (1) SCC 368] , a Bench of
two learned Judges of this Court has held that : (SCC p. 372,
para 12)
'12. ... Escalation is a normal incident arising out of gap of
time in this inflationary age in performing any contract. The
arbitrator has held that there was delay, and he has further
referred to this aspect in his award. ... After discussing the
evidence and the submissions the arbitrator found that it
was evident that there was escalation and, therefore, he
came to the conclusion that it was reasonable to allow 20%
of the compensation under Claim I, he has accordingly
allowed the same. This was a matter which was within the
jurisdiction of the arbitrator and, hence, the arbitrator had
not misconducted himself in awarding the amount as he has
done.'
This Court held that the contractor was justified in seeking
price escalation on account of an extension of time for the
completion of work. Once the arbitrator was held to have the
jurisdiction to determine whether there was a delay in the
execution of the contract due to the respondent, the latter
was liable for the consequence of the delay, namely, an
increase in price.
15. A similar principle finds expression in another judgment
of two learned Judges of this Court in Food Corporation of
India v. A.M. Ahmed & Co. [Food Corporation of India v. A.M.
Ahmed & Co., (2006) 13 SCC 779] : (SCC pp. 794-95, para
32)
'32. Escalation, in our view, is normal and routine incident
arising out of gap of time in this inflationary age in
performing any contract of any type. In this case, the
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arbitrator has found that there was escalation by way of
statutory wage revision and, therefore, he came to the
conclusion that it was reasonable to allow escalation under
the claim. Once it was found that the arbitrator had
jurisdiction to find that there was delay in execution of the
contract due to the conduct of FCI, the Corporation was liable
for the consequences of the delay, namely, increase in
statutory wages. Therefore, the arbitrator, in our opinion,
had jurisdiction to go into this question. He has gone into
that question and has awarded as he did. The arbitrator by
awarding wage revision has not misconducted himself. The
award was, therefore, made rule of the High Court, rightly so
in our opinion.'
16. In K.N. Sathyapalan v. State of Kerala [K.N. Sathyapalan
v. State of Kerala, (2007) 13 SCC 43] , this Court has held
that : (SCC pp. 51-52, para 32)
'32. Ordinarily, the parties would be bound by the terms
agreed upon in the contract, but in the event one of the
parties to the contract is unable to fulfil its obligations under
the contract which has a direct bearing on the work to be
executed by the other party, the arbitrator is vested with the
authority to compensate the second party for the extra costs
incurred by him as a result of the failure of the first party to
live up to its obligations. That is the distinguishing feature of
cases of this nature and Alopi Parshad case [Alopi Parshad
& Sons Ltd. v. Union of India, (1960) 2 SCR 793 : AIR 1960
SC 588] and also Patel Engg. case [State of U.P. v. Patel
Engg. Co. Ltd., (2004) 10 SCC 566] . As was pointed out by
Mr Dave, the said principle was recognised by this Court in
P.M. Paul [P.M. Paul v. Union of India, 1989 Supp (1) SCC
368] where a reference was made to a retired Judge of this
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Court to fix responsibility for the delay in construction of the
building and the repercussions of such delay. Based on the
findings of the learned Judge, this Court gave its approval to
the excess amount awarded by the arbitrator on account of
increase in price of materials and costs of labour and
transport during the extended period of the contract, even in
the absence of any escalation clause. The said principle was
reiterated by this Court in T.P. George case [T.P. George v.
State of Kerala, (2001) 2 SCC 758].' "
7.4.6 It was the petitioner's contention that the judgment in Assam
State Electricity Board -v- Buildworth Pvt. Ltd. (supra) does
not help the respondent insofar as there were several letters by
which the petitioner repeatedly rejected the claim for the
respondent for price escalation. However, in my opinion, the
ratio laid down in the aforesaid judgment, that is, price
escalation would not bind the parties beyond the contractual
period would squarely apply to the case at hand.
7.4.7 While concluding this issue, it would be prudent to point
out that the petitioner during the course of its submission
before the arbitral tribunal had discounted its stand on this
issue. Relevant portion from the petitioner's written
submission before the tribunal on price escalation has been
extracted below:-
"A2. The contract is a firm price contract , with no
price variation clause. Hence, the claim for price
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variation is to be looked at from the point of view of
being a claim in damages under Section 73 of the
Indian Contract Act, 1872. Hence, actual loss has to
be provide to have been suffered by the Claimant in
order for present claim to be sustained."
As such, it can be inferred from the petitioner's aforesaid
written submission that even though there was no price
escalation clause in the contract, arbitral tribunal can award
damages if the same can be established under Section 73 of
the Indian Contract Act, 1872.
7.4.8 It was the petitioner's argument that the arbitral tribunal
had not dealt with the issue of whether the contract was a
firm price contract or not, in the award and as such the
award has to be sacrificed at the altar of reasonableness, in
light of the Hon'ble Supreme Court's pronouncement in
Dyna Technologies (supra). However, this argument of the
petitioner cannot be sustained. Firstly, a plain reading of
the relevant contractual provisions makes it evident that
while there is no price escalation clause, there was also no
explicit bar on award of price escalation. Moreover, in
absence of an explicit prohibition, statutory right to
damages in terms of Section 73 of the Indian Contract Act,
1872 still exists. As a consequence, the contract cannot be
considered as a firm price contract beyond its duration. So
it was not essential for the arbitral tribunal to enter into a
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detailed discussion on an issue which could be inferred
merely from a bare reading of the contract. Furthermore,
extensive discussion and reasons have been provided in the
award on the issue of delay and entitlement of the
respondent to price escalation. So, the award is not in
violation of the judgment of the Hon'ble Supreme Court in
Dyna Technologies (supra) and Section 31(3) of the Act.
7.4.9 What is evident from the aforesaid discussion is that, while
the cases cited by the petitioner contained an express
prohibition on award of escalation in any case till the
completion of work, there was no such explicit bar on award
of escalation in the instant case. Clause 11.1 of the GCC
just states that the contract shall be on a firm price basis
but it remains silent on whether or not escalation can be or
cannot be awarded in any case. Having held that the
contract between the parties contained no explicit bar on
award of escalation, this Court finds that the contract
between the petitioner and the respondent cannot be
termed as a firm price contract beyond the duration of work
as originally stipulated in the contract. However, whether
or not the respondent was entitled to price escalation will
be dealt later on in the judgment during the discussion on
the relevant issues.
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7.5 Letter dated February 03, 2017
7.5.1 The letter dated February 03, 2017 lies at the centre of the
arbitral award dated December 21, 2019 and also the challenge
against the said award before this Court and hence, it is crucial
to deal with the challenge against the validity of the letter dated
February 03, 2017 foremost before dealing with the challenge
against the arbitral award.
7.5.2 By the said letter dated February 3, 2017 the petitioner replied
to the claims and other issues raised by the respondent in
connection with the construction of Phase 1 of the
Raghunathpur Thermal Power Project. The petitioner in its letter
alleged that the delay of 468 days against Unit 2 is attributable
to the respondent and sought to levy liquidated damages of INR
212.80 crores, that is, at the rate of 5% of the contract price.
Furthermore, the petitioner also offered compensation of INR
10.26 crores to the respondent on account of delay in handing
over land and other inputs by the petitioner. Compensation of
INR 10.26 crores was calculated as follows:-
a. Compensation for Civil Construction for Mail Plant
Switch Yard only: INR 0.648 Crores.
b. Compensation for Erection Work Including
Structural Steel Works For Civil Works (Including Service
Tax) for Switch Yard Portion only: INR 1.040 Crores.
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c. Compensation for idling/overstay charges for Delay
of RTR of Unit 1: INR 0.152 Crores.
d. Compensation for Civil Construction Work for Ash
Pond portion: INR 8.520 Crores.
7.5.3 Apart from the aforesaid, the petitioner alleged deviation from
NIT by the respondent during execution of the project and
sought recovery of a sum of INR 44.71 crores only. The
petitioner rejected the claims submitted by the respondent
during a meeting dated December 12, 2017 as unjustified and
lastly, the petitioner asked the respondent to confirm the
acceptance of the letter.
7.5.4 Several judicial pronouncements were relied upon by the
petitioner to argue that the document, that is, the letter dated
February 03, 2017 can only be considered in its entirety and
cannot be severed for part acceptance and part rejection. I will
now discuss each of these pronouncements.
7.5.5 The judgment of the Oudh Judicial Commissioner's Court in
Kuar Nageshar Sahai -v- Shiam Bahadur and Ors. reported
in AIR 1922 Oudh 231 was relied upon by the petitioner to
argue that the letter dated February 03, 2017 was a
compromise/offer and cannot be taken as an admission.
Relevant portions have been extracted below:-
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"6. The next property claimed by the plaintiff is Babuapur, a
hamlet of Behandar Kalan, which appears as No. 2 on List A
attached to the plaint. Behandar Kalan admittedly forms
part of the Baragaon estate. The plaintiffs' case is that this
hamlet belonged to Narendra Bahadur and had been given
to him by Wazir Chand, that it was not part of the Baragaon
estate and that they were entitled to succeed to it under the
will of Narendra Bahadur. In support of this argument we
were referred to a jamabandi, Ex. 21, which shows that the
rents of this hamlet were collected by Sarafaraz Khan
ziladar and Sarfaraz Khan has himself given evidence that
he was ziladar of Chandra Kuar and Narendra Bahadur and
the income of Babuapur was taken by Narendra Bahadur.
Two other jamabandis are referred to, Exs. 22 and 23, but
the learned counsel for the plaintiffs has been unable to
show us that they relate to the hamlet of Babuapur. In
addition to this there is a mortgage-deed Ex. 20, executed by
one Munna Singh in which it is recited that the mortgagee is
borrowing money for the purpose of paying rent to Narendra
Bahadur for the hamlet of Babuapur. Plaintiffs' counsel
would also wish to rely on Ex. A19, the compromise alleged
to have been entered into between Raj Bahadur and
Nageshar Sahai, in which reference has been made to
Babuapur as belonging to Narendra Bahadur. But as it has
been held that compromise is not binding on the parties, any
recital in it is not of much value as evidence against
Nageshar Sahai. Parties are of ??? willing to make
admissions for the purpose of effecting a compromise,
to which it would be unfair to hold them if the
compromise falls through the only other evidence to which
we have been referred is that of two witnesses, D.W. 19 and
D.W. 27 both of whom are servants of the plaintiffs. On the
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other hand it is pointed out that Babuapur is admittedly a
hamlet of Behandar Kalan which is one of the villages of the
Baragaon estate which was owned by Wazir Chand, that
there is no evidence whatsoever of any gift or transfer by
Wazir Chand in favour of Narendra Bahadur, and Narendra
Bahadur could not acquire any title to this hamlet during the
lifetime of Chandra Kuar. In the khewat of Behandar Kalan
(Ex. A-48) Mussammat Chandra Kuar is shown as the owner
of the entire village and in no place in the papers is
Narendra Bahadur shown as proprietor of this hamlet. The
recital in the mortgage-deed and the fact that Narendra
Bahadur's servants collected the rents of this hamlet are
capable of explanation. Exhibits A-10 and A-11 show that
when on the death of Wazir Chand mutation was effected in
respect of the Baragaon taluqa in favour of Musammat
Chandra Kuar she appointed Narendra Bahadur as her
agent. We are clearly of opinion that there is no satisfactory
evidence to show that Narendra Bahadur was the owner of
this property."
Emphasis Added
7.5.6 The judgment of the High Court of Allahabad in Shibcharan
Das -v- (Firm) Gulabchand Chhotey Lal reported in AIR 1936
All 157 was also cited by the petitioner. In the said judgment,
High Court of Allahabad had remarked that when negotiations
are being made without prejudice, it is not open for one of the
parties to give evidence of an admission by another. Relevant
paragraph has been reproduced below:-
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"3. The learned Subordinate Judge held in the first place
that the sum stated on the face of the promissory note, viz.,
Rs. 4,200 had not been in fact advanced and that the sum
actually lent to the defendant amounted to Rs. 3,750 only.
Upon the issue directed to the amount of the consideration
which actually passed, he rightly held that the onus, of
showing that the sum stated on the face of the note was not
in fact lent, rested upon the defendant. He, however, held
that the defendant had discharged the onus and established
that he had received a sum of Rs. 3,750 and not Rs. 4,200
as stated of the face of the note. The appellant has urged
before us in this appeal that was should come to a contrary
conclusion upon the evidence. We have considered the
evidence which was placed before the learned Subordinate
Judge and have come to the conclusion that the defendant
??? discharge the onus which the law ??? upon him and did
establish that he ??? a sum of Rs. 450 less than that stated
in the note. The evidence of the defendant himself coupled
with the evidence of Johri Lal, his munim, abundant proves
this. The defendant's books were produced in Court and the
learned Subordinate Judge was perfectly satisfied that they
were genuine and had been entered up in the ordinary
course a business when this transaction took ??? in 1927. If
the books were genuine, the it is clear that only the sums
shown in those books were actually received by the
defendant. The defendant also called a Vakil Pandit Behari
Lal Sharma, who gave evidence corroborating that given by
the defendant himself. In our judgment the witness's
evidence was not admissible Negotiations were being
conducted with a view to settlement, and that being so
we are bound to hold that these negotiations were
being conducted "without prejudice." In such
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circumstances it is not open for one of the parties to
give evidence of an admission made by an other. If
negotiations are to result in a settlement each side must give
away a certain amount. If one of the parties offers to take
something less than what he later claims he is legally
entitled, such must not be used against him; otherwise
persons could not make offers during negotiations with a
view to a settlement. Further, it appears to us that this vakil
wat at the time of these negotiations acting on behalf of the
plaintiff and conducting litigation for him and that being so
he could not, by reason of Section 126 of the Evidence Act,
give evidence as to communications made to him without the
express consent of his client, viz., the plaintiff himself. In the
present case the vakil gave evidence against his own client
and clearly without the latter's consent. Even eliminating the
evidence of this witness this evidence of the defendant
himself and his munim, coupled with the books, does
establish that the defendant received a esser sum than that
which appears on he face of the note."
Emphasis Added
7.5.7 Furthermore, Madras High Court's judgment in Karamadai
Naicken -v- R. Raju Pillai reported in AIR 1949 Mad 401 was
also relied upon to argue that the letter dated February 3, 2017
must be taken as a whole and should not be read in parts.
7.5.8 The judgment of Punjab and Haryana High Court in Smt. Surjit
Kaur -v- Gurcharan Singh reported in AIR 1973 P&H 18 was
relied upon by the respondent to argue that the letter dated
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February 03, 2017 should not be taken as evidence. Relevant
paragraph has been reproduced below:-
"6. A perusal of this section would show that if an
admission is made upon an express condition that
evidence regarding it would not be given or under
circumstances from which the Court could infer that
the parties had agreed that the evidence regarding it
would not be given, than such an admission would not
be relevant. In the present case, as I have already said,
both the parties were trying to effect a compromise and
during that interval, the said letter was written by the
husband. It may be stated that the husband has frankly
admitted that he did write that letter, but he claimed
privilege regarding the same on the ground that it was
written when the talks of a compromise were going on
between the parties. It appears from the circumstances of
this case that he had written this letter perhaps at the
instance of the wife, because she might be ready to go back
to the husband, but her father may not be giving her
permission to do so, and it is quite possible that he wrote
that letter just to prevail upon her father to send her back to
him. Equally probable is that the father might have asked
the husband to write such a letter, so that he could show it
to his daughter and on its basis persuade her to go back
after telling her that the husband had admitted his fault and
apologised for the same. In any case, this letter, admittedly,
was written during the period when the compromise talks
were going on. The inference drawn by the learned Judge
from all these circumstances was that the letter was written
at a time when the parties had agreed that no evidence
would be given regarding it. That being so, the case will be
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covered by the second condition laid down in section 23,
quoted above, and as such, the husband could claim
privilege regarding the same. It has been ruled in a Bench
decision of the Allahabad High Court in Shibcharan Das v.
(Form) Gulabchand Chhotey Lal [A.I.R. 1936 All 157.] , that
where negotiations were being conducted with a view to a
settlement, it should be held that those negotiations were so
conducted without prejudice."
Emphasis Added
However, the said judgment could be easily distinguished on the
basis that there is no such condition which is explicit or implicit
in the said letter dated February 03, 2017 written by the
petitioner.
7.5.9 Judgment of the Orissa High Court in Sri Bauribandhu
Mohanty and Anr. -v- Sri Suresh Chandra Mohanty and
Ors. reported in 1991 SCC OnLine Ori 69 was also relied upon
the petition to buttress their argument against treating the
letter dated February 03, 2017 as an admission. Paragraphs
relied upon have been extracted below:-
"9. In the compromise petition filed on 5-3-82, there is
admission of the parties regarding existence of the pathway
over C.S. Plot No. 244. In the petition filed in Civil Revision
No. 889 of 1989, the petitioners have averred that the
compromise petition was filed having been signed by the
advocates for both the parties and no sketch map was
attached to it as required by the Court. It does not show that
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the compromise petition was duly signed by both the parties.
The compromise petition not having been signed by the
parties in accordance with law and having not acted upon,
obviously could not be treated as valid compromise petition
intended to be used as evidence in the suit. Assuming
however, that the parties had signed the said compromise
petition, the question now raised is whether admissions
made in such compromise petition which was not acted upon
by the parties, can be allowed to be lead in evidence.
* * *
11. In view of the above discussions, there is no doubt in my
mind that the statements made in the compromise petition
even if treated as valid admissions, were not intended to be
treated as evidence by any of the parties because of failure
of the compromise petition. In view of this both the orders
dated 9-8-89 and 19-8-89 passed by the learned trial Court
in the suit rejecting the petitions for recalling P.W. 7 and
D.W. 5 for the purpose of getting the compromise petition
exhibited and for getting the admissions on the record, as
evidence being contrary to Section 23 of the Act, it justified.
In the result, the Civil Revisions Nos. 889 and 890 of 1989
are dismissed, but in the circumstances, there shall be no
order as to costs.
Petitions dismissed."
7.5.10 Lastly, the judgment of the Hon'ble Supreme Court in Union of
India and Ors. -v- N. Murugesan and Ors. reported in (2022)
2 SCC 25 was also relied upon by the petitioner. Hon'ble
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Supreme Court in the said judgment had outlined the principle
of approbate and reprobate and propounded that no party can
be allowed to accept and reject the same thing. I have extracted
the relevant portions below:-
"26. These phrases are borrowed from the Scots law. They
would only mean that no party can be allowed to accept and
reject the same thing, and thus one cannot blow hot and
cold. The principle behind the doctrine of election is inbuilt in
the concept of approbate and reprobate. Once again, it is a
principle of equity coming under the contours of common law.
Therefore, he who knows that if he objects to an instrument,
he will not get the benefit he wants cannot be allowed to do
so while enjoying the fruits. One cannot take advantage of
one part while rejecting the rest. A person cannot be allowed
to have the benefit of an instrument while questioning the
same. Such a party either has to affirm or disaffirm the
transaction. This principle has to be applied with more vigour
as a common law principle, if such a party actually enjoys
the one part fully and on near completion of the said
enjoyment, thereafter questions the other part. An element of
fair play is inbuilt in this principle. It is also a species of
estoppel dealing with the conduct of a party. We have
already dealt with the provisions of the Contract Act
concerning the conduct of a party, and his presumption of
knowledge while confirming an offer through his acceptance
unconditionally.
27. We would like to quote the following judgments for better
appreciation and understanding of the said principle:
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27.1.Nagubai Ammal v. B. Shama Rao [Nagubai Ammal v. B.
Shama Rao, 1956 SCR 451 : AIR 1956 SC 593] : (AIR pp.
601-02, para 23)
'23. But it is argued by Sri Krishnaswami Ayyangar that as
the proceedings in OS. No. 92 of 1938-39 are relied on as
barring the plea that the decree and sale in OS. No. 100 of
1919-20 are not collusive, not on the ground of res judicata
or estoppel but on the principle that a person cannot both
approbate and reprobate. It is immaterial that the present
appellants were not parties thereto, and the decision in
Verschures Creameries Ltd. v. Hull & Netherlands
Steamship Co. Ltd. [Verschures Creameries Ltd. v. Hull &
Netherlands Steamship Co. Ltd., (1921) 2 KB 608 (CA)] , and
in particular, the observations of Scrutton, LJ., at p. 611
were quoted in support of this position. There, the facts were
that an agent delivered goods to the customer contrary to the
instructions of the principal, who thereafter filed a suit
against the purchaser for price of goods and obtained a
decree.
Not having obtained satisfaction, the principal next filed a
suit against the agent for damages on the ground of
negligence and breach of duty. It was held that such an
action was barred. The ground of the decision is that when
on the same facts, a person has the right to claim one of two
reliefs and with full knowledge he elects to claim one and
obtains it, it is not open to him thereafter to go back on his
election and claim the alternative relief. The principle was
thus stated by Bankes, L.J. : (Verschures Creameries Ltd.
case [Verschures Creameries Ltd. v. Hull & Netherlands
Steamship Co. Ltd., (1921) 2 KB 608 (CA)] , KB p. 611)
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'... Having elected to treat the delivery to him as an
authorised delivery they cannot treat the same act as a
misdelivery. To do so would be to approbate and reprobate
the same act.'
The observations of Scrutton, L.J. on which the appellants
rely are as follows : (Verschures Creameries Ltd. case
[Verschures Creameries Ltd. v. Hull & Netherlands
Steamship Co. Ltd., (1921) 2 KB 608 (CA)] , KB pp. 611-12)
'... A plaintiff is not permitted to "approbate and reprobate".
The phrase is apparently borrowed from the Scotch law,
where it is used to express the principle embodied in our
doctrine of election -- namely, that no party can accept and
reject the same instrument : Ker v. Wauchope [Ker v.
Wauchope, (1819) 1 Bligh PC 1 at p. 21 : 4 ER 1 at p. 8] :
Douglas-Menzies v. Umphelby [Douglas-Menzies v.
Umphelby, 1908 AC 224 at p. 232 (PC)] . The doctrine of
election is not however confined to instruments. A person
cannot say at one time that a transaction is valid and
thereby obtain some advantage, to which he could only be
entitled on the footing that it is valid, and then turn round
and say it is void for the purpose of securing some other
advantage. That is to approbate and reprobate the
transaction.'
It is clear from the above observations that the maxim that a
person cannot "approbate and reprobate" is only one
application of the doctrine of election, and that its operation
must be confined to reliefs claimed in respect of the same
transaction and to the persons who are parties thereto. The
law is thus stated in Halsbury's Laws of England, Vol. XIII,
p. 464, para 512:
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'On the principle that a person may not approbate and
reprobate, a species of estoppel has arisen which seems to
be intermediate between estoppel by record and estoppel in
pais, and may conveniently be referred to here. Thus a party
cannot, after taking advantage under an order (e.g. payment
of costs), be heard to say that it is invalid and ask to set it
aside, or to set up to the prejudice of persons who have
relied upon it a case inconsistent with that upon which it
was founded; nor will he be allowed to go behind an order
made in ignorance of the true facts to the prejudice of third
parties who have acted on it.'
27.2. State of Punjab v. Dhanjit Singh Sandhu [State of
Punjab v. Dhanjit Singh Sandhu, (2014) 15 SCC 144] : (SCC
pp. 153-54, paras 22-23 & 25-26)
'22. The doctrine of "approbate and reprobate" is only a
species of estoppel, it implies only to the conduct of parties.
As in the case of estoppel it cannot operate against the
provisions of a statute. (Vide CIT v. MR. P. Firm Muar [CIT v.
MR. P. Firm Muar, AIR 1965 SC 1216].)
23. It is settled proposition of law that once an order has
been passed, it is complied with, accepted by the other party
and derived the benefit out of it, he cannot challenge it on
any ground. (Vide Maharashtra SRTC v. Balwant Regular
Motor Service [Maharashtra SRTC v. Balwant Regular Motor
Service, AIR 1969 SC 329] .) In R.N. Gosain v. Yashpal Dhir
[R.N. Gosain v. Yashpal Dhir, (1992) 4 SCC 683] this Court
has observed as under : (R.N. Gosain case [R.N. Gosain v.
Yashpal Dhir, (1992) 4 SCC 683] , SCC pp. 687-88, para 10)
'10. Law does not permit a person to both approbate and
reprobate. This principle is based on the doctrine of election
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which postulates that no party can accept and reject the
same instrument and that 'a person cannot say at one time
that a transaction is valid and thereby obtain some
advantage, to which he could only be entitled on the footing
that it is valid, and then turn round and say it is void for the
purpose of securing some other advantage'.'
* * *
25. The Supreme Court in Rajasthan State Industrial
Development & Investment Corpn. v. Diamond & Gem
Development Corpn. Ltd. [Rajasthan State Industrial
Development & Investment Corpn. v. Diamond & Gem
Development Corpn. Ltd., (2013) 5 SCC 470 : (2013) 3 SCC
(Civ) 153] , made an observation that a party cannot be
permitted to "blow hot and cold", "fast and loose" or
"approbate and reprobate". Where one knowingly accepts
the benefits of a contract or conveyance or an order, is
estopped to deny the validity or binding effect on him of such
contract or conveyance or order. This rule is applied to do
equity, however, it must not be applied in a manner as to
violate the principles of right and good conscience.
26. It is evident that the doctrine of election is based on the
rule of estoppel, the principle that one cannot approbate and
reprobate is inherent in it. The doctrine of estoppel by
election is one among the species of estoppel in pais (or
equitable estoppel), which is a rule of equity. By this law, a
person may be precluded, by way of his actions, or conduct,
or silence when he has to speak, from asserting a right
which he would have otherwise had.'
27.3.Rajasthan State Industrial Development & Investment
Corpn. v. Diamond & Gem Development Corpn. Ltd.
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[Rajasthan State Industrial Development & Investment
Corpn. v. Diamond & Gem Development Corpn. Ltd., (2013) 5
SCC 470 : (2013) 3 SCC (Civ) 153] : (SCC pp. 480-81, paras
15-16)
"I. Approbate and reprobate
15. A party cannot be permitted to "blow hot-blow cold",
"fast and loose" or "approbate and reprobate". Where one
knowingly accepts the benefits of a contract, or conveyance,
or of an order, he is estopped from denying the validity of, or
the binding effect of such contract, or conveyance, or order
upon himself. This rule is applied to ensure equity, however,
it must not be applied in such a manner so as to violate the
principles of what is right and of good conscience. [Vide
Nagubai Ammal v. B. Shama Rao [Nagubai Ammal v. B.
Shama Rao, 1956 SCR 451 : AIR 1956 SC 593] , CIT v. V.
MR. P. Firm Muar [CIT v. MR. P. Firm Muar, AIR 1965 SC
1216] , Ramesh Chandra Sankla v. Vikram Cement [Ramesh
Chandra Sankla v. Vikram Cement, (2008) 14 SCC 58 :
(2009) 1 SCC (L&S) 706] , Pradeep Oil Corpn. v. MCD
[Pradeep Oil Corpn. v. MCD, (2011) 5 SCC 270 : (2011) 2
SCC (Civ) 712] , Cauvery Coffee Traders v. Hornor Resources
(International) Co. Ltd. [Cauvery Coffee Traders v. Hornor
Resources (International) Co. Ltd., (2011) 10 SCC 420 :
(2012) 3 SCC (Civ) 685] and V. Chandrasekaran v.
Administrative Officer [V. Chandrasekaran v. Administrative
Officer, (2012) 12 SCC 133 : (2013) 2 SCC (Civ) 136 : (2013)
4 SCC (Cri) 587 : (2013) 3 SCC (L&S) 416] .]
16. Thus, it is evident that the doctrine of election is based
on the rule of estoppel--the principle that one cannot
approbate and reprobate is inherent in it. The doctrine of
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estoppel by election is one among the species of estoppel in
pais (or equitable estoppel), which is a rule of equity. By this
law, a person may be precluded, by way of his actions, or
conduct, or silence when it is his duty to speak, from
asserting a right which he would have otherwise had."'
7.5.11 In my considered opinion, the petitioner's arguments
against the letter dated February 03, 2017 are nothing but
an attempt to invite this Court to re-appreciate the
evidentiary value of the letter dated February 03, 2017
which this Court cannot do under Section 34 of the Act. It
would be prudent to refer to the judgment of the Hon'ble
Supreme Court in the case of Ravindra Kumar Gupta & Co.
-v- Union of India reported in (2010) 1 SCC 409 wherein the
Hon'ble Supreme Court outlined that the Courts cannot re-
appreciate evidence under Section 34 of the Act and that
the Arbitrator is the sole judge of the quality and quantity
of evidence. Relevant portions have been extracted below:-
"9. The law with regard to scope and ambit of the jurisdiction
of the courts to interfere with an arbitration award has been
settled in a catena of judgments of this Court. We may make
a reference here only to some of the judgments. In State of
Rajasthan v. Puri Construction Co. Ltd. [(1994) 6 SCC 485]
this Court observed as follows: (SCC p. 500, para 26)
'26. The arbitrator is the final arbiter for the dispute between
the parties and it is not open to challenge the award on the
ground that the arbitrator has drawn his own conclusion or
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has failed to appreciate the facts. In Sudarsan Trading Co. v.
Govt. of Kerala [(1989) 2 SCC 38] it has been held by this
Court that there is a distinction between disputes as to the
jurisdiction of the arbitrator and the disputes as to in what
way that jurisdiction should be exercised. There may be a
conflict as to the power of the arbitrator to grant a particular
remedy. One has to determine the distinction between an
error within the jurisdiction and an error in excess of the
jurisdiction. Court cannot substitute its own evaluation of the
conclusion of law or fact to come to the conclusion that the
arbitrator had acted contrary to the bargain between the
parties. (emphasis in original) Whether a particular amount
was liable to be paid is a decision within the competency of
the arbitrator. By purporting to construe the contract the
court cannot take upon itself the burden of saying that this
was contrary to the contract and as such beyond
jurisdiction. If on a view taken of a contract, the decision of
the arbitrator on certain amounts awarded is a possible view
though perhaps not the only correct view, the award cannot
be examined by the court. Where the reasons have been
given by the arbitrator in making the award the court cannot
examine the reasonableness of the reasons. If the parties
have selected their own forum, the deciding forum must be
conceded the power of appraisement of evidence. The
arbitrator is the sole judge of the quality as well as
the quantity of evidence and it will not be for the court
to take upon itself the task of being a Judge on the
evidence before the arbitrator.
27. In MCD v. Jagan Nath Ashok Kumar [(1987) 4 SCC
497] , it has been held by this Court that appraisement
of evidence by the arbitrator is ordinarily never a
matter which the court questions and considers. It may
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be possible that on the same evidence the court may
arrive at a different conclusion than the one arrived at
by the arbitrator but that by itself is no ground for
setting aside the award. It has also been held in the said
decision that it is difficult to give an exact definition of the
word 'reasonable'. Reason varies in its conclusions
according to the idiosyncrasies of the individual and the
time and circumstances in which he thinks. In cases not
covered by authority, the verdict of a jury or the decision of
a Judge sitting as a jury usually determines what is
'reasonable' in each particular case. The word reasonable
has in law prima facie meaning of reasonable in regard to
those circumstances of which the actor, called on to act
reasonably knows or ought to know. An arbitrator acting as
a Judge has to exercise a discretion informed by tradition,
methodised by analogy, disciplined by system and
subordinated to the primordial necessity of order in social
life. Therefore, where reasons germane and relevant for the
arbitrator to hold in the manner he did, have been
indicated, it cannot be said that the reasons are
unreasonable.'
* * *
12. In Kwality Mfg. Corpn. v. Central Warehousing Corpn.
[(2009) 5 SCC 142] it was held: (SCC pp. 146-47, para 10)
'10. At the outset, it should be noted that the scope of
interference by courts in regard to arbitral awards is limited.
A court considering an application under Section 30 or 33 of
the Act, does not sit in appeal over the findings and decision
of the arbitrator. Nor can it reassess or reappreciate evidence
or examine the sufficiency or otherwise of the evidence. The
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award of the arbitrator is final and the only grounds on
which it can be challenged are those mentioned in Sections
30 and 33 of the Act. Therefore, on the contentions urged,
the only question that arose for consideration before the High
Court was, whether there was any error apparent on the
face of the award and whether the arbitrator misconducted
himself or the proceedings.' "
Emphasis Added
7.5.12 Before I conclude this issue, I would like to put some
observations in respect of the letter dated February 03, 2017 on
record. Firstly, The letter nowhere mentions that it was a
without prejudice communication, and in fact stated that:-
"A compensation of Rs 10.16 Crs. is found to be admitted
on account of delay in handing over land and other inputs".
This admission was not made subject to any condition.
7.5.13 Secondly, the arbitral tribunal's treatment of the letter dated
February 03, 2017 cannot be termed as severance or part-
acceptance. The arbitral tribunal, after taking into consideration
the contents of the letter dated February 03, 2017 has clearly
held that
a. In respect of levy of liquidated damages for a delay of 468
days in respect of Unit 2 only, the arbitral tribunal held in
paragraph 6.3(b) of the award that "The Respondent, neither
with the support of any document nor by leading any oral
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evidence has been able to show how it has arrived at a
specific figure of 468 days."
This in my view, is a finding arrived at after consideration
of material evidence placed before the arbitral tribunal and
does not call for any interference.
b. In respect of admitting delay in handing over of land and
other inputs, the arbitral tribunal held in paragraph 8.3(e)
of the award that "Thus, it cannot be held that the
Respondent did not delay in handing over land as required
by the Contract. ......... The documents and evidence on
record show that the Claimant was not able to carry out
work even all portions of land handed over by the
Respondent by reason of various
disturbance/hindrance/objections...."
Clearly, after due consideration, the arbitral tribunal has
held that there was clear delay in handing over land. This
finding, arrived after giving due consideration to the
contentions and evidence presented by both the sides does
not call for any interference.
c. On Commercial implication of NIT Deviation, the Arbitral
Tribunal has clearly outlined that while there may be some
deviations from the NIT by the respondent, the respondent
could still have justifiable grievances regarding the same.
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Furthermore, delay if any caused by these deviations, gets
subsumed within the larger delay caused by the petitioner
in handing over of land, coal, DM water, and other inputs.
7.15.14 In light of the above discussion, one may conclude that the
judgments cited by the petitioner in support of their contentions
are completely distinguishable on facts. Furthermore, as stated
above this Court cannot re-appreciate evidence that has been
discussed by the arbitral tribunal and reasons provided for the
same by the arbitral tribunal.
7.15.15 Accordingly, this Court finds that the letter dated February
03, 2017 has been considered in its entirety and in
consonance with the other material evidence on record. As
has been discussed previously, arbitral tribunal is the
master of all evidence placed before it and the Courts are
not empowered under Section 34 of the Act to take a
second look and re-appreciate the evidence placed before
the arbitral tribunal. Only in a case where the evidence
relied upon by the arbitral tribunal could not have been
relied upon by any reasonable person, or the finding arrived
after taking into account such evidence is completely
perverse can the courts exercise their powers under Section
34 of the Act. However, the instant case with respect to the
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letter dated February 03, 2017 does not fall within these
grounds and accordingly does not call for any interference.
7.6 Severance of Arbitral Awards
7.6.1 Since this Court, as would be seen in the foregoing paragraphs,
sets aside multiple awards on different issues in the award
dated December 21, 2019, this Court feels it pertinent to
discuss the principle of severability when it comes to arbitral
awards, and adjudge whether or not the awards which have
been set aside have been done without impacting the portion of
the award that has been upheld.
7.6.2 It is a well-established principle that the Courts under
Section 34 of the Act have the power to severe and partly
set aside the award. A doctor treating a poisoned leg would
prefer to cut the poisoned leg off to prevent the poison from
spreading across the entire body. Afterall, you would not
kill off the entire body just because the leg is poisoned.
Similarly, in an arbitral award, there might be some issues
suffering from infirmity, which would invite the Courts to
exercise their powers under Section 34 of the Act. In such a
case, it would be preferable to severe and set aside only
those issues, rather than setting aside the arbitral award in
its entirety. This also makes commercial sense.
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7.6.3 A full judge bench of the Bombay High Court in the case of R.S.
Jiwani -v- Ircon International Ltd. reported in 2009 SCC
OnLine Bom 2021 undertook an exhaustive review on the issue
of severability of arbitral awards. Relevant portions of the said
judgment have been extracted below:-
"17. The argument raised before us is that sub-clauses (i) to
(iii) and (v) of clause (a) of sub-section (2) of section 34 are
the grounds where it is mandatory for the Court to set aside
the whole award and there is no other choice before the
Court. It is only in the class of cases falling under section
34(2)(a)(iv) that with the aid of the proviso to that sub-
section, the Court can apply principle of severability. In that
case, if the matter submitted to the arbitration can be
separated from the one not submitted then the Court may set
aside that part of the award alone which is not submitted to
arbitration. This argument is founded on the Division Bench
judgment of this Court in the case of Mrs. Pushpa P.
Mulchandani v. Admiral Radhakrishin Tahiliani, 2008(7) LJ
Soft, 161, and which was relied upon by the respondents for
inviting the decision against the Appellant. Thus, we have to
examine the provision of section 34 of the 1996 Act to find
whether it permit of any other interpretation than the one put
forward by the respondents. Sub-clauses (i), (ii), (iii) and (v)
of clause (a) of sub-section (2) of section 34 deal with certain
situations which may require the Court to set aside an
award of the arbitral tribunal. These may be the cases
where the party was under incapacity, the agreement is not
valid under the law in force, where proper notice was not
given to the party or otherwise enable to present his case,
and the composition of arbitral tribunal or procedure was not
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in accordance with the agreement between the parties and
lastly the subject-matter of the dispute is not capable of
settlement by arbitration under the law for the time being in
force. Explanation to section 34(2) which is in the nature of a
declaration further explains that when an award is in
conflict with the public policy of India when the award was
induced or affected by (i) fraud or (ii) by corruption; or (iii)
was in violation of section 75 or 81 of the Act. It is difficult
for this Court to hold that under all these categories it would
be inevitable for the Court to set aside the entire award. It
may not be very true that even under these categories, it
would be absolutely essential for the Court to set aside an
award. It is true that where a party was under incapacity or
was not served with the notice at all and the arbitration
agreement itself was not valid that an award may have to be
set aside in its entirety. But even within these clauses, there
is possibility of a situation where it may not be necessary for
the Court to set aside the entire award. Let us take an
example that where a party is given a notice has
participated in the proceedings before the arbitral tribunal
but was unable to lead evidence or present himself or submit
his counter claim. Would it be fair for the Court to set aside
an award of the arbitral tribunal in its entirety in this
situation? A party who participated in the arbitral proceeding
even led evidence and cross-examined the witnesses of the
claimants in relation to the claims but for any reason was
not able to place his evidence on record in relation to the
counter claims or he was not granted sufficient opportunity
to present his case or for some reason was unable to present
his case before the arbitral tribunal, would it not be just, fair,
equitable and in line with the object of the Act of 1996 to
consider setting aside award only regarding counter claim.
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Is such a party which has succeeded in the claims made by
it, which are otherwise lawful and not hit by any of the
stated circumstances, should be awarded his reliefs while
either rejecting or even altering the award with regard to the
counter claim filed by the aggrieved party before the
Arbitrator. Situation may be different where arbitration
agreement is not valid. In other words, where claim is
unlawful the Supreme Court in the case of Karnail Singh v.
State of Haryana, 1995 Supp (3) SCC 376 held that not valid
would mean unlawful and equated it to void.
"8. 'Void' dictionarily means, ineffectual, nugatory; having no
legal force or binding effect, unable in law to support the
purpose for which it was intended; nugatory and ineffectual
so that nothing can cure it; not valid. In Words and Phrases
(American), Vol. 44, published by West Publishing Co., at
page 319 it is stated thus:
"A 'void' thing is nothing; it has no legal effect whatsoever;
and no rights whatever can be obtained under it or grow out
of it. In law it is the same thing as if the void thing had never
existed."
What was declared void was election. That is the process
which led to choosing or selecting appellant as a member
was invalid. The legal effect of declaration granted by the
Tribunal was that the election of the appellant became non-
existent resulting automatically in nullifying the earlier
declaration. The declaration did not operate from the date it
was granted but it related back to the date when election
was held. The legislative provision being clear and the
Tribunal being vested only with power of declaring election
to be void the entire controversy about voidable and void
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was unnecessary. The appellant could not therefore, claim
any pension under section 7A of the 1975 Act."
* * *
20. The cases would be different where it is not possible or
permissible to sever the award. In other words, where the
bad part of the award was intermingled and interdependent
upon the good parts of the award there it is practically not
possible to sever the award as the illegality may affect the
award as a whole. In such cases, it may not be possible to
set aside the award partially. However, there appears to be
no bar in law in applying the doctrine of severability to the
awards which are severable. In the case of Messrs. Basant
Lal Banarsi Lal v. Bansi Lal Dagdulal, AIR 1961 SC 823,
though the Supreme Court was dealing with an application
for setting aside an award passed by the Bombay City Civil
Court, contending that forward contract in groundnuts were
illegal as making of such contracts was prohibited by Oil
Seeds (Forward Contract Prohibition) Order, 1943 and hence
arbitration clause contained in the forward contracts in
groundnuts between the parties was null and void, where it
was found as a matter of fact that it was not possible to
segregate the dispute under the various contracts as there
was direct link between them. The Supreme Court held as
under:
'It would follow that the arbitration clause contained in that
contract was of no effect. It has therefore to be held that the
award made under that arbitration clause is a nullity and
has been rightly set aside. The award, it will have been
noticed, was however in respect of disputes under several
contracts one of which we have found to be void. But as the
award was one and is not severable in respect of the
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different disputes covered by it, some of which may have
been legally and validly referred, the whole award was
rightly set aside.'
* * *
24. Now a further question that falls for consideration of this
Court is as to whether there is anything contained in 1996
Act which prohibits in law the Court from adopting the
approach applicable under the 1940 Act or prohibits
applicability of principle of severability to the awards under
1996 Act. We are unable to see any prohibition much less an
absolute bar in the provisions of section 34 of 1996 Act to
that effect. There could be instances falling under section
34(2)(a), sub-sections (iii) and (v) where the principle of
severability can safely be applied. These provisions do not
specifically or impliedly convey legislative intent which
prohibits the Courts from applying this principle to the
awards under the 1996 Act. Again for example, an Arbitral
Tribunal might have adopted a procedure at a particular
stage of proceeding which may be held to be violative of
principles of natural justice or impermissible in law or the
procedure was not in accordance with the agreement
between the parties but the parties waived such an objection
and participate in the arbitration proceedings without
protest, in that event it will be difficult for the Court to hold
that the good part of the award cannot be segregated from
the bad part.
* * *
30. If the principles of severability can be applied to a
contract on one hand and even to a statute on the other
hand, we fail to see any reason why it cannot be applied to
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a judgment or an award containing resolution of the disputes
of the parties providing them such relief as they may be
entitled to in the facts of the case. It will be more so, when
there is no statutory prohibition to apply principle of
severability. We are unable to contribute to the view that the
power vested in the Court under section 34(1) and (2) should
be construed rigidly and restrictedly so that the Court would
have no power to set aside an award partially. The word
"set aside" cannot be construed as to 'only to set aside an
award wholly', as it will neither be permissible nor proper for
the Court to add these words to the language of section
which had vested discretion in the Court. Absence of a
specific language further supported by the fact that the very
purpose and object of the Act is expeditious disposal of the
arbitration cases by not delaying the proceedings before the
Court would support our view otherwise the object of
Arbitration Act would stand defeated and frustrated.
* * *
33. It must be understood that the scope of judicial
intervention under section 34 is very limited and cannot be
equated to the powers of a civil appellate Court. The award
can be set aside on the grounds stated in these provisions
and that is what is emphasized by the use of expression
'only'. The Supreme Court in the case of Mc Dermott
International Inc. v. Burnt Standard Co. Ltd., (2006) 11 SCC
181 has discussed in some elaboration the cases where the
Court can interfere with the awards and/or set aside the
award. Mere appreciation of evidence or an error simpliciter
in appreciation of fact or law may not essentially fall within
the class of cases which may be covered within the ambit
and scope of section 34 of the Act. We will shortly proceed to
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discuss this aspect of law but only insofar as it is relevant
for answering the question posed before the larger Bench.
* * *
35. The Supreme Court was primarily stating the principles
which have been kept in mind by the Courts while interfering
with the award of the Arbitral Tribunal that it was to outline
the supervisory role of the Courts within the ambit and scope
of section 34. It is true that the Court like a Court of appeal
cannot correct the errors of arbitrator. It can set aside the
award wholly or partially in its discretion depending on the
facts of a given case and can even invoke its power under
section 34(4). It is not expected of a party to make a separate
application under section 34(4) as the provisions open with
the language "on receipt of application under sub-section (1),
the Court may..........." which obviously means that
application would be one for setting aside the arbitral award
to be made under section 34(1) on the grounds of reasons
stated in section 34(2) and has to be filed within the period
of limitation as stated as reply under section 34(3). The
Court may if it deems appropriate can pass orders as
required under section 34(4). In other words, the provisions
of section 34(4) have to be read with section 34(1) and 34(2)
to enlarge the jurisdiction of the Court in order to do justice
between the parties and to ensure that the proceedings
before the Arbitral Tribunal or before the award are not
prolonged for unnecessarily. In our humble view, the Division
Bench appears to have placed entire reliance on para 52 by
reading the same out of the context and findings which have
been recorded by the Supreme Court in subsequent
paragraphs. It is also true that there are no pari materia
provisions like sections 15 and 16 of the Act of 1940 in the
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1996 Act but still the provisions of section 34 read together,
sufficiently indicate vesting of vast powers in the Court to set
aside an award and even to adjourn a matter and such acts
and deeds by the Arbitral Tribunal at the instance of the
party which would help in removing the grounds of attack for
setting aside the arbitral award. We see no reason as to why
these powers vested in the Court should be construed so
strictly which it would practically frustrate the very object of
the Act. Thus, in our view, the principle of law stated by the
Division Bench is not in line with the legislative intent which
seeks to achieve the object of the Act and also not in line
with accepted norms of interpretation of statute."
7.6.4 Furthermore, it has been held by the Hon'ble Supreme Court in
the case of J.G. Engineers (P) Ltd. -v- Union of India reported
in (2011) 5 SCC 758 that the Courts are empowered to
segregate/severe an arbitral award:-
"25. It is now well settled that if an award deals with and
decides several claims separately and distinctly, even if the
court finds that the award in regard to some items is bad,
the court will segregate the award on items which did not
suffer from any infirmity and uphold the award to that
extent. As the award on Items 2, 4, 6, 7, 8 and 9 was upheld
by the civil court and as the High Court in appeal did not
find any infirmity in regard to the award on those claims, the
judgment of the High Court setting aside the award in regard
to Claims 2, 4, 6, 7, 8 and 9 of the appellant, cannot be
sustained. The judgment to that extent is liable to be set
aside and the award has to be upheld in regard to Claims 2,
4, 6, 7, 8 and 9."
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7.6.5 The principle which emerges is that while severing an
arbitral award is a delicate procedure, insofar as, the
severed/perverse part of the award is not in any way
connected to the legally sound part of the award, the Courts
under Section 34 are empowered to set aside only that
portion of the award which suffers from some infirmity. In
my opinion, such a practice should be encouraged also, as
rather than setting aside the entire arbitral award, it will be
more prudent to separate the good and the bad. It is better
to take out the rotten apple, instead of throwing the entire
basket out.
7.6.6 Having dealt with the scope of interference available under
Section 34 of the Act, the price escalation clause, the letter
dated February 03, 2017, and severance of arbitral awards, I
will now proceed to deal with the challenge to the impugned
award dated issue wise.
8.1 Since, these issues were dealt collectively by the arbitral
tribunal, I will proceed to deal with the challenge to these issues
together.
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8.2 In respect of delay, the petitioner before the arbitral tribunal
repeated and reiterated the letter dated February 03, 2017 and
sought to levy liquidated damages in terms of the said letter
before the arbitral tribunal. The respondent argued that the
petitioner could not successfully establish the entire delay to be
on part of the petitioner and furthermore, the petitioner did not
hand over the land and other inputs on time, although it was
required to do so under the contract. The respondent further
contended that the delay if any on its part got subsumed within
the larger delay on part of the petitioner.
8.3 Arbitral tribunal while dealing with the issue of delay held that
while there was a delay of 1643 days in completion of Unit No. 1
and 1835 days in completion of Unit No. 2, no delay has been
attributed by the petitioner to the respondent in respect of Unit
No. 1. Furthermore, even for Unit No. 2, delay of only 468 days
has been claimed in terms of the letter dated February 03, 2017.
The contentions of the parties in respect of the letter dated
February 03, 2017, have already been dealt with by me. Just to
reiterate, arbitral tribunal held that although liquidated
damages in respect of Unit No. 2 for a delay of 468 days were
sought to be claimed by the petitioner in terms of the letter
dated February 03, 2017, the petitioner before the arbitral
tribunal neither by the way of oral testimony or evidence
established as to how this delay of 468 days was calculated.
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Furthermore, since the petitioner was not able to support its
claim for delay of 468 days before, the arbitral tribunal held that
it was not entitled to levy liquidated damages. This finding of the
arbitral tribunal has been arrived after taking into account oral
and written evidence. This Court finds no infirmity, patent
illegality, or perversity with this finding of the arbitral tribunal.
8.4. Land
8.4.1 In respect of handing over of land, Clause 10.2 of the GCC was
referred to by respondent. The same has been reproduced here
for ease of reference:-
"10. 2 The Employer shall be responsible for acquiring and
providing legal and physical possession of the site and
access thereto, and for providing possession of and access to
all other areas reasonably required for the proper execution
of the Contract, including all requisite rights of way, as
specified in Scope of Works and Supply by the Employer of
the Contract Agreement. The Employer shall give full
possession of and accord all rights of access thereto on or
before the date(s) specified."
8.4.2 Arbitral tribunal in respect of land also referred to the L1 & L2
Schedule to hold that Appendix 5 provides for a specific time
within which the site, i.e. Main Plant land and balance land
(Ash Dyke/Ash pond) was to be handed over to the respondent
by the petitioner free from encumbrances. After appreciation
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of evidence, the arbitral tribunal established the delay caused in
handing over the land by reason of land acquisition disputes,
agitation by the local people, etc. As such, the petitioner was not
able to comply with its contractual obligation to hand over the
land/site in time.
8.4.3 It was the case of the petitioner that majority of the land was
handed over without much delay and the finding of the arbitral
tribunal that entire land had to be handed over prior to
commencement of any construction activity is patently illegal
and suffers from a fundamental error. In my view, these
arguments tantamount to nothing but a repetition of the
arguments made before the arbitral tribunal. The arbitral
tribunal has clearly held that:-
"However, it cannot be gainsaid that the land has to be
handed over according to the contract prior to the claimant
starting any activity on the said land. Admittedly, the
Petitioner has not handed over the site in accordance with
the time Schedule provided under the Contract."
The findings of the arbitral tribunal in respect of land have been
arrived after careful consideration of the contentions of the
parties and evidence placed on record. This Court finds no
perversity or patent illegality with the findings of the arbitral
tribunal, and as such finds no reason to interfere with the
findings of the arbitral tribunal.
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8.5. BRH
8.5.1 It is an undisputed fact that the BRHs were not stamped as was
statutorily mandated. But, as has been held in the award, the
petitioner led the respondent to believe that if the BRHs were
examined and approved by CMERI, the petitioner would not
object to the unstamped BRHs being used. Furthermore, it has
been held by the arbitral tribunal that while the petitioner was
well within its right to reject the unstamped BRHS, there was no
need to put the petitioner through the process of getting the
unstamped BRHs tested by CMERI. This could very well be a
justifiable grievance that the respondent could have against the
petitioner.
8.5.2 Furthermore, the arbitral tribunal held that since no delay has
been claimed by the petitioner in achieving COF of Unit 1, even
though there may be delay on part of the respondent, the same
did not delay in achieving COF of Unit 1. As for Unit 2, the
arbitral tribunal after referring to the correspondence including
petitioner's letter dated February 27, 2013, respondent's reply
dated October 10, 2013, petitioner's response dated October 28,
2013 and further response of the petitioner dated November 23,
2013 held that the delay alleged in respect of BRH does not
specifically relate to Unit 2.
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8.5.3 Petitioner's contention before this Court that there is patent
illegality in finding of the arbitral tribunal in respect of BRH is
without any merit. Accordingly, this finding calls for no
interference.
8.6. NDCT
8.6.1 The arbitral tribunal held that NDCT - 1 was initially not
constructed by the respondent in accordance with the
contractual provisions. As a result, the respondent had to
dismantle the already constructed portion of NDCT - 1 and had
to reconstruct the same. Pending the reconstruction of NDCT -
1, NDCT - 2 was to be used for completion of different
milestones of Unit 1.
8.6.2 Requirement of reconstruction of NDCT - 1 was held to have no
effect in achieving COF of Unit 1, as no delay was alleged by the
petitioner in respect of Unit 1. Even after NDCT - 1 was ready,
the petitioner was not ready with the CCP. Furthermore, with
reference to the Minutes of the Meeting dated May 6, 2015 and
November 24, 2015, the arbitral tribunal held that the RTR of
Unit 2 could be commenced only after the CCP was made ready
and coal was provided. As such, the arbitral tribunal held that
no delay was caused in Unit - 2 by the reason of using NDCT - 2
for completion of different milestones of Unit - 1.
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8.6.3 The contention of the petitioner that the milestones of Unit 1
had to be achieved by connecting NDCT - 2 and defective NDCT
of Unit - 1 had a cascading effect on COF of both Unit 1 and
Unit 2, have already been dealt with by the arbitral tribunal.
The petitioner under Section 34 of the Act cannot invite this
Court to open the knot and reassess the findings of the arbitral
tribunal. Furthermore, the petitioner has not been able to
establish any patent illegality or perversity in the finding of the
arbitral tribunal with regards to NDCT, which would call for this
Court to exercise its power under Section 34.
8.7. Insulation Material
8.7.1 It was contended by the petitioner before this Court that
insulation material to be supplied by the respondent was to be
imported. However, the imported material got damaged and had
to be replaced.
8.7.2 It has been established before the arbitral tribunal that the
respondent had to make appropriate arrangements to ensure
proper storage of the insulation material and even unseasonal
rains did not absolve the respondent from this responsibility.
However, the arbitral tribunal has categorically came to a
finding that the respondent was making requests to the
petitioner for permit to obtain indigenous material from
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contractually approved vendors. While the petitioner was
hesitant initially, it agreed eventually to the use of indigenous
material. The initial hesitance and later acceptance of the
petitioner to the use of indigenous insulation material by the
respondent caused a considerable amount of delay.
Furthermore, there was no specific evidence before the arbitral
tribunal to establish the delay in obtaining insulation material
delayed the COF of Unit 2.
8.7.3 Arguments made by the petitioner before this Court have
already been taken into consideration by the arbitral tribunal.
The finding of the arbitral tribunal in respect of Insulation
Material does not call for any interference.
8.8. Coal and Water
8.8.1 In respect of Unit 1, the arbitral tribunal held that even if there
was delay on part of the petitioner on account of BRH, NDCT -
1, and Insulation Material, the same got subsumed in the delay
on part of the petitioner in providing land even if the petitioner
is assumed to have provided coal and water as was required. In
respect of Unit 2, the arbitral tribunal referred to the Minutes of
Meeting dated January 7/13, 2015, to establish that till this
date coal and water were not available for Unit 1, much less for
Unit 2. For completion of RTR of Unit 2, the petitioner was
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required to provide inputs but failed to do so. The aforesaid
minutes also show that the further work of Unit 2 was
dependent upon coal and water being made available by the
petitioner.
8.8.2 After detailed consideration of all the issues in respect of delay,
the arbitral tribunal arrived at a finding that the respondent
was indeed entitled to extension of time till February 23, 2016.
8.9. Other Issues on Delay
8.9.1 The arbitral tribunal held that "It is clear than neither of the
parties has for some reason or the other adhered to the schedule
of the contract. It is clearly a chicken and egg situation making it
impossible to conclude definitely that delay is on account of the
Claimant for the entire period as compared to the contractual
schedule or even for the period of 468 days claimed by the
Respondent." It was argued by petitioner that once it is held
that both parties have delayed, and it is impossible to apportion
the delay between the parties, then the arbitral tribunal cannot
award claims for delay in favour of one of the parties.
8.9.2 In my opinion, the petitioner is misreading the award. The
arbitral tribunal, as discussed, has clearly held that even if
the respondent was responsible for any delay, the same got
subsumed within the larger delay on part of the petitioner
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in providing land, coal, and water. Such finding has been
arrived at after detailed consideration of all the evidence
and contention of the parties. No grounds have been made
out by the petitioner which would invite this Court to
interfere with the finding of the arbitral tribunal in respect
of delay.
9.1 As per the arbitral tribunal, the respondent is entitled to
extension of time for completion of both the Units and that there
were no delays on part of the claimant. Hence, the petitioner
herein was neither entitled to impose liquidated damages nor
could have set off the said damages against retention money.
9.2 The petitioner's case in respect of delay was limited to Unit 2. In
fact, the petitioner vide letter dated February 03, 2017 admitted
that there was no delay by the claimant in achieving COF of
Unit 1 and actually offered compensation to the respondent for
delay on part of their own part in respect of Unit - 1 thereby
admitting responsibility for delay in achieving RTR of the said
Unit. Furthermore, the petitioner by way of the said letter
attributed a specific delay of 486 days in project execution with
respect to Unit 2. Naturally, the petitioner was obligated to
explain the calculation pertaining to the said delay which also
led to imposition of liquidated damages on the claimant.
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9.3 The findings of the tribunal in paragraph 14.3 (p) of the award
shows that no delay could be attributed to the respondent with
regard to COF of Unit 1. After having so held, the arbitral
tribunal held that the delay 'if any' is subsumed in the delay on
part of the petitioner. Similarly, the tribunal clearly observed
that the petitioner neither with the support of any document
nor by leading any oral evidence has been able to show how it
had arrived at a specific figure of 468 days of delay attributed to
the respondent in achieving COF of Unit 2. In paragraph 15.3 (l)
of the award, the tribunal observed that being a chicken and egg
situation, it was impossible to conclude definitely that the delay
is on account of the claimant for the entire period as compared
to the contractual schedule or even for the period of 468 days as
claimed by the respondent.
9.4 In my considered view, such categorical findings by the arbitral
tribunal do not suffer from any fundamental error or patent
illegality. Furthermore, the Court, in paragraph nos. 8, 8.4, 8.5,
8.6, 8.7, 8.8, and 8.9 has already discussed its reasoning and
rationale that such observations by the tribunal do not call for
any interference in a Section 34 application.
9.5 In the light of above discussions, the findings of the arbitral
tribunal on Issues No. 2, 12, 13 and 14 do not merit exercise of
powers provided under Section 34 of the Act.
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10.1 The aforesaid issues relate to the larger issue of delay in COF
which has already been dealt with in detail by this Court as a
part of Issues No. 1 to 6. After perusal of the award and
submissions, I am of the view that the findings of the arbitral
tribunal were arrived at after careful consideration of
contentions, materials on record and evidence. In my considered
opinion, the findings of the arbitral tribunal on the said issues
do not suffer from any infirmity, patent illegality or perversity.
Hence, the challenge to these issues is answered in the negative.
11.1 The parties, neither before the Tribunal, nor before this Court,
contested the fact that these works were carried out. However,
the petitioner argued that these were within the scope of work of
the respondent and were also done because of some parts being
defective.
11.2 The tribunal has undertaken an item-wise assessment and
come to a factual finding that while some works were in the
nature of operation and management (Item 1 to 7 with respect
to Unit 1; Items 1 to 4, 5 and 7 with respect to Unit 2) other
works were actually required to be done by the petitioner but
actually done by the respondent (Item 8, 9, 10 and 11 with
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respect to Unit 1; Item 6 with respect to Unit 2). The petitioner
has argued that the arbitral tribunal was wrong in holding that
the cost was not disputed by Mr. Ananda Chatterjee (CW 1) and
the amounts were proven by Mr. Newton Gonsalves (CW2), since
the amounts were only reflected in a tabular format created by
the respondent.
11.3 I do not find any manifest illegality in the awarding of the above
amount. The additional tasks were undertaken and the
amounts had to be proven in a certain manner and that manner
was found sufficient by the arbitral tribunal. It is a factual
determination, which does not go astray so as to shock the
conscience of the Court. Therefore, interference is unwarranted.
Thereby, the finding in Issue No. 15 is sustained.
12.1 The arbitral tribunal has found the two additional bays to be
beyond the clause which provided that anything required for
improved design, layout etc. is to the account of the contractor.
It appears to be a reasonable interpretation of the contract.
Supplements, in any form, to the two bays may have attracted
this clause. But altogether two new additional bays cannot be
said to attract such a clause.
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12.2 The arbitral tribunal further relied upon (a) CW-2's testimony
based on executed work orders, purchase orders and BBUs as
approved by the respondent and (b) the letter dated February 3,
2017 wherein the petitioner agreed to pay for the civil
construction and structural work relating to providing 2
additional bays to substantiate that the 2 additional bays were
additional work. With respect to the letter dated February 3,
2017, I have already discussed before how the manner of
reliance on a particular document/instrument is upon the
arbitral tribunal, unless such reliance completely shocks the
conscience of this Court. Anyway, I am not to adjudicate upon
the degree of reasonableness of the arbitral tribunal's finding,
but merely that it is not so unreasonable that no person could
have come to such a conclusion. That does not seem to be the
case herein. Correspondingly, the finding in Issue No. 16 is
sustained.
13.1 The claim under this Issue was made as the area designated for
dumping of excavated earth adjacent to the Ash Dyke was
inundated with water as also the access/lead to the designated
area. This required approaching the site by a longer route and
the claim is the difference between the actual road to approach
the designated area and the original road for carrying the
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disposable earth. These facts were found to be true by the
arbitral tribunal. It also found that there was no delay on part of
the Claimant.
13.2 However, the fundamental error that emerges is with regards to
the evidence relied upon to ascertain the quantum of damages.
The arbitral tribunal places its reliance upon CW-2's testimony
(which is stated to be based on executed work orders and
bill/invoices) that was not disputed by the petitioner. However,
the petitioner has argued that no bills/invoices were produced
at all and such a finding by the arbitral tribunal was perverse
and contrary to records. Furthermore, the respondent did not
lead any evidence to prove otherwise either in their written or
oral pleadings before this Court.
13.3 While this Court cannot go into the sufficiency of evidence, a
finding based on absolute reliance on just one witness'
testimony, without even looking at the documents to which the
witness has referred to, is a conclusion reached on no evidence
at all. If the documents were placed before the arbitral tribunal,
it may have led to a different conclusion. But, the respondents,
before this Court, did not indicate or refer to any document (on
which the witness based his testimony) that may have been
produced before the arbitral tribunal. This indicates a
fundamental flaw in the decision-making process. As per the
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judgement in Dyna (supra), the reasoning behind such a
finding must be proper, intelligible and adequate. Anything
short of these requirements lends credence to an inference of a
fundamental flaw in the decision making process. In my
opinion, no reasonable person could have awarded an amount
based on just such evidence. The reasoning confounds me.
Furthermore, contrary to the arbitral tribunal's findings, bills
and invoices were not placed. The tribunal has awarded this
claim without basing the same on any cogent evidence and the
reasoning provided for awarding these claims is further hit by
the Apex Court's judgment in Dyna (supra). Damages cannot
be awarded just for the asking but must be buttressed by
reliable evidence of invoices and payments. Without providing
evidence that could easily be made available does not entitle the
respondent to the claim.
13.4 Therefore, this finding and award granted is patently illegal,
perverse, and contrary to Section 31(3) of the Act, and is
accordingly set aside.
14.1 This claim was towards providing separate 900MW ACW pipe
headers for two units in place of a common ACW Header from
ACW system pump to inlet of filter. The revised drawing was for
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a common header, as submitted after discussion with the
respondent. However, the arbitral tribunal came to a finding
that, in reality, two separate headers were provided.
14.2 Once having found that separate headers were provided, an
amount had to be awarded. It would otherwise be unjust
enrichment. However, the petitioner contends that bills or
invoices were not produced to prove payment. The arbitral
tribunal based its computation entirely based on the evidence
given by CW-2 that such a claim was drawn up by reference to
executed work orders. Such a finding cannot be said to be
based on evidence. Mere affirmation by one witness, without
production of documents, cannot be a sound basis for
computation of an amount. It must be noted, that even the
respondents have not indicated to this Court, as to whether
such documents were placed before the arbitral tribunal.
Secondly, to reiterate my conclusion on Issue No. 17, the
reasoning for awarding such an amount is completely devoid of
intelligibility. For these reasons, the award with respect to Issue
No. 18 is set aside.
14.3 As has been discussed, a finding arrived despite lack of cogent
evidence cannot be sustained and supported by the Courts
under Section 34 of the Act. Reasons have to be provided not
just for the sake of it but must stand on the parameters of
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proper, intelligible, and adequate. This finding fails to pass
muster under Section 34 of the Act, and is further dragged
down by the weight of the Apex Court's judgment in Dyna
(supra), and is accordingly set aside.
15.1 The respondent was supposed to provide at least 2 AHUs, each
having a capacity of 50% common to both Units. However, they
were requested for a stand-by Unit for the main control building
and providing 3 AHUs with 50% capacity or 2 AHUs with 100%
capacity instead of 2 AHUs with 50% capacity. The respondent
complied with the request and supplied a component in addition
to the contractually agreed quantum/quality.
15.2 The petitioner contends that the changes required for improved
working does not attract additional liability and as per Clause
1.00.00 of Section 1 of Vol. IIA, variations were to be taken into
account without any cost implication. Clause 7.1.3.5 of the
G.C.C. provides a procedure for submitting the price and
delivery quotation by the respondent for certain spares asked
for by the petitioner. However, in my opinion, this procedure
does not necessarily or expressly exclude the possibility of
raising demands later on for providing such spares, if not asked
for as per this procedure.
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15.3 The arbitral tribunal has found that this was an additional
requirement which was fulfilled, which does not amount to mere
improvement and enhancement of capacity. This appears to be
a possible interpretation and therefore is not deserving of
interference.
16.1 The claim under Issue 20 was for supply of additional spares
which were in addition to the mandatory spares under the
contract. The arbitral tribunal came to a conclusion that the
supply of such spares have not been disputed and also that
they were over and above the quantities indicated under the
contract. This is a finding of fact that does not warrant
interference as it is not manifestly perverse or contrary to the
record.
16.2 The petitioner's argument, that procedure under Clause 7.1.3.5
of the G.C.C. was not followed, stands controverted by the
respondent's argument that this clause was applicable to
recommended spares and not additional mandatory spares. The
respondent's arguments seem to have found favour with the
arbitral tribunal. The arbitral tribunal's decision of upholding
the finding on Issue No. 20 is a possible one and cannot be
interfered with.
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17.1 The claim in Issue No. 21 was towards providing new technology
relays. These were not contemplated and did not exist at the
time when the contract was executed. They were also of a higher
value.
17.2 The arbitral tribunal did not find merit in the petitioner's
argument that the additional work's cost was not communicated
as per Clause 7.1.3.5. of the G.C.C., on the basis that an
altogether different item not contemplated under the contract
was provided. Firstly, as explained before, Clause 7.1.3.5. of the
G.C.C. does not bar raising of demand later on. Secondly,
Clause 39.1.1 of the G.C.C. empowers the petitioner to propose
and require changes, modifications etc. to the facilities. It, in no
certain terms, ousts the liability of the petitioner to pay the
respondent for supply of different items (not contemplated for
under the contract).
17.3 The arbitral tribunal's ruling on Issue No. 21, even if not as
detailed in the preceding paragraph, suggests the same in an
implied manner. Implied reasoning, if found in an arbitral
award, is sufficient to sustain the same. However, the problem
arises somewhere else. The quantum has been arrived at by
the arbitral tribunal on the basis that it was based on executed
purchase orders. The petitioner contends that no proof of
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expense or payment was produced. On a perusal of the
evidence, it is found that the documents produced before the
arbitral tribunal are not bills or invoices that prove the quantum
of amounts incurred by the respondent. Rather, these
documents are in the form of communications made by the
respondent to the petitioner indicating the amount due, without
providing the basis for which they have reached the quantum
mentioned in those communications. A finding arrived on
merely such communication is a finding based on no evidence
at all. The reasoning behind granting an amount in an arbitral
award, which was merely communicated by one party to
another, is highly flawed. It does not meet the tests of reasoning
as laid down in Dyna (supra). Therefore, the award with respect
to Issue No. 21 is set aside.
18.1 Issue No.24 related to a claim of INR 437,53,01,238/- and
€9,995,735 on account of increase in the price by reason of the
extension of the period during which the work was carried out.
On whether or not the petitioner was entitled to the claim on
account of price escalation, arbitral tribunal held that since the
respondent did not claim any delay on part of the petitioner for
Unit No. 1, and no delay was found by the arbitral tribunal,
with regard to Unit No. 2 and since elaborate findings have been
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given in respect of delay already, the respondent was entitled to
raise the claim for price escalation.
18.2 The arbitral tribunal remarked that it is a settled principle of
law that when a contract has been breached, the party who is at
the suffering end of such breach is entitled to receive, from the
party who has caused the breach, compensation for any damage
or loss caused to it. Furthermore, the arbitral tribunal held that
in light of the law settled by the Hon'ble Supreme Court that in
dealing with cases concerning contracts for work, a party need
not prove minute details of loss and damages, and rather a
particular evaluation must be undertaken. It was also held that
in a contract where the value of works exceeds 4000 crores, it is
not possible to present records denoting each instance of
escalation. As far as quantification goes, the claim was premised
on the basis of the bills raised by the petitioner on the
respondent after the scheduled date of completion and a price
variation formula was then applied. I feel it prudent to extract
the price variation formula applied to arrive at the claim of price
escalation here before proceeding further:-
EC1= EC0 [ (F+a x (A1/ Ao) + b x (B1/Bo) + c x (C1/Co) + Lb
x (L1/Lo))}
Price Variation Formulation: EC1 = EC0 *PV factor
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PV Factor = [ (F+a x (A1/ Ao) + b x (B1/Bo) + c x (C1/Co) + Lb
x (L1/Lo))}
F= The fixed portion of the Ex-factory/ FOB component of the
Contract price (F) shall be 0.15
a,b,c, are co-efficients of major materials / items involved in
the Ex - factory / FOB component of the contract price. The
sum of these co-efficients is 0.60. The labour component is
0.25.
Therefore, the vPrice Variation ids claimed on 0.85.
Thus, the fixed component in the formula is restricted to
0.85.
Thus, the fixed component in the formula is restricted to 0.15
and no increment is claimed on the fixed component.
Wholesale Price Index (WPI) is represented as A, B,C in the
PV formula and considered from Office of Economic Advisor
(Ministry of Commerce & Industry, GOI)
(www.eaindustry.nic.in)
L= Labour Index, namely, Consumer Price Index (CPI) for
Industrial Workers (Gen.) applicable to "All India" as
published by the office of the Economic Adviser. Government
of India / RBI Bulleting/ Labour Bureau Simla
(www.labourbureau.nic.in)
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18.3 In respect of Price Variation formula and the claim for
escalation, following cross examination of CW-2 bears
relevance:-
"Q17. If you come back to the price variation formula, can
you tell us as to why the calculation is taken from June,
2009 when the contract provides for different completion
dates for different activities?
Ans. We have considered the invoice billed after February,
2011 only. For the purpose of the indices the base date is
June, 2009. Consumer price index and wholesale price index
for example were available with base date June, 2009 and
the indices applied are indices from February, 2011
onwards.
Q18. Are you suggesting that price variation claim in your
affidavit is restricted to invoices raised after February 2011?
Ans. No.
Q19. On what basis have you applied the price variation
formula based on Indian indices to foreign supplies under
the contract?
Ans. The indices have to be applied as we would not know
what would be the actual incremental cost in the foreign
markets.
Q20. Is it correct that the calculations in your affidavit is
based on a hypothetical application of the formula for the
foreign supplies?
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Ans. No. To my understanding the price variation formula is
a universal formula which we also use in other projects. So
this applies both to foreign as well as Indian supplies.
Q21. In the exercise undertaken by you to make this
calculation have you verified as to whether the increased
amount was paid by the claimant to the foreign suppliers?
Ans. No.
Q22. In the exercise undertaken by you to make this
calculation have you verified as to whether the increased
amount claimed for domestic supplies was actually paid by
the claimant to various domestic suppliers?
Ans. No.
Q23. Please come to the same paragraph 16.1. Would it be
correct to assume that the invoices referred to in your
calculation sheets were paid by the respondent to the
claimant at the relevant time when the invoices were raised
incrementally?
Ans. I did not verify the payments.
Q24. Can you show from your calculation sheets in your
price variation claim that you have discounted the amount
paid at the relevant time for each of the invoices referred in
the sheets?
Ans. I have not considered the amount paid for the purpose
of calculation.
Q25. So would it be correct that the calculation sheets
assumes all the invoices are unpaid?
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Ans. The payment aspect has not been considered by me in
the calculation.
Q26. Please come to page 66. Please look at the column
'period and interest'. Can you tell us on what basis the
period has been assumed for this calculation?
Ans. As the payment period was for 45 days 1 have
considered 45 days from the date of invoice.
Q27. In this calculation the period assumes that the relatable
invoice was wholly unpaid. Is that correct?
Ans. No
Q28. Come to the interest column. Would it be correct to say
that if the payment as per the invoices is taken without the
price variation claim, then this interest calculation would be
incorrect as given in the calculation sheet with the affidavit?
Ans. I would like to rectify my reply to Question No. 27. It is
only the incremental cost arrived by virtue of the price
variation formula which is shown as unpaid and interest has
been accordingly calculated on the incremental amount.
Q29. Was this incremental amount incurred by the claimant
by making any additional payment?
Ans. I did not verify the same.
Q30. Please come to 16 and the calculation sheets. In cases
where the cost incurred by the claimant at the relevant time
was as per the cost estimated by the claimant, have those
cases been excluded from the variation claim ?
Ans. I have not verified the same.
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Q31. Please come to 16.2 of your affidavit. Have you
verified whether the amounts mentioned in paragraph 16.2
were incurred by the claimant during the project execution?
Ans. We have calculated the amount by applying the price
variation formula on the invoices raised. I have not verified
for the purpose of this calculation whether the cost has been
incurred by the claimant."
18.4 In respect of the price variation formula, it was argued by the
petitioner that the price variation formula has not been provided
in the contract and furthermore, that the formula has been
unilaterally imposed on the petitioner which is not permitted. In
this regard, judgments of the Hon'ble Supreme Court in
Ssanyong (supra), and PSA Sical (supra), and the judgment
of this Court in Universal Sea Port (supra) were relied upon by
the petitioner. However, to my mind, these judgments do not
help the petitioner's case. When there was no specific price
variation formulation provided for in the contract, and the
respondent was held entitled to damages, there had to be some
formula applied, to quantify the amount of damages. In such a
situation, use of a universal formula, which has also been used
in other projects, cannot be termed as perverse or
unreasonable. Moreover, CW-2's examination and further
evidence placed in this regard has been thoroughly taken into
account by the arbitral tribunal.
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18.5 As far as proving the quantum goes, it has already been held by
the arbitral tribunal that minute details of loss and damages
need not be proven and in a contract of this nature, it is
improbable to present records for each instance of escalation.
18.6 During the course of arbitral proceedings, the respondent
revised the Euro claim from 6,357,069 to Euro 7,000,210 but
since no formal amendment was filed, the increase in Euro
figure was not taken on record.
18.7 In respect of the claims under this issue, arbitral tribunal
restricted the amount awarded under this issue to 75% of the
amount claimed.
18.8 It was also argued by the petitioner that the finding of the
arbitral tribunal that "While the Respondent argued on the
tenability of the claim, it has not disputed the quantum of claim
though in cross examination of CW. 2, the Respondent has sought
to build an opinion that C.W. 2 was unaware of the basis of the
claim." is perverse and contrary to records. The contention of
the petitioner that the finding of the arbitral tribunal is perverse
on the fact that it did not challenge the quantum of the claim is
correct. The petitioner not only challenged the basis of the claim
but also as seen in the SOD and the cross examination of CW2
did question the formula and the quantum was accordingly also
challenged. However, the primary contention put forth by the
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petitioner was that the contract was a firm price contract, and
therefore, the entire basis of the award of this claim was wrong.
The finding that the quantum was not challenged may be a
perverse finding but cannot take away from the other evidence
on record that has been taken into account by the arbitral
tribunal for fixing the basis of this claim (delay in handing over
land and other inputs) and the applicability of the formula used
by the respondent. One stray comment that may be incorrect or
not as per record cannot and does not make the claim awarded
as wrong or illegal in any manner.
18.9 In its recent judgment in Batliboi Environmental Engineers
Limited -v- Hindustan Petroleum Corporation Limited and
Ors. reported in 2023 SCC OnLine SC 1208, the Hon'ble
Supreme Court has propounded as follows:-
"15. McDermott International Inc. refers to Sections 55 and
73 of the Indian Contract Act, 18728, which deal with the
effect of failure to perform at fixed time in contracts where
time is of essence, and computation of damages caused by
breach of contract, respectively, and states that these
Sections neither lay down the mode nor how and in what
manner computation of damages for compensation has to be
made. As computation depends upon attendant facts and
circumstances and methods to compute damages, how the
quantum thereof should be determined is a matter which
would fall within the domain and decision of the arbitrator.
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16. This is without doubt, a sound legal and correct
proposition. However, the computation of damages should
not be whimsical and absurd resulting in a windfall and
bounty for one party at the expense of the other. The
computation of damages should not be disingenuous. The
damages should commensurate with the loss sustained. In a
claim for loss on account of delay in work attributable to the
employer, the contractor is entitled to the loss sustained by
the breach of contract to the extent and so far as money can
compensate. The party should to be placed in the same
situation, with the damages, as if the contract had been
performed. The principle is that the sum of money awarded
to the party who has suffered the injury, should be the same
quantum as s/he would have earned or made, if s/he had
not sustained the wrong for which s/he is getting
compensated."
The aforesaid paragraphs further fortify the view that the
formula used by the arbitral tribunal does not require any
interference by this Court.
18.10 Since, I have already dealt extensively with the price variation
aspect, arguments of the petitioner in respect of price variation
claimed in Issue No. 24 cannot be sustained.
18.11 It was argued by the petitioner that since the remedy provided
for in the contract for delay was extension of time for
completion, no other remedy could have been availed by the
petitioner. I will now proceed to discuss the contractual clauses
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and judicial pronouncements in this aspect which were relied
upon by the petitioner.
18.12 Following clauses of the GCC and SCC were referred to by the
petitioner in support of its contention that the only remedy
available for delay was extension:-
"11. 3 Subject to GCC Sub-Clauses 9.2, 10.1 and 35
(Unforeseen Conditions) hereof, the Contractor shall be
deemed to have satisfied itself as to the correctness and
sufficiency of the Contract Price, which shall, except as
otherwise provided for in the Contract, cover all its
obligations under the Contract.
* * *
40.1 The Time(s) for Completion specified in the SCC shall be
extended, if the Contractor is delayed or impeded in the
performance of any of its obligations under the Contract by
reason of any of the following;
(a) any Change in the Facilities as provided in GCC Clause
39 (Change in the Facilities)
(b) any occurrence of Force Majeure as provided in GCC
Clause 37 (Force Majeure), unforeseen conditions as
provided in GCC Clause 35 (Unforeseen Conditions), or
other occurrence of any of the matters specified or
referred to in paragraphs (a), (b), (c) of GCC Sub-Clause
32.2
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(c) any suspension order given by the Employer under GCC
Clause 41 (Suspension) hereof or reduction in the rate of
progress pursuant to GCC Sub-Clause 41.2 or
(d) any changes in laws and regulations as provided in
GCC Clause 36 (Change in Laws and Regulations) or
(e) any default or breach of the Contract by the Employer,
specifically including failure to supply the items listed in
Scope of Works and Supply by the Employer of the
Contract Agreement,
or any activity, act or omission of any other contractors
employed by the Employer or
(f) any other matter specifically mentioned in the Contract;
by such period as shall be fair and reasonable in all the
circumstances and as shall fairly reflect the delay or
impediment sustained by the Contractor."
18.13 The petitioner placed reliance upon the judgment of the Hon'ble
Supreme Court in Ramnath International Construction (P)
Ltd. -v- Union of India (supra) to argue that where the
contractor seeks and obtains extension of time for execution of
works, he will not be entitled to claim compensation on the
ground of such delay. Since the contract in Ramnath
International (supra) explicitly prohibited award of damages if
the extension of time had been claimed, no damages could have
been awarded in that case. However, no such provision is
present in the instant case.
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18.14 The judgment of the Calcutta High Court in Union of India -v-
Budhlani Engineers reported in (2008) 3 CHN 661 was
further relied upon by the petitioner to advance the argument
that when extension of time has already been claimed, there is
no scope for claiming damages. Relevant paragraphs have been
extracted below:-
"3. According to the respondent, it however, received part of
such payment and the same was received under protest and
without prejudice to its claim for further sum. The final
payment was made when the respondent was forced to
strike out the endorsement "with protest". The respondent
apparently recorded full and final satisfaction and certificate
of clearance of all dues. The respondent, however, contended
that such endorsement was forced upon it by withholding
the amount of the final bill.
* * *
23. In this connection, it will be profitable to refer to the sub-
clauses (2) and (3) of clause 17 of the conditions of the work,
which are quoted below:
"2. Delay and extension of time.--If the Contractor be
delayed at any time in the progress of the works by any act
or neglect of the Railway's employees or by any other
contractor employed by the Railway under sub-clause (4) of
clause 20 of these conditions, or by strikes, lock-outs, fire,
unusual delay in transportation, unavoidable casualties or
any causes beyond the Contractor's control, or by delay
authorised by the Engineer pending arbitration, or by any
cause which the Engineer shall decide to justify the delay,
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then the time of completion of the works may be extended for
such reasonable time as the Engineer on behalf of the
Railway may decide.
3. Extension of time on Railway Account.--In the event
of any failure or delay by the Railway to hand over to
the Contractor possession of the lands necessary for
the execution of the works or to give the necessary
notice to commence the works or to provide the
necessary drawings or instructions or any other delay
caused by the Railway due to any other cause
whatsoever, then such failure or delay shall in no way
affect or vitiate the contract or alter the character
thereof or entitle the Contractor to damages or
compensation therefor but in any such case, the
Railway may grant such extension or extensions of the
completion date as may be considered reasonable."
24. The aforesaid two sub-clauses point out that in the event
of extension of time for completion of work for any reason
whatsoever as mentioned therein, there is no scope of
claiming damages against the Railway for the loss of idle
labour. Therefore, the claim of damages for the delay due to
excess water in the site was not entertainable. In this
connection, it will not be out of place to refer to the decision
of the Supreme Court in the case of Ramnath International
Construction (P) Ltd. v. Union of India, reported in 2007 (2)
SCC 453, where the contract provided that if there was any
delay, attributable either to the contractor or the employer or
to both and the contractor sought for and obtained extension
of time for execution on that account, he would not be
entitled to claim compensation of any nature on the ground
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of such delay in addition to the extension of time obtained by
him. According to the Supreme Court, prayer for extension of
time by the contractor amounted to a specific consent by the
contractor to accept extension of time alone in satisfaction of
his claim for delay and not to claim any compensation in lieu
thereof.
25. We, therefore, hold that the sub-clauses (2) and (3) of
clause 17 did not authorise the contractor to claim any
compensation once he had applied for extension and got the
extension. The Arbitrator, therefore, clearly misdirected
himself in awarding compensation on that account and the
learned Single Judge totally overlooked this aspect of the
case. We, accordingly, set aside the award so far as it
granted damages to the respondent for the suspended
period of work as mentioned in claim No. 12(iv)(a)(b)(c) & (d)
as the same is not tenable under the terms of the
agreement."
Emphasis Added
As is evident from a reading of paragraph 23 of the above
judgment, it was an explicit stipulation in the contract that in
the event Railway delayed in handing over the land, the
contractor will not become entitled to compensation. However,
no such explicit prohibition on award of escalation is present in
the instant case.
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18.15 The judgment of the Hon'ble Supreme Court in Oil and Natural
Gas Corporation -v- Wig Brothers Builders and Engineers
Private Limited reported in (2010) 13 SCC 377 was also relied
upon by the petitioner in support of its argument that since
extension of time in event of delay is the only remedy provided
in the contract, compensation/damages cannot be claimed by
the petitioner. Paragraphs relied upon by the petitioner have
been reproduced below:-
"5. The award has been made with reference to several
claims. The appellant has not been able to make any valid
ground to attack except with reference to Claim 1. In fact, the
learned counsel for the appellant rightly concentrated upon
the award on Claim 1, which relates to the claim for
compensation for loss on account of prolongation of the
completion period on account of ONGC's failure to perform its
contractual obligations. The arbitrator has held that the
delay in completion was due to the fault of both the
contractor and ONGC and that both are equally liable for the
delay of 19 months. The arbitrator held that as both were
equally liable, the contractor was entitled to compensation at
the rate of Rs. 1 lakh for a period of 9½ months (that is, half
of the period of delay of 19 months) in all Rs. 9,50,000.
6. The arbitrator has observed that there is no provision in
the contract by which the contractor can be estopped from
raising a dispute in regard to the said claim. But Clause 5-A
of the contract pertains to extension of time for completion of
work and specifically bars any claim for damages. The said
clause is extracted below:
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"In the event of delay by the Engineer-in-charge to hand over
to the contractor possession of land/lands necessary for the
execution of the work or to give the necessary notice to the
contractor to commence work or to provide the necessary
drawing or instructions or to do any act or thing which has
the effect of delaying the execution of the work, then
notwithstanding anything contained in the contract or
alter the character thereof or entitle the contractor to
any damages or compensation thereof but in all such
cases the Engineer-in-charge may grant such extension or
extensions of the completion date as may be deemed fair
and reasonable by the Engineer-in-charge and such decision
shall be final and binding."
7. In view of the above, in the event of the work being
delayed for whatsoever reason, that is, even delay which is
attributable to ONGC, the contractor will only be entitled to
extension of time for completion of work but will not be
entitled to any compensation or damages. The arbitrator
exceeded his jurisdiction in ignoring the said express bar
contained in the contract and in awarding the compensation
of Rs. 9.5 lakhs. This aspect is covered by several decisions
of this Court. We may refer to some of them.
8. In Associated Engg. Co. v. Govt. of A.P. [(1991) 4 SCC 93]
this Court observed: (SCC p. 103, para 24)
"24. The arbitrator cannot act arbitrarily, irrationally,
capriciously or independently of the contract. His sole
function is to arbitrate in terms of the contract. He has no
power apart from what the parties have given him under the
contract. If he has travelled outside the bounds of the
contract, he has acted without jurisdiction."
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9. In Rajasthan State Mines & Minerals Ltd. v. Eastern Engg.
Enterprises [(1999) 9 SCC 283] this Court held: (SCC pp. 300
& 310, paras 22-23 & 44)
"22. ... The rates agreed were firm, fixed and binding
irrespective of any fall or rise in the cost of the work covered
by the contract or for any other reason or any ground
whatsoever. It is specifically agreed that the contractor will
not be entitled or justified in raising any claim or dispute
because of increase in cost of expenses on any ground
whatsoever. By ignoring the said terms, the arbitrator has
travelled beyond his jurisdiction as his existence depends
upon the agreement and his function is to act within the
limits of the said agreement. This deliberate departure from
the contract amounts not only to manifest disregard of the
authority or misconduct on his part but it may tantamount to
mala fide action.
23. It is settled law that the arbitrator is the creature of the
contract between the parties and hence if he ignores the
specific terms of the contract, it would be a question of
jurisdictional error which could be corrected by the court and
for that limited purpose agreement is required to be
considered. ...
* * *
44. (h) ... He cannot award an amount which is ruled out or
prohibited by the terms of the agreement."
10. In Ramnath International Construction (P) Ltd. v. Union of
India [(2007) 2 SCC 453] a similar issue was considered.
This Court held that Clause 11(C) of the general conditions of
contract (similar to Clause 5-A under consideration in this
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case) was a clear bar to any claim for compensation for
delays, in respect of which extensions had been sought and
obtained. This Court further held that such a clause amounts
to a specific consent by the contractor to accept extension of
time alone in satisfaction of claims for delay and not to claim
any compensation; and that in view of such a bar contained
in the contract in regard to award of damages on account of
delay, if an arbitrator awards compensation, he would be
exceeding his jurisdiction.
11. In view of the above, the award of the arbitrator in
violation of the bar contained in the contract has to be held
as one beyond his jurisdiction requiring interference.
Consequently, this appeal is allowed in part, as follows:
(a) The judgment of the High Court and that of the civil court
making the award the rule of the court is partly set aside
insofar as it relates to the award of Rs. 9.5 lakhs under
Claim 1 and the award of interest thereon."
Emphasis Added
The contract between the parties in ONGC -v- Wig Brothers
(supra) specifically stated in the event of delay by the Engineer-
in-charge to hand over the possession of land/lands to the
contractor, the contractor will not be entitled to claim any
damages. While it is true that the remedy provided for delay in
the instant case was extension of time, there was no prohibition
placed on award of damages in case extension of time is availed.
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18.16 Additional reliance was also placed on the judgment of the
Hon'ble Supreme Court in Union of India -v- Chandalavada
Gopalakrishna Murty and Others (supra) to advance the
argument that since in terms of the contract, extension of time
was the only remedy available for delay, the contractor will not
be entitled to either damages or compensation. Relevant portion
has been extracted below:-
"6. The dispute now to be resolved is confined only to Item 1
of the claim. To answer this question, we may refer to Clause
17(3) of the contract. Clause 17(3) reads:
'17. (3) In the event of any failure or delay by the Railway to
hand over to the contractor possession of the lands
necessary for the execution of the works or to give the
necessary notice to commence the works or to provide the
necessary drawings or instructions or any other delay
caused by the Railway due to any cause, whatsoever, the
said failure or delay shall in no way effect or vitiate
the contract or alter the character thereof or entitle
the contractor to damages of compensation thereof but
in any such case, the Railway may grant such extension or
extensions of the completion date as may be considered
reasonable.'
Clause 17(3) thus clearly shows that if there is delay by the
Railways the term of the contract can be extended as has
been done in the present case. However, the contractor shall
not be entitled to damages or compensation."
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The relevant contractual provision in the aforesaid case
explicitly prohibited the entitlement of contractor to damages,
but as previously discussed, the relevant contractual provision
in the instant case contains no such bar.
18.17 Lastly, the petitioner also placed reliance upon the judgment of
the Hon'ble Supreme Court in K. Marappan (Dead) Through
Sole Legal Representatives Balasubramanian -v-
Superintending Engineer T.B.P.H.L.C. Circle Anantapur
(supra) in support of its contention that the contractor cannot
claim compensation when extension of time has already been
claimed. Relevant portion has been extracted below:-
"24. Since the impugned decision is based on Clause 59, it is
now necessary to refer to the same. It reads as follows:
'59. Delays and extension of time.--No claim for
compensation on account of delays or hindrances to
the work from any cause whatever shall lie, except, as
hereinafter defined. Reasonable extension of time will be
allowed by the Executive Engineer or by the officer
competent to sanction the extension for unavoidable delays,
such as may result from causes, which, in the opinion of the
Executive Engineer, are undoubtedly beyond the control of
the contractor. The Executive Engineer shall assess the
period of delay or hindrance caused by any written
instructions issued by him, at twenty five per cent in excess
of the actual working period so lost.
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In the event of the Executive Engineer failing to issue
necessary instructions and thereby causing delay and
hindrance to the contractor, the latter shall have the right to
claim an assessment of such delay by the superintending
Engineer of the Circle whose decision will be final and
binding. The contractor shall lodge in writing with the
Executive Engineer a statement of claim for any delay or
hindrance referred to above, within fourteen days from its
commencement, otherwise, no extension of time will be
allowed.
Whenever authorised alterations or additions made during
the progress of the work are of such a nature in the opinion
of the Executive Engineer as to justify an extension of time in
consequence thereof, such extension will be granted in
writing by the Executive Engineer or other competent
authority when ordering such alterations or additions.'
25. It is our view that it will not be open to a contractor to
claim compensation which arises on account of the fact that
the work is delayed or hindrance caused to the work from
any cause whatsoever. To demystify this further, it means
that should the work be delayed on account of reasons
which are attributable either partially or entirely to the
employer, namely, the respondent herein, the claim for
compensation is barred. Equally, the clause interdicts raising
claim for compensation by the contractor if the employer
poses hindrance to the work. If work gets delayed on
account of the contractor himself, it is axiomatic that he
cannot claim compensation as it would amount to a person
taking advantage of his own wrong. Delay from any cause
cannot found a claim for compensation. It may also happen
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that the work may get delayed not due to the fault of the
employer. There may be natural causes such as natural
calamities which may cause delay in carrying out the work.
Even in such cases, in our view, Clause 59 would cast an
embargo against a claim by the contractor. This
interpretation gives full play to the words "delays from any
cause whatsoever". Equally, if there is hindrance to the work
from any cause whatever, a claim for compensation would
not lie.
26. The heading of Clause 59 is "delays and extension of
time". While compensation on account of delay and
hindrance is impermissible, what Clause 59 provides,
however, is that reasonable extension of time be allowed.
Request for extension of time must arise from causes beyond
the control of the contractor. It is further provided in Clause
59 that if delay or hindrance is caused by any written
instruction by the Executive Engineer then the period of the
delay or hindrance is to be assessed at 25% in excess of the
actual working period so lost. It is further provided that if
delay and hindrance is caused to the contractor as a result
of the Executive Engineer failing to issue necessary
instructions, the contractor will have the right to claim and
assessment of the delay by the Superintending Engineer of
the circle. The contractor is to lodge a statement of claim for
any delay or hindrance within 14 days from its
commencement, failing which no extension for time will be
allowed. Still further Clause 59 declares that whenever
authorised alterations or additions which are made during
the progress of the work are of such a nature which justify
an extension of time, extension can be granted in writing by
the Executive Engineer or other competent authority when
ordering such alterations or additions. In short, under
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Clause 59 while extension of time on account of delay
or hindrance can be granted, claim for compensation
on account of delay or hindrance on account of any
cause will not lie."
Emphasis Added
In my view, this case does not help the petitioner's case since as
is evident from a bare reading of the aforesaid judgment, Clause
59 clearly stated that claim for compensation on account of
delay or hindrance will not lie. However, the contract in the
instant case places no such prohibition on account of delay or
hindrance.
18.18 While it is true that the remedy for delay in the contract was
extension of time, there was no explicit indication in the
contract that, extension of time was the only remedy. In
absence of such indication, the arbitral tribunal cannot be held
at fault for award of damages even if extension of time as a
remedy for delay had already been availed of by the respondent.
Moreover, the arbitral tribunal has already held that when a
contract has been breached, the party at the suffering end of
such breach is entitled to receive compensation. In absence of
any specific prohibition on award of compensation, this Court
finds no perversity or patent illegality with the finding of the
arbitral tribunal on this issue.
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18.19 It was argued that price escalation has been granted in garb of
damages, and the award being a firm price contract, such
finding of the arbitral tribunal cannot be sustained. While firm
price aspect has already been deliberated in detail, but just to
reiterate, the contract was a firm price contract, only for the
schedule of work as stipulated in the contract. In absence of an
explicit prohibition on award of escalation, arbitral tribunal was
not contractually withheld from awarding price escalation.
Moreover, damages have been awarded in terms of Section 73 of
the Indian Contract Act, 1872. The said section has been
reproduced below:-
"73. Compensation for loss or damage caused by breach of
contract.--When a contract has been broken, the party who
suffers by such breach is entitled to receive, from the party
who has broken the contract, compensation for any loss or
damage caused to him thereby, which naturally arose in the
usual course of things from such breach, or which the parties
knew, when they made the contract, to be likely to result
from the breach of it.
Such compensation is not to be given for any remote and
indirect loss or damage sustained by reason of the breach.
Compensation for failure to discharge obligation resembling
those created by contract.--When an obligation resembling
those created by contract has been incurred and has not
been discharged, any person injured by the failure to
discharge it is entitled to receive the same compensation
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from the party in default, as if such person had contracted to
discharge it and had broken his contract.
Explanation.--In estimating the loss or damage arising from
a breach of contract, the means which existed of remedying
the inconvenience caused by the non-performance of the
contract must be taken into account."
18.20 It is a well-established principle of law that if a contract has
been breached, the party who has suffered such breach cannot
be left hanging. Section 73 of the Indian Contract Act, 1872 is a
statutory safeguard to protect the party affected by breach of
contract. In absence of any explicit bar on award of damages in
the contract, the arbitral tribunal cannot be faulted for award of
damages. Even if extension of time as a result of breach of
contractual obligations, has been availed as a remedy, it would
not prevent the party who has suffered such breach from
putting forward a claim for damages if there is no explicit
prohibition contained in the contract. In such a situation, award
of damages by the arbitral tribunal would not violate Section
28(3) of the Act, since if damages have been awarded in absence
of an explicit prohibition, arbitral tribunal cannot be said to
have acted contrary to the terms of the contract.
18.21 As far as the use of Indian indices for foreign supplies go, C.W.
2's testimony which has been extracted above bears relevance.
C.W. 2 had deposed before the arbitral tribunal that since the
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actual incremental cost for foreign supplies was not known
Indian indices were used. In my view, this is not a completely
perverse reasoning, on which no reliance could have been
placed by the arbitral tribunal. Since the actual incremental
cost for foreign supplies was not known, reliance on Indian
indices cannot be termed as impractical. Moreover, argument
regarding use of Indian indices for foreign supplies has already
been considered by the arbitral tribunal and as such, this Court
cannot reappreciate the finding of the arbitral tribunal in
absence of any perversity or patent illegality.
18.22 When it comes to proving actual damages, it has been argued by
the petitioner that the same has not been done in the instant
case. The same has already been taken into consideration by
the arbitral tribunal. Every minute detail/instance of escalation
is practically impossible to establish in a work contract which
runs into thousands of crores. In such a case, use of price
variation formula and indices is a more practical and viable
alternative. Furthermore, arbitral tribunal's assessment of
damages has been arrived at after extensive consideration of
material evidence and oral testimony, and the same can be
perused from the record of arbitral proceedings. Moreover the
arbitral tribunal has already considered and held that it is a
settled law of the Hon'ble Supreme Court that an arbitral
tribunal is entitled to make an assessment of what is the
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damage and what should be the quantum in respect of the
same.
18.23 In light of the aforesaid discussion, this Court finds no reason
to interfere with arbitral tribunal's finding in respect of Issue
No. 24.
19.1 Issue No. 25 relates to a claim of INR 29,71,07,396.31/-, which
was on account of additional cost incurred towards construction
of Ash Dyke. The arbitral tribunal referred to the petitioner's
letter dated February 03, 2017 and remarked that the
respondent itself offered the respondent a compensation of INR
8.472 crores towards ash dyke. The same was considered as an
admission on part of the petitioner. The arbitral tribunal further
held that the respondent was severely impeded in carrying out
the works in the Ash Pond area and so, the respondent was
entitled to this claim. Based on C.W.'s deposition the amount
under this claim changed to INR 29,03,09,091.86/-.
19.2 Entire amount claimed under this head was awarded.
19.3 Since most of the grounds raised against the award of Issue No.
25, were similar to the ones raised against Issue No. 24, and the
same having already been conclusively dealt with under Issue
No. 24, I will not deal with those issues here.
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19.4 It was argued that the award of Issue No. 25 amounts to double
recovery since escalation for the entire project has already been
claimed under Issue No. 24. Furthermore, petitioner advanced
the argument that Ash Dyke was part of the Main Plant Package
(MPP) and hence escalation could not have been separately
claimed for Ash Dyke under Issue No. 25.
19.5 In this regard, petitioner made reference to the testimony of Mr.
Partha Banerjee, RW-4 which has been extracted below:-
"Q2. Do you mean you had nothing to do with the
construction of ash dyke, ash pond and ash corridor which
are not a part of the main plant area or main plant package ?
Ans. Construction of ash pond and ash corridor are part of
main plant package awarded to the claimant. I approved
and finalised the design and drawings of the ash pond and
ash corridor."
To my mind, this argument does not advance the petitioner's
case since this is only one side of the things. While it is true that
ash pond and ash corridor were indeed part of the main plant
package, it is also an undisputed fact that the ash pond and ash
corridor were a separate component of the package not
connected to the main plant.
19.6 Firstly, it is evident from a perusal of the Statement of Defence,
and other written submissions that the argument of double
recovery was never raised before the arbitral tribunal and is
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being argued for the first time before this Court. Secondly, the
main plant land and Ash Pond land were treated differently by
the petitioner itself. Apart from the letter dated February 03,
2017 where the petitioner offered respondent compensation
separately for Main Plant Switch Yard Portion and Ash Pond
portion, it was also the contention of the petitioner before the
arbitral tribunal that there was no "relationship and dependence
between the Main Plant land and Ash Pond area since no
construction and erection activity in the Main Plant area was
connected with the availability of Ash Pond area" (Paragraph
8.2(a) of the arbitral award dated December 21, 2019).
Furthermore, there was a distinction made between the land
designated for main plant (928.630 acres) and the balance land
designated ash pond/dyke land (507.480 acres). As such, the
respondent could not be placed at fault for claiming
compensation/damages separately for the ash dyke and the
main plant land. As a result of the respondent raising these
claims under separate heads, both these issues were separately
treated and dealt with by the arbitral tribunal.
19.7 In light of the aforesaid discussion, challenge to Issue No. 25 is
answered in the negative.
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20.1 Issue No. 27 related to a claim of INR 210,64,59,626/- and
€21,000,088/- on account of overstay by the claimant on
account of delay in achieving COF of Unit 1 and Unit 2 as well
as completion of Performance Guarantee tests.
20.2 The breakup of the amount claimed under Issue No. 27 has
been provided by C.W. 2 in his Affidavit of Evidence. The same
has been reproduced below -
"19.2 The additional actual cost computed is by reason of
extended period of the Contract beyond the Schedule Date of
Completion which got extended, which resulted in additional
costs to Claimant. The same has been claimed by the
Claimant in relation to the cost incurred for overstay
beyond 14th February 2011 represented by vouchers,
invoices, payment slips, etc. Additionally, I produce
the Auditors' Certificate showing that an amount of
Rs. 100,87,95,334/- has been incurred by the Claimant
towards overheads, salary, and depreciation. The said
Certificate appears in Vol. 54A filed along with the Rejoinder.
Interest calculated at the rate of 18% per annum after 45
days from 28th October 2015, i.e. the date of submission of
letter claiming amounts incurred on account of overstay at
that time by the Claimant is Rs. 42,50,13,181/-
19.3 The Claimant has claimed proportionate cost of
Euro 13,000,000/- based on the original Contract of
Euro 6,000,000/- for supervising the work (Services
Contract) for a period of 30 months. The amount of
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Euros 13,000,000/- is arrived at for the extended
period of stay of 66 months of SEC personnel. The
Claimant has claimed interest at the rate of 18% per annum
which has been calculated from the Scheduled Date of
Completion up to 31st July. 2017 being a sum of Euros
8,000,088/-"
20.3 What would be evident from a reading of the
aforementioned paragraphs is that a principal amount of
INR 100 Crores (approx.) has been claimed towards
overheads, salary, and depreciation for which Auditor's
Certificate (hereinafter referred to as 'CA Certificate') has
been adduced as evidence. For overstay, a principal amount
of INR 68 Crores has been claimed for which vouchers,
invoices, payment slips, etc. have been provided. In all, the
total INR component claimed (excluding interest) amounts
to INR 168 Crores (approx.) For the Euro component of 13
million (excluding interest) which is on account of overstay
of SEC personnel, the same is a proportionate figure arrived
based on the original contract of Euro 6 million.
20.4 The award of this claim has been challenged by the petitioner
on account of the claim being awarded on the basis of no
evidence. It has also been alleged that there was no causal link
between the purported cost incurred on account of overstay and
delay. Furthermore, it has also been alleged that there is double
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recovery between Issue 27 and issues no. 24 and 25 as
overhead is part of the fixed coefficient reflected in the formula
applied by the respondent for claiming price escalation.
20.5 It seems from a reading of the award that in addition to the
auditor's certificate which was for an amount of INR 100 crores
approximately., for the balance amount claimed under this
issue vouchers, invoices, and payment slips were presented by
the respondent. Furthermore, CW - 2's deposition has also been
relied upon by the petitioner.
20.6 The CA certificate relied upon for a major part of the overhead
claim has been prepared after performing following duties:-
"(a) Obtained the attached Annexure of statement of specific
expenses incurred by EPC a division of the Company in
executing Raghunathpura Thermal Power Project for the
period from February 1, 2011 to November 30, 2016 which
are prepared by the management and
(b) Verified the amounts are as per the books of account of
the relevant period and it pertains to the aforesaid projects."
However, it is pertinent to note that the CA certificate does not
contain any certification if these expenses were indeed made
over and above the amount that has already been claimed on
account of price variation/escalation.
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Furthermore, the CA certificate as per its own words does not
"constitute an audit or a review made in accordance with the
generally accepted auditing standard in India" and consequently,
it expresses no assurance.
20.7 It was contended that the CA certificate by itself would not
amount as a sufficient evidence. The petitioner had relied on the
judgment of the Hon'ble Supreme Court in Petlad Turkey Red
Dye Works Co. Ltd. -v- Dyes and Chemical Workers Union
and Ors. reported in AIR 1960 SC 1006. Relevant portions of
the said judgment have been extracted below:-
"4. That is a distinction which the courts of law have always
been careful to make. Thus, if a person is to prove that he
was ill on a particular date, the mere filing of a certificate of
a medical man that he was ill on that date is not accepted as
evidence to show that he was ill. The correctness of the
statement made in the certificate has to be proved by an
affidavit or oral testimony in court by the doctor concerned or
by some other evidence. There is no reason why an
exception should be made in the case of balance sheets
prepared by companies for themselves. It has to be borne in
mind that in many cases the Directors of the Companies may
feel inclined to make incorrect statements in these balance
sheets for ulterior purposes. While that is no reason to
suspect every statement made in these balance sheets, the
position is clear that we cannot presume the statements
made therein to be always correct. The burden is on the
party who asserts a statement to be correct to prove the
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same by relevant and acceptable evidence. The mere
statement of the balance sheet is of no assistance to show
therefore that any portion of the reserve was actually utilized
as working capital.
5. The question whether a balance sheet can be taken as
proof of a claim what portion reserve has actually been used
as working capital was very recently considered by us in
Khandesh Spg. & Weaving Mill Co. Ltd. v. Rashtriya Girni
Kamgar Sangh, Jalgaon [ Civil Appeal No. 257 of 1958] . As
was pointed out by Subba Rao, J. in that case the balance
sheet of a Company is prepared by the Company's own
officers and when so much depends on the ascertainment of
what portion of the reserve was utilized as working capital,
the principles of equity and justice demand that an
Industrial Court should insist upon a clear proof of the same
and also give a real and adequate opportunity to the labour
to canvass the correctness of the particulars furnished by the
employer. In that case we also considered an observation in
Indian Hume Pipe Company Ltd. v. Workmen [(1959) 2 LLJ
357] which was relied upon for an argument that the
balance-sheet was good evidence to prove that amounts
were actually used as working capital. As was pointed out
in Khandesh Spg. & Weaving Mills case [ Civil Appeal No.
257 of 1958] this observation was not intended to lay down
the law that a balance sheet by itself was good evidence to
prove any fact as regards the actual utilisation of reserves
as working capital. The observation relied on was a sentence
at p. 362-- "Moreover, no objection was urged in this behalf,
nor was any finding to the contrary recorded by the
Tribunal". If it had been intended to state as a matter of law
that the balance sheet itself was good evidence to prove the
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fact of utilisation of a portion of the reserve as working
capital it would have been unnecessary to add such a
sentence.
6. This question as regards the sufficiency of the balance
sheet itself to prove the fact of utilization of any reserve as
working capital was also considered by us in Management
of Trichinopoly Mills Ltd. v. National Cotton Textile Mills
Workers Union [ Civil Appeal No. 309 of 1957] and it was
held that the balance-sheet does not by itself prove any such
fact and that the law requires that such an important fact as
the utilisation of a portion of the reserve as working capital
has to be proved by the employer by evidence given on
affidavit or otherwise and after giving an opportunity to the
workmen to contest the correctness of such evidence by
cross-examination."
20.8 The Hon'ble Supreme Court in the case of Messrs. Gannon
Dunkerlay & Co. Ltd. -v- Workmen reported in (1972) 3 SCC
443 had stated that mere CA certificate cannot be sufficient and
it has to be accompanied by actual evidence of how the CA
arrived at a particular figure. I have reproduced the relevant
paragraph below:-
"6. Then, there is the register Ext. C-5 which contains entries
of lots of other buildings owned by the Company, including
buildings which are not used for business purposes and are
let out for earning extraneous income and in respect of which
no rehabilitation grant has been claimed by the Company.
This register is the register maintained for the purpose of
calculating depreciation in respect of each building. This
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register was started in the year 1955-56, and the
progressive depreciation in respect of each building from that
year onwards is entered in this register. The register shows
original cost of buildings of the year 1947-48 at Rs 82,000
and of the year 1952-53 at Rs 50,000. Thus, there was proof
available in these registers of the original cost of these three
blocks of buildings. The claim of the Company for
rehabilitation grant for the year 1958-59 was in respect of
buildings of the value of Rs 4,95,648. As we have just
indicated, the entries in register Ext. C-1 bear out the
construction of buildings for the cylinder factory in 1958-59
of the value of Rs 4,54,789. For buildings claimed to have
been constructed in that year of the value of the
difference between these two amounts no documentary
evidence has been produced. Reliance was placed on
behalf of the Company on a certificate issued by the
Chartered Accountant on April 18, 1963, in which the
total original cost of the buildings used by the
Company for its business purposes, after excluding
those that were let out, was certified to be Rs
6,27,648. It was urged that, if, from this amount, the
three amounts proved as value of buildings entered in
the two registers Exts. C-1 and C-5 is deducted, the
balance represents the additional buildings that were
constructed in 1958-59 and which are used for
business purposes by the Company. This certificate
cannot be accepted as the basis for proving that
buildings of that value were really constructed in the
year 1958-59 and form part of the business premises
of the Company. The certificate cannot be held to
prove the original cost of those buildings. Even the
Chartered Accountant, who gave the certificate, did
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not explain in the affidavit how he had arrived at this
figure of Rs 6,27,648. Consequently, rehabilitation
grant can be allowed only in respect of the three sets
of buildings, mentioned above, the original cost of
which has been proved by production of registers Exts.
C-1 and C-5."
Emphasis Added
20.9 Additionally, the judgment of the Hon'ble Supreme Court in
Central Bureau of Investigation -v- V.C. Shukla and Ors.
reported in (1998) 3 SCC 410 also bears relevance in the
instant case. In the aforesaid case, the Hon'ble Supreme Court
outlined that while relying upon parties' books of account there
should be additional safeguard of insistence upon other
evidence. Relevant paragraphs have been extracted here for ease
of reference:-
"35. The probative value of the liability created by an entry
in books of account came up for consideration in
Chandradhar Goswami v. Gauhati Bank Ltd. [AIR 1967 SC
1058 : (1967) 1 SCR 898 : 37 Comp Cas 108] That case
arose out of a suit filed by Gauhati Bank against
Chandradhar (the appellant therein) for recovery of a loan of
Rs 40,000. In defence he contended, inter alia, that no loan
was taken. To substantiate their claim the Bank solely relied
upon certified copy of the accounts maintained by them
under Section 4 of the Bankers' Book Evidence Act, 1891
and contended that certified copies became prima facie
evidence of the existence of the original entries in the
accounts and were admissible to prove the payment of loan
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given. The suit was decreed by the trial court and the appeal
preferred against it was dismissed by the High Court. In
setting aside the decree this Court observed that in the face
of the positive case made out by Chandradhar that he did
not ever borrow any sum from the Bank, the Bank had to
prove the fact of such payment and could not rely on mere
entries in the books of account even if they were regularly
kept in the course of business in view of the clear language
of Section 34 of the Act. This Court further observed that
where the entries were not admitted it was the duty of the
Bank, if it relied on such entries to charge any person with
liability, to produce evidence in support of the entries to
show that the money was advanced as indicated therein
and thereafter the entries would be of use as corroborative
evidence.
36. The same question came up for consideration before
different High Courts on a number of occasions but to
eschew prolixity we would confine our attention to some of
the judgments on which Mr Sibal relied. In M.S. Yesuvadiyan
v. P.S.A. Subba Naicker [AIR 1919 Mad 132 : 52 IC 704] one
of the learned Judges constituting the Bench had this to say:
'Section 34, Evidence Act, lays down that the entries in
books of account, regularly kept in the course of business are
relevant, but such a statement will not alone be sufficient to
charge any person with liability. That merely means that the
plaintiff cannot obtain a decree by merely proving the
existence of certain entries in his books of account even
though those books are shown to be kept in the regular
course of business. He will have to show further by some
independent evidence that the entries represent real and
honest transactions and that the moneys were paid in
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accordance with those entries. The legislature however does
not require any particular form or kind of evidence in
addition to entries in books of account, and I take it that any
relevant facts which can be treated as evidence within the
meaning of the Evidence Act would be sufficient
corroboration of the evidence furnished by entries in books of
account if true.'
While concurring with the above observations the other
learned Judge stated as under:
'If no other evidence besides the accounts were given,
however strongly those accounts may be supported by the
probabilities, and however strong may be the evidence as to
the honesty of those who kept them, such consideration
could not alone with reference to Section 34, Evidence Act, be
the basis of a decree.'
34. The rationale behind admissibility of parties' books of
account as evidence is that the regularity of habit, the
difficulty of falsification and the fair certainty of ultimate
detection give them in a sufficient degree a probability of
trustworthiness (Wigmore on Evidence, § 1546). Since,
however, an element of self-interest and partisanship of the
entrant to make a person -- behind whose back and without
whose knowledge the entry is made -- liable cannot be ruled
out the additional safeguard of insistence upon other
independent evidence to fasten him with such liability, has
been provided for in Section 34 by incorporating the words
"such statements shall not alone be sufficient to charge any
person with liability"."
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20.10 It is an undisputed fact that the Indian Evidence Act, 1872 is
not applicable to arbitral proceedings. While it is true that the
law of evidence might not apply to proceedings before an
arbitral tribunal, but principles of evidence do apply. There are
certain basic principles of law of evidence that have to be
adhered to even while citing evidence before an arbitral tribunal.
A finding arrived at by merely relying on CA certificate without
any additional evidence to back the claim, in my opinion is a
finding based on no evidence at all.
20.11 At this juncture, this Court would like to make a reference to
the judgment of the Delhi High Court in Satluj Jal Vidyat
Nigam Ltd -v- Jaiprakash Hyundai Consortium and Ors.
reported in 2023 SCC OnLine Del 4039:-
"57. Entertaining financial claims based on novel
mathematical derivations, without proper foundation in the
pleadings and/or without any cogent evidence in support
thereof can cause great prejudice to the opposite party.
Especially in the context of construction contracts where
amounts involved are usually astronomical, any laxity in
evidentiary standards and absence of adequate diligence on
the part of an arbitral tribunal in closely scrutinizing
financial claims advanced on the basis of mathematical
derivations or adoption of novel formula, would cast serious
aspersions on the arbitral process. The present case is an
example where substantial liability has sought to be
fastened on one of the contracting parties based on specious
paper calculations. It cannot be overemphasized that arbitral
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tribunals must exercise due care and caution while dealing
with such claims."
20.12 Without any supporting evidence accompanying it, CA's
certificate by itself could not have been relied upon by the
arbitral tribunal to award the amount claimed in Issue No. 27.
Furthermore, in absence of the CA certificate being not in
accordance with proper auditing standards and without any
undertaking as to whether or not the overhead expenses were
indeed above and beyond the expenses already claimed for price
escalation in Issues 24 and 25, the arbitral tribunal's finding in
Issue No. 27 amounts to a finding without reason, which is
based on no evidence at all.
20.13 Apart from a finding based on no evidence, the awarded amount
in Issue 27, as per me, also amounts to double recovery, which
cannot be permitted. Firstly, a look at the price variation
formula as discussed above would make it apparent that
overhead is actually a part of the fixed coefficient reflected in the
formula applied by the respondent to claim price escalation.
Labour has already been included as a component in the price
variation formula. Secondly, no evidence has been provided to
establish that the overstay/overhead cost is an additional
expenditure over and above the amount that has already been
claimed for price escalation. Allowing the respondent to enjoy
the fruits of the awarded amount in Issue No. 27 in addition to
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Issues No. 24 and 25, would, tantamount to unjust enrichment
of the respondent at the expense of the petitioner.
20.14 The principle of unjust enrichment has been defined by the
Hon'ble Supreme Court in the case of Mahabir Kishore & Ors.
-v- State of M.P. reported in (1989) 4 SCC 1 as follows:-
"10. Courts in England have since been trying to formulate a
juridical basis of this obligation. Idealistic formulations as
"aequum et bonum" and "natural justice" were considered to
be inadequate and the more legalistic basis of unjust
enrichment is formulated. The doctrine of "unjust
enrichment" is that in certain situation it would be "unjust"
to allow the defendant to retain a benefit at the plaintiff's
expense. The relatively modern principle of restitution is of
the nature of quasi-contract. But the English law has not yet
recognised any generalised right to restitution in every case
of unjust enrichment. As Lord Diplock has said, "there is no
general doctrine of "unjust enrichment" recognised in English
law. What it does is to provide specific remedies in particular
cases of what might be classed as unjust enrichment in a
legal system i.e. based upon the civil law". In Sinclair v.
Brougham [1914 AC 398] Lord Haldane said that law could
not "de jure" impute promises to repay whether for money
"had and received" otherwise, which may, if made de facto,
it would inexorably avoid.
11. The principle of unjust enrichment requires: first, that the
defendants has been "enriched" by the receipt of a "benefit";
secondly, that this enrichment is "at the expense of the
plaintiffs"; and thirdly, that the retention of the enrichment
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be unjust. This justifies restitution. Enrichment may take the
form of direct advantage to the recipient wealth such as by
the receipt of money or indirect one for instance where
inevitable expense has been saved."
20.15 Although, CW - 2, in its testimony as extracted below provided
that overheads are not reflected in price variation, no other
evidence apart from oral testimony of CW - 2 was led by the
respondent before the arbitral tribunal:-
"Q 37. Can you tell us in your calculation sheets where can it
be seen that these overheads are also not reflected in your
calculation sheets for price variation?
Ans. Since the invoices considered in the price variation
calculation are as per the rates already laid down in the
BBU the incremental over heads are not considered in the
price variation."
Arriving at a conclusion based on mere oral testimony of CW-2
that the overhead claims were over and above what has already
been claimed for price variation is an unreasonable and perverse
conclusion which no reasonable person could have arrived at.
20.16 As far as claims for overheads during the period of delay are
concerned, this Court feels pertinent to make a reference to the
recent judgment of the Hon'ble Supreme Court in Batliboi
Environmental Engineers Limited (supra):-
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"20. .....In a given case, where there is a fundamental
breach by the employer, albeit, the builder/contractor does
not immediately elect to treat the contract as repudiated, he
may still be entitled to raise a claim for loss of profit on the
uncompleted work. Offsite expenses or overheads are all
administrative or executive costs incidental to the
management supervision or capital outlay as
distinguished from operating charges. These charges
cannot be fairly charged to one stream of work or job,
and rather be distributed as they relate to the general
business or the work of the contractor/builder being
undertaken or to be undertaken, as the overheads are
relatable to the builder/contractor's business in
entirety.
* * *
23. Ordinarily, when the completion of a contract is
delayed and the contractor claims that s/he has
suffered a loss arising from depletion of her/his
income from the job and hence turnover of her/his
business, and also for the overheads in the form of
workforce expenses which could have been deployed in
other contracts, the claims to bear any persuasion
before the arbitrator or a court of law, the
builder/contractor has to prove that there was other
work available that he would have secured if not for
the delay, by producing invitations to tender which
was declined due to insufficient capacity to undertake
other work. The same may also be proven from the
books of accounts to demonstrate a drop in turnover
and establish that this result is from the particular
delay rather than from extraneous causes......
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* * *
26. Hudson in his 14th Edition refers to claim for
management or overheads during the period of delay. The
author has referred to Hudson's formula as well as
Eichleay's formula, and observes that recently limitations of
Hudson's approach have received greater emphasis as the
English courts have become more generous in their approach
and assessment of claims for time management. The
authors accept what has been highlighted above, and
the need to take care in delay cases to avoid any
double recovery, overlap with other claims, or when
payments are obtained by the contractor on account of
variation(s), or any damages for breach have to be
concluded by using contract price. "Thickening", by
adding unreasonable expenses, should not be accepted. It is
observed that in the total cost method, there is difficulty in
linking cause and effect convincingly, albeit is more precise
and factually accurate. Thus, Hudson's method should be
taken as the basis for computation with caution and as a
last resort, where no other way to compute damages is
feasible or mathematically accurate. Inaccuracies in
Hudson's computation should not be overlooked, and should
be accounted and neutralized. Hudson's formula when
applied should be with full care and caution not to over-
award the damages."
Emphasis Added
20.17 Other relevant portion of the CW-2's examination with respect
to Issue 27 has been extracted below:-
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"Q33. Please come to paragraph 19 of your affidavit. Can
you tell us the different between paragraph 16 and
paragraph 19 of your affidavit?
Ans. The amount considered in paragraph 19 relates to the
overhead expenses incurred by the claimant during the
extended period of the contract while paragraph 16 relates to
the material and services incurred in the project.
Q34. Are you suggesting that these "over head expenses"
relate to items which are not covered by the invoices for
services?
Ans. Yes
Q35. Can you explain what are these over head expenses
which you have taken into account?
Ans. The over head expenses mainly include salary, and
depreciation on own assets of the corporate office and the
employees at the site.
Q36. Did the contract provide for separate head for your
corporate office and depreciation as items which can be
billed to the respondent?
Ans. I have not verified the contract but since these were the
additional expenses incurred during the extended period of
the contract the same has been claimed.
* * *
Q39. Were you involved in making the auditor's certificate
mentioned in paragraph 19.2 of your affidavit?
Ans. Yes
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Q40. Can you tell us what are the assumptions that you
gave to the auditors for the purpose of the certificate?
Ans. Since our accounts are maintained in SAP (Accounting
Software) it is easy to identify the cost incurred and related
to this project by the corporate office and site office.
Q41. What was the period indicated by you to the auditors
to calculate this amount?
Ans. Leave is given to witness to go through the auditor's
report disclosed in this proceeding.
The period is from February, 2011 till November, 2016.
* * *
Q48. Come back to your affidavit at paragraph 19.3 (1st
line). On what basis have you concluded that the SEC
personnel (from China) was at the project site for 66 months?
Ans. It is as per information given to my by the project team.
Q49. Is there any document which was verified by you
Ans. I have verified the original contract with SEC and
apportioned the same amount over the extended period. I
have not verified any document with regards to the presence
of SEC personnel at the project.
* * *
Q54. Please have a look at the auditor's certificate as
mentioned in paragraph 19.2 of your affidavit of evidence.
Come to paragraph 7 of the document. Can you tell us why
the Chartered Accountants are saying that "the above
procedure do not constitute either an audit or a review?
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Ans. The certificate is mainly to certify the figures are in
agreement with the books of account as mentioned in
paragraph 6 of the auditor's certificate.
Q55. Do you agree that the Chartered Accountant did not
carry out an audit and therefore the document is not a result
of any audit?
Ans. I have no idea what the Chartered Accountant has
done."
20.18 As is evident from the aforesaid testimony, there was neither
any evidence presented before the arbitral tribunal to establish
that the SEC personnel had overstayed at the project site, nor
any invoices produced which were issued by SEC or proof of any
payment produced by the respondent. Moreover, there was no
proper audit conducted to actually verify and establish whether
these overhead expenses were based on actuals, and whether
the overhead cost which has been claimed was over and above
the amount already being claimed under the head of price
escalation. In such a situation, arbitral tribunal's award of Issue
No. 27 stands on a murky ground.
20.19 In addition to the award of INR 168,14,46,445/-, an amount of
€ 13,000,000 towards overstay of SEC personnel has also been
awarded. No reason for award of Euro component has been
provided for in the award, as has been discussed, and the CA's
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certificate, even if considered as reliable evidence, is limited only
to the INR component of 100 crores.
20.20 The anvils of perversity on which the evidence presented before
the arbitral tribunal has to be tested is outlined in Associate
Builders (supra). Relevant paragraphs have been extracted
below:-
"31. The third juristic principle is that a decision which is
perverse or so irrational that no reasonable person would
have arrived at the same is important and requires some
degree of explanation. It is settled law that where:
(i) a finding is based on no evidence, or
(ii) an Arbitral Tribunal takes into account something
irrelevant to the decision which it arrives at; or
(iii) ignores vital evidence in arriving at its decision,
such decision would necessarily be perverse.
32. A good working test of perversity is contained in two
judgments. In Excise and Taxation Officer-cum-Assessing
Authority v. Gopi Nath & Sons [1992 Supp (2) SCC 312] , it
was held: (SCC p. 317, para 7)
'7. ... It is, no doubt, true that if a finding of fact is arrived at
by ignoring or excluding relevant material or by taking into
consideration irrelevant material or if the finding so
outrageously defies logic as to suffer from the vice of
irrationality incurring the blame of being perverse, then, the
finding is rendered infirm in law.'
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In Kuldeep Singh v. Commr. of Police [(1999) 2 SCC 10 :
1999 SCC (L&S) 429] , it was held: (SCC p. 14, para 10)
'10. A broad distinction has, therefore, to be maintained
between the decisions which are perverse and those which
are not. If a decision is arrived at on no evidence or evidence
which is thoroughly unreliable and no reasonable person
would act upon it, the order would be perverse. But if there
is some evidence on record which is acceptable and which
could be relied upon, howsoever compendious it may be, the
conclusions would not be treated as perverse and the
findings would not be interfered with.' "
20.21 As has been propounded by the Hon'ble Supreme Court in
Dyna Technologies (supra), and as discussed previously, while
there is no need for the Courts to test an arbitral award on the
same rigorous parameters as Court judgments, still, the
reasoning contained should be intelligible and adequate.
Proper, intelligible, and adequate are the three parameters
on which any reasoned award has to stand. If reasons have
been provided, but they are unintelligible, the same would
amount to giving no reasons at all. The findings of the arbitral
tribunal do not pass the muster of reasonability. Award of
significant monetary sums cannot be based on lacklustre
evidence and vague certifications. As has been deliberated at
length, while this Court cannot reappreciate evidence presented
before the arbitral tribunal, a finding arrived based on
unconvincing evidence is an unreasoned finding and it is well
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within the limited powers of this Court under Section 34 to set
aside such finding.
20.22 The Hon'ble Supreme Court in Ssanyong Engineering (supra)
has held that a decision which is perverse (See, Associate
Builders (supra)) would amount to patent illegality appearing
on the face of the award. As such, a finding which has been
arrived based on no evidence at all, or after ignoring vital
evidence, can be struck down under the grounds of patent
illegality under Section 34(2-A) of the Act. This view was again
reiterated by the Hon'ble Supreme Court in Parsa Kentre
Collieries Limited -v- Rajasthan Rajya Vidut Utpadan
Nigam Limited (supra). In Patel Engineering Limited -v-
North Eastern Electric Power Corporation Limited (supra),
the Hon'ble Supreme Court held that if a decision of the arbitral
tribunal is so perverse, or so irrational, that no fair minded and
reasonable personal could have possibly arrived at such a
decision, then the Courts can invoke the grounds of patent
illegality to set aside that decision.
20.23 Moreover, recently in its judgment in Batliboi Environmental
Engineers Limited (supra), the Hon'ble Supreme Court by
placing reliance on precedents reiterated that a finding which
has been arrived at by placing reliance on thoroughly
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unreliable evidence has to be treated as perverse. Relevant
paragraph has been extracted below -
"43. Referring to the third principle in Western Geco, it was
explained that the decision would be irrational and perverse
if (a) it is based on no evidence; (b) if the arbitral tribunal
takes into account something irrelevant to the decision which
it arrives at; or (c) ignores vital evidence in arriving at its
decision. The standards prescribed in Excise and Taxation
Officer-cum-Assessing Authority v. Gopi Nath & Sons 1992
Supp (2) SCC 312, (for short, Gopi Nath & Sons) and Kuldeep
Singh v. Commissioner of Police MANU/SC/0793/1998 :
(1999) 2 SCC 10 should be applied and relied upon, as good
working tests of perversity. In Gopi Nath & Sons it has been
held that apart from the cases where a finding of fact is
arrived at by ignoring or excluding relevant materials or
taking into consideration irrelevant material, the finding is
perverse and infirm in law when it outrageously defies logic
as to suffer from vice of irrationality. Kuldeep Singh
clarifies that a finding is perverse when it is based on
no evidence or evidence which is thoroughly unreliable
and no reasonable person would act upon it. If there is
some evidence which can be acted and can be relied upon,
however compendious it may be, the conclusion should not
be treated as perverse. This Court in Associate Builders
emphasised that the public policy test to an arbitral award
does not give jurisdiction to the court to act as a court of
appeal and consequently errors of fact cannot be corrected.
Arbitral tribunal is the ultimate master of quality and
quantity of evidence. An award based on little evidence or no
evidence, which does not measure up in quality to a trained
legal mind would not be held to be invalid on this score.
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Every arbitrator need not necessarily be a person trained in
law as a Judge. At times, decisions are taken acting on
equity and such decisions can be just and fair should not be
overturned Under Section 34 of the A&C Act on the ground
that the arbitrator's approach was arbitrary or capricious.
Referring to the third ground of public policy, justice or
morality, it is observed that these are two different concepts.
An award is against justice when it shocks the conscience of
the court, as in an example where the claimant has
restricted his claim but the arbitral tribunal has awarded a
higher amount without any reasonable ground of
justification. Morality would necessarily cover agreements
that are illegal and also those which cannot be enforced
given the prevailing mores of the day. Here again
interference would be only if something shocks the court's
conscience. Further, 'patent illegality' refers to three sub-
heads: (a) contravention of substantive law of India, which
must be restricted and limited such that the illegality must
go to the root of the matter and should not be of a trivial
nature. Reference in this regard was made to Clause (a) to
Section 28(1) of the A&C Act, which states that the dispute
submitted to arbitration under Part I shall be in accordance
with the substantive law for the time being in force. The
second sub-head would be when the arbitrator gives no
reasons in the award in contravention with Section 31(3) of
the A&C Act. The third sub-head deals with contravention of
Section 28(3) of the A&C Act which states that the arbitral
tribunal shall decide all cases in accordance with the terms
of the contract and shall take into account the usage of the
trade applicable to the transaction. This last sub-head
should be understood with a caveat that the arbitrator has
the right to construe and interpret the terms of the contract in
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a reasonable manner. Such interpretation should not be a
ground to set aside the award, as the construction of the
terms of the contract is finally for the arbitrator to decide.
The award can be only set aside under this sub-head if the
arbitrator construes the award in a way that no fair-minded
or reasonable person would do."
Emphasis Added
20.24 There may be multiple interpretations or findings which can be
arrived at based on similar evidence. This is because, not every
person, thinks the same. And that is the beauty of the human
mind. We all can look at the same thing, but arrive at different
conclusions. As Gayle Lynne Good said, perspective can cause
two people to look at the same thing and see totally different
things. In a case, where the view taken by arbitral tribunal
based on evidence, is a plausible view which can be arrived at
after looking at such evidence, Courts would not be empowered
to interfere with an arbitral award under Section 34 of the Act.
However, if the view taken by the arbitral tribunal is not even a
possible view, and is such which no fair minded person could
have arrived at, then it would call for the Courts to exercise
their powers under Section 34 of the Act. I must however clarify
here that the Courts are not empowered under Section 34 to
substitute their view with the tribunal's by merely stating that
the view taken by the arbitral tribunal's is less probable. For a
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decision of the arbitral tribunal to be interfered with by the
Courts, it must be so perverse that it would shock the
conscience of this Court.
20.25 While this Court has deliberated upon the arguments put forth
by the counsel for both the parties, and dealt with the judicial
pronouncements put forth herein before, a relevant aspect of
this matter has to be dealt with by this Court. This particular
issue deals with two aspects - a.) Overheads, Salaries, and
Depreciation amounting to INR 100 Crores, for which C.A.
Certificate has been produced for a principal amount of INR 100
Crores and for the additional cost for overstay amounting to INR
68 crores, respondent has produced vouchers, invoices, and
payment slips and; b.) Payments to be made to SEC for their
overstay to the tune of €13,000,000. The first thing that comes
to my mind while perusing this claim of the Claimant, is that
this claim is nothing but just a claim of unjust enrichment for
damages that are too remote to be granted for the
Raghunathpur Thermal Power Project. When the claim for
escalation and prices that includes overheads and other
components such as salaries, and remuneration has already
been paid as compensation/damages in Issues No. 24 and 25,
this particular claim is then nothing but a repetition of the same
in another form. Not only is this claim remote, it is further clear
from the evidence produced before the arbitral tribunal that
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there is neither any evidence shown to indicate that these were
additional expenses incurred by the Claimant nor any proof for
such payments has been produced. In the first case, the CA's
certificate for a claim of INR 100 crores is nothing but a
statement based on the book of accounts of the respondent and
does not anywhere state that additional Overhead expenses
were incurred because of the delay in the project. The same lies
true for the vouchers, invoices, and payment slips produced for
the additional claim of INR 68 crores. According to me, this
claim should have been out rightly rejected by the arbitral
tribunal. The arbitral tribunal has failed to apply its mind
correctly to this issue. In fact, this is a case of complete non
application of mind as these claims are extremely remote in
nature and could not have been granted under any
circumstances under Section 73 of the Indian Contract Act,
1872. Coming to the claim regarding SEC personnel who were
supposedly present for an additional 66 months, it is clear from
the evidence of CW 2, that there is no proof that SEC personnel
were actually present at the site. Not a single document in
relation to invoices raised by SEC on the respondent has been
produced, nor has any proof of payment to SEC for these 66
months been produced before the arbitral tribunal. It is
therefore appropriate to say that the claim is not just capricious
and whimsical but is also bereft of any evidence. In light of the
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above observations, the claim awarded under Issue No. 27 is
outrightly set aside.
21.1 This issue considered whether the claims made by the claimant
were barred by limitation. While the arbitral tribunal answered
this issue in the negative, the petitioner before this Court
reiterated its challenge on the grounds of limitation. As a result
of the same, I have dealt with this issue herein.
21.2 The primary contention of the petitioner on the issue of
limitation was that despite its repeated rejection of escalation
and other claims of the respondent, the respondent continued
to work under the contract, and thereby it waived/abandoned
any right to claim escalation/overheads. Every period of
extension, the petitioner argued, constitutes a new agreement
and claims up to that period, if not made, will stand
extinguished in accordance with Section 55 of the Indian
Contract Act, 1872. Hence, according to the petitioner, the
limitation period for the claims of the respondent arising out of
each extension period would start from the day when the
respondent sought extension of the period of contract and all
claims arising out of the extensions from 2011 onwards would
be barred by limitation.
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21.3 The petitioner put forth the judgment of the Hon'ble Supreme
Court in State of Gujarat -v- Kothari & Associates (supra). I
have extracted the relevant paragraphs relied upon by the
petitioner below:-
"3. It is noteworthy that in each request for an extension,
the respondent sought compensation for monetary loss due
to the extended time-limit, but while allowing each extension
the appellant State denied the claim for compensation each
time. The respondent's case was that as per the contract
period, 342 days should have been made available to it to
conduct the stipulated work, but as a result of the delay in
handing over the site and the materials, the respondent had
to seek extensions, and nevertheless managed to complete
the project in 288 working days, thus indicating that there
was no laxity on its part
* * *
5. The trial court found that the delay was caused by the
appellant State; that work was completed by the respondent
well within the number of days contractually allocated to
complete it. Noting that under Section 73 of the Contract Act
compensation is payable for any loss or damage for breach
of a contract, the trial court granted compensation under
twelve of the thirteen heads of claims itemised by the
respondent. In terms of its judgment dated 4-5-1991 the trial
court observed that the factual matrix pertaining to these
amounts claimed have remained uncontroverted, and
accordingly decreed the suit. The respondent was granted
Rs 13,61,571 with interest at 12% p.a. with effect from 7-8-
1983 viz. the date of the statutory notice. The appellant State
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appealed against the decree and the respondent filed a
counterclaim seeking interest from the date of written
demand of the suit claim instead of from the date of
statutory notice. The High Court, vide its judgment dated 30-
7-2003 [State of Gujarat v. Kothari & Associates, 2003 SCC
OnLine Guj 127 : (2003) 3 GLH 613] , dismissed the appeal
filed by the appellant State and allowed the respondent's
cross-objection, granting interest thereon from 5-3-1982.
* * *
9. The period of limitation would be computed under either
Article 55 or Article 113, both of which are laid out below for
the facility of reference:
Description of Suit Period of Time from
Limitation which period
begins to run
55.For compensation for Three years When the
the breach of any contract is
contract, express or broken or
implied, not herein (where there are
specially provided for. successive
breaches) when
the breach in
respect of which
the suit is
instituted occurs
or (where the
breach is
continuing)
when it ceases.
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* * *
113. Any suit for which Three years When the right
no period of limitation is to sue accrues.
provided elsewhere in
this Schedule.
* * *
11. It also appears to us that the contract was clearly not
broken as the respondents chose to keep it alive despite its
repeated breaches by the appellant State. The factual matrix
presents a situation of successive or multiple breaches,
rather than of a continuous breach, as each delay in
handing over the canal/site by the appellant State
constituted to a breach that was distinct and complete in
itself and gave rise to a separate cause of action for which
the respondent could have rescinded the contract or possibly
claimed compensation due to prolongation of time and
resultant escalation of costs. Of course the respondent is
enabled to combine all these causes of action in one plaint,
as postulated in CPC provided each claim is itself justiciable.
Even the respondent has argued before the High Court that
the suit was based on successive breaches committed by the
appellant State. In our opinion, the suit was required to be
filed within three years of the happening of each breach,
which would constitute a distinct cause of action. Article 55
specifically states that in respect of successive breaches, the
period begins to run when the breach in respect of which the
suit is instituted, occurs. In this vein, Rohtas Industries
Ltd. v. Maharaja of Kasimbazar, China Clay Mines [Rohtas
Industries Ltd v. Maharaja of Kasimbazar, China Clay
Mines, ILR (1951) 1 Cal 420] is apposite as it has held that
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when a party agrees to deliver certain goods every month for
a duration spanning certain years, the cause of action for
breach for failure to deliver in a particular month arises at
the end of that month and not at the end of the period of the
contract. The situation before us is similar in that the cause
of action had arisen on each occasion when the appellant
State failed to hand over the site at the contractually
stipulated time. Specifically, the limitation periods arose on
15-11-1976, 15-11-1977, 15-11-1978 and 15-11-1979 i.e. on
the first day of each season, when the respondent State
committed a breach by failing to hand over the site. Thus,
the period of limitation did not commence at the termination
of the contract period or the date of final payment. The High
Court's conclusion that the last date of breach and last date
of payment were relevant, not each cause of action, was
thus patently erroneous. For each breach, a corresponding
amount of damages for additional costs could have been
sought. The suit, however, was filed on 25-1-1985, well
after the limitation period of three years for even the
final breach, as the various causes of action became
time-barred on 15-11-1979, 15-11-1980, 15-11-1981
and 15-11-1982 respectively
12. There is another perspective on the method or manner in
which limitation is to be computed. We have already
narrated that the respondent, on every occasion when the
extension was sought by it, had requested to be
compensated for delay. The appellant State had granted the
extensions but had repudiated and rejected the respondent's
claims for damages. The effect of these events would be that
the cause of action for making the claim for damages
indubitably arose on each of those occasions. It is certainly
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arguable that the appellant State may have also been
aggrieved by the delay, although the facts of the case appear
to be unfavourable to this prediction, since delay can
reasonably be laid at the door of the appellant. The
respondent, however, could prima facie be presumed to have
accepted a renewal or extension in the period of performance
but with the rider that the claim for damages had been
abandoned by it. If this assumption was not to be made
against the respondent, it would reasonably be expected
that the respondent should have filed a suit for damages on
each of these occasions. In a sense, a fresh contract would
be deemed to have been entered into between the parties on
the grant of each of the extensions. It is, therefore, not legally
possible for the respondent to contend that there was a
continuous breach which could have been litigated upon
when the contract was finally concluded. In other words,
contemporaneous with the extensions granted, it was
essential for the respondent to have initiated legal action.
Since this was not done, there would be a reasonable
presumption that the claim for damages had been
abandoned and given a go-by by the respondent."
Emphasis Added
21.4 However, to my mind, the aforesaid judgment does not advance
the petitioner's case as the same is distinguishable on facts. In
Kothari Associates (supra), while granting extension, the State
explicitly denied the claim of the contractor for compensation.
The State in the said case further made it clear that the claim
for damages would not be entertained at all. However, in the
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instant case, the petitioner vide its letter dated March 07, 2013,
while denying the claim of the respondent for escalation, also
agreed to convene a meeting on various contractual issues
raised by the respondent. Contrary to the factual situation in
Kothari Associates (supra), there was no outright rejection of
respondent's escalation claims by the petitioner.
21.5 It is a well-established principle of law that the period of
limitation for issuing a notice under Section 21 of the Act starts
from the date when negotiation efforts between the parties
reaches a "breaking point" and a cause of actions arises. In the
instant case, the parties were involved in negotiation right until
2017 and the letter dated February 03, 2017 bears testimony to
this fact. When the petitioner by its letter dated February 03,
2017 itself demanded liquidated damages for Unit 2 and offered
compensation to the respondent for Unit 1, thereby partially
admitting the validity of respondent's claim, it cannot now plead
before this Court that the claims of the respondent were barred
by limitation.
21.6 In its judgment in Geo Miller and Company Private Limited -
v- Chairman, Rajasthan Vidyut Utpadan Nigam Limited
reported in (2020) 14 SCC 643, the Hon'ble Supreme Court
propounded that the period of bona fide negotiations between
the parties has to be excluded while computing the period of
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limitation for reference to arbitration. Relevant paragraphs of
the said judgment have been extracted below:-
"28. Having perused through the relevant precedents, we
agree that on a certain set of facts and circumstances, the
period during which the parties were bona fide negotiating
towards an amicable settlement may be excluded for the
purpose of computing the period of limitation for reference to
arbitration under the 1996 Act. However, in such cases the
entire negotiation history between the parties must be
specifically pleaded and placed on the record. The Court
upon careful consideration of such history must find out
what was the "breaking point" at which any reasonable
party would have abandoned efforts at arriving at a
settlement and contemplated referral of the dispute for
arbitration. This "breaking point" would then be treated as
the date on which the cause of action arises, for the purpose
of limitation. The threshold for determining when such a
point arises will be lower in the case of commercial disputes,
where the party's primary interest is in securing the payment
due to them, than in family disputes where it may be said
that the parties have a greater stake in settling the dispute
amicably, and therefore delaying formal adjudication of the
claim.
29. Moreover, in a commercial dispute, while mere failure to
pay may not give rise to a cause of action, once the applicant
has asserted their claim and the respondent fails to respond
to such claim, such failure will be treated as a denial of the
applicant's claim giving rise to a dispute, and therefore the
cause of action for reference to arbitration. It does not lie to
the applicant to plead that it waited for an unreasonably
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long period to refer the dispute to arbitration merely on
account of the respondent's failure to settle their claim and
because they were writing representations and reminders to
the respondent in the meanwhile."
21.7 In the instant case, on a perusal of the negotiation history
between the petitioner and the respondent, it becomes evident
that the letter dated February 03, 2017 was the last
straw/breaking point between the parties. Right up to that date,
both the petitioner and the respondent were involved in
negotiations and discussions on their respective claims. As such
the respondent was well within the contours of limitation when
it invoked its right to arbitration and issued Section 21 notice
accordingly on June 15, 2017.
21.8 In light of the aforesaid discussion, challenge to this issue and
challenge on the grounds of limitation before this Court is
answered in the negative.
22.1 This issue was concerned with whether any of the claims raised
by the claimant are not arbitrable. The tribunal has already
dealt with the issue of the non-arbitrability of the claims where
such a point has been raised. Furthermore, this issue has not
been argued by the petitioner before this Court, neither by way
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of written submissions nor by oral pleadings. Accordingly, the
challenge to this issue is answered in the negative by this Court.
23.1 The aforesaid issues were concerned with whether the petitioner
was entitled to additional interest paid to the financial
institutions/banks due to delay in completion of works
attributable to the claimant and further interest costs incurred
in order to fund such additional interest.
23.2 This Court has not found any perversity or illegality with the
arbitral tribunal's findings on the point that there is no delay on
part of the claimant in execution of the project. Secondly, clause
30.1 (a) of the GCC clearly indicates that the claimant is not
responsible for any interest cost or any other indirect or
consequential loss. The carve outs to this clause are in the
cases of criminal negligence or wilful misconduct. Thorough
perusal of the arbitral award and the records before me revealed
that the petitioner has not been able to lead legal evidence to
fulfil the aforesaid carve outs.
23.3 Hence, in the absence of any perversity or illegality in the
findings of the tribunal in connection with the aforesaid issues,
this Court is not inclined to interfere. Accordingly, the findings
of the tribunal on these issues are sustained.
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24.1 The aforesaid issues were concerned with whether the award
debtor was entitled to revenue loss from tariff due to delay in
completion of the project and defective works carried out by the
Claimant and subsequent financial loss.
24.2 This Court has not found any perversity or illegality with the
findings of the arbitral tribunal on the point that there was no
delay on part of the claimant in execution of the project.
Secondly, clause 30.1 (a) of the GCC clearly indicates that the
claimant was not responsible for any interest cost or any other
indirect or consequential loss. The carve outs to this clause are
in the cases of criminal negligence or wilful misconduct. Neither
the arbitral award nor the records before me reveal any such
event nor the petitioner has been able to lead any evidence to
fulfil the aforesaid carve outs.
24.3 Hence, in the absence of any perversity or illegality in the
findings of the tribunal in connection with the aforesaid issues,
this Court is not inclined to interfere. Accordingly, the findings
of the tribunal on these issues are sustained.
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25.1 The issue was whether the award debtor was entitled to recover
the amount paid to the claimant for specific works/supplies
which were ultimately not done by the claimant in accordance
with the terms of the contract and to set off the said amount
against the retention money.
25.2 It is to be noted here that the aforesaid issue was the sole
counterclaim which was allowed by the arbitral tribunal in
favour of the petitioner. However, the awarded sum was one-
tenth of the figure claimed by the petitioner, and hence, the
petitioner has challenged the findings of the tribunal on the
aforesaid issue.
25.3 On perusal of the award and the records before me, I am in
agreement with the view taken by the arbitral tribunal that the
claim by the petitioner was devoid of substantive evidence and
was based upon estimates. Moreover, the fact that this Court
does not enjoy the power to modify an award, by way of
increasing or decreasing the awarded sum, is no longer res
integra. In light of the above observations, the findings of the
arbitral tribunal in the aforesaid issue stand sustained.
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26.1 The aforesaid issues are concerned with whether the petitioner
was entitled to loss of interest income for advances made to the
claimant for works to be completed within the completion
schedule and to loss on account of fluctuation in exchange rate
on Euro element of the Contract Price due to the Claimant's
delay in completing the work.
26.2 First things first, this Court is in complete agreement with the
arbitral tribunal on the point that there is no delay on part of
the claimant in execution of the project. Secondly, clause 30.1
(a) of the GCC is crystal clear in indicating that the claimant is
not responsible for any interest cost or any other indirect or
consequential loss. Hence, in the absence of any perversity or
illegality in the findings of the tribunal in connection with the
aforesaid issues, this Court is not inclined to interfere with
arbitral tribunal's findings.
27.1 This issue relates to whether the award debtor was entitled to
loss of revenue from April 1, 2016 caused due to lower
generation of power basis the defective Electrostatic Precipitator
(ESP) installed by the claimant in both the Units.
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27.2 The arbitral tribunal rejected the claim raised by the petitioner
in the aforesaid issue. In my considered view, the petitioner has
failed to satisfy as to how the findings of the arbitral tribunal in
the aforesaid issue are perverse and/or illegal. The materials on
record including petitioner's chief engineer's endorsement in
relation to February 3, 2017 clearly show that the purported
lower generation of electricity was an operational and
maintenance issue.
27.3 In addition to the above, the aforesaid issue was raised for the
first time at the stage of counter claim by the petitioner and
there was no whisper of the same at any earlier stages. Lastly,
the petitioner failed to prove criminal negligence or wilful
misconduct on part of the respondent to overcome the carve out
in clause 30.1 of the GCC.
27.4 In light of the above observations, this Court is not inclined to
interfere with the findings of the arbitral tribunal in the
aforesaid issue.
28.1 The aforesaid issues relate to the award of interest and costs.
The arbitral tribunal, by way of reference to case laws and
alluding to the rationale behind the entitlement of interest, held
that the parties must be granted an interest at the rate of 10%
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p.a. for the period between the date on which the cause of
action arose and the date on which the award is being made,
along with further interest at the rate of 12% p.a. for the period
between the date of award till the date of payment.
28.2 After perusal of the cost sheet of the parties, the tribunal
awarded the respondent a sum of INR 3 crores as costs for the
arbitration proceedings.
28.3 In my considered view, the arbitral tribunal has judiciously
exercised its power to award interest and costs. Hence, there
exists absolutely no reason for this Court to interfere with the
said findings of the tribunal on the aforesaid issues.
29.1 Issues No. 35 and 47 set out the claims and counter-claims
allowed by the arbitral tribunal in favour of the respondent and
petitioner respectively along with amount payable and interest
therein. For the reasons discussed above, this Court sets aside
only that portion of the award which concerns Issues No 17, 18,
21, and 27.
29.2 At the cost of repetition, the Court upholds the findings of the
arbitral tribunal on all the issues discussed in the arbitral
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award except awards under Issues No. 17, 18, 21, and 27 which
now stands set aside.
30.1 The issue is regarding whether the OAC is deemed to have been
issued as on April 13, 2017 and May 19, 2017 in respect of
Units 1 and 2 under clause 25.2.4 of the GCC. It is a matter of
fact that the contract provides for a deemed OAC to be granted
from the date on which notice is given under Clause 25.2.4.
30.2 The petitioner argued that OAC is to be issued upon successful
achievement of COF and successful completion of Performance
Guarantee Test (PG) and meeting of Functional Guarantee (FG).
As the respondent did not satisfy any of the conditions, it is not
entitled to issuance of deemed or actual OAC.
30.3 In my considered view, the petitioner did not contradict evidence
led by the respondent in support of this issue. Moreover, the
petitioner had the opportunity to communicate its grievance
with regards to the parameters of the various PG/demonstration
tests. In the absence of any response to the notices issued by
the respondent, the arbitral tribunal was correct in holding the
said notices as date of issue of deemed OACs. This Court does
not find any perversity or illegality in the said findings of the
arbitral tribunal with regards to issue no. 49.
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31.1 In this issue, the question is whether the claimant was entitled
to an order directing the petitioner to release the bank
guarantees which were furnished by the claimant as part of its
contractual obligations.
31.2 This Court did not find any infirmity with the finding of the
arbitral tribunal in Issue No. 49 which, as a declaratory relief,
has a direct bearing on the issue in challenge. Relying upon
clause 13.3.3 read with clause 25.2.4 of the GCC, the claimant
was entitled to release of its bank guarantees. For the reasons
above, this Court is not inclined to interfere with the findings of
the arbitral tribunal in this issue and the same stands
sustained.
32 Issues No. 5(e), 6(c), 6(d), 22, 29, 31, 32, and 33 were not dealt
with by the arbitral tribunal because, either the claimant or at
times the petitioner did not argue these issues before the
arbitral tribunal. Issues No. 28, 30, and 34 were not argued by
the parties before this Court. Issue No. 26 raised by the
claimant, was answered in negative by the arbitral tribunal. This
has not been challenged by the claimant before this Court.
Accordingly, these issues have not been dealt with by me in this
judgment.
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33. Principles and Summary
33.1 I have culled out the principles emerging from the aforesaid
discussion below:-
a. It is squarely within the exclusive domain of the arbitral
tribunal to interpret the terms of contract. Only in a
situation where arbitral tribunal interprets the contract in a
completely perverse manner and wanders beyond the four
corners of the contract, Courts can exercise their powers
under Section 34 of the Act. Furthermore, a finding based
on no evidence at all or which has been arrived at after
ignoring vital evidence, can be set aside on the ground of
patent illegality appearing on the face of the award. (See:
Ssaanyong Engineering (supra)).
b. When in a given situation, two or more views are possible
and the arbitral tribunal takes any one of the possible
views, Courts cannot interfere under Section 34 of the Act.
Only if the view taken by arbitral tribunal is such which no
reasonable person could have taken, Courts can exercise
their discretion under Section 34 of the Act. (See: State of
Jharkhand and Others -v- HSS Integrated SDN and
Another (supra)).
c. By virtue of the mandate contained in Section 31(3) of the
Act, arbitral tribunal is required to give reasons in its
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award. Furthermore, the reasons have to be proper,
intelligible, and adequate. (See: Dyna Technologies
(supra) )
d. Courts under Section 34 of the Act do not sit as appellate
Courts and cannot re appreciate evidence presented before
arbitral tribunal. The ground of patent illegality against an
arbitral award can only be invoked if the view taken by an
arbitral tribunal or its interpretation of a contractual term
is so perverse that it would shock the conscience of the
Court, and is so irrational that no fair minded and
reasonable person could have arrived at such a view.
Additionally, an award without reasons would also fall
within the ground of patent illegality. (See: Delhi Airport
Metro Express (supra)). The same was reiterated by the
Hon'ble Supreme Court in PSA Sical Terminal (P) Ltd.
(supra).
e. In Chairman Board of Trustees for Shyama Prasad
Mookherjee Port Kolkata (supra), after extensive
consideration of the law on this issue, I had outlined that
arbitral tribunal is the ultimate authority on questions of
law and facts. However, in no situation, the arbitral
tribunal is permitted to venture beyond the explicit
understanding between the parties i.e. the terms of the
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contract. I had further espoused that by virtue of Section
28(3), 'terms of the contract' and 'trade usage' are to be
read conjunctively. Only, in a situation where the terms of
the contract are ambiguous or silent, arbitral tribunal is
competent to take into account trade usage.
f. The position of law before the 1996 Act came into force, has
been outlined in Champsey Bhara and Company -v-
Jivraj Ballo Spinning and Weaving Company Limited
(supra). In the said decision, it was held that interference
with an arbitral award can only be permitted when there is
an error of law either in the award or in a document
incorporated within the award. While it cannot be disputed
that the scope of examination under Section 34 of the Act is
extremely restrictive, nevertheless, Courts under Section 34
of the Act are empowered to look beyond the plain text of
the arbitral award. Courts while adjudicating an application
under Section 34 are empowered to look at the entire
record of the arbitral proceedings.
g. While the judgments in Rawla Construction Co-v- Union
of India (supra), Allen Berry & Co. Pvt. Ltd -v- Union of
India (supra), had propounded that when a particular
clause has not been referred to by the arbitral tribunal,
Courts are not empowered to read the clause of the
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contract first and hold the arbitral tribunal's decision to be
against the same then. Furthermore, it was held that
documents which have not been incorporated into the
award cannot be considered by the Courts. However, these
principles which may have been relevant at the time when
these judgments were delivered cannot be made applicable
now. This is so because, both the substantive law, and the
jurisprudence on interference with arbitral awards have
undergone substantial change since the decisions in Rawla
Construction (supra) and Allen Berry (supra). The law as
it exists today permits the Courts to go beyond the mere
text of the arbitral award. While it cannot be denied that
even today, no additional evidence or document which was
never a part of the record of arbitral proceedings can be
ordinarily taken into account by the Courts, nevertheless,
Courts are well within their powers under the Act to
consider the entire record of arbitral proceedings, and can
take into account even those documents which although
may not find an explicit mention in the award, but were a
part of the record of arbitral proceedings.
h. While the usage of the phrase "patent illegality appearing on
the face of the award" is common between the 1996 Act and
the 1940 Act, their interpretation cannot be similar. This is
because, by virtue of the insertion of Section 28(3) and
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Section 31(3) in the 1996 Act, which respectively mandate
the arbitral tribunal to follow the terms of the contract and
give reasons for its findings, the phrase "patent illegality
appearing on the face of the award" has to be accorded a
different meaning. A statute has to be read as a whole, and
each section has to be accorded a meaning which is not in
conflict with the other sections of that statute. An arbitral
award in conflict with Section 28(3) and Section 31(3) can
be set aside on the ground of patent illegality. As has been
propounded by the Hon'ble Supreme Court in Associate
Builders (supra), an award in conflict with the provisions
of the Act cannot be sustained. In order to adjudge if an
award is in violation of Section 28(3) and Section 31(3) of
the Act, Courts at time might need to venture beyond the
award itself. However, except for extremely rare situations,
the boundary of examination has to be restricted to only
the record of arbitral proceedings. Record of arbitral
proceedings encompasses all the documents, submissions,
and evidence which were presented before the arbitral
tribunal.
i. In absence of an explicit prohibition, firm price component
of the contract cannot be enforced for work done beyond
the contractually scheduled period. Furthermore, in cases
where there is no explicit prohibition in the contract on
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award of damages/price escalation, arbitral tribunal cannot
be faulted for awarding damages/price escalation. In
absence of an explicit prohibition, and where the claims of
the party seeking compensation/escalation are found to be
sustainable, arbitral tribunal is well within its jurisdiction
and power to award damages/price escalation.
j. Courts under Section 34 of the Act are empowered to partly
set aside an arbitral award. If the issues in which the
decision of the arbitral tribunal cannot be sustained are
distinct and severable from the rest of the issues, then it
would be prudent and encouraged to partly set aside the
award. Such partial setting aside of an arbitral award
would not amount to modification of the arbitral award,
something which the Courts are not permitted to do under
Section 34 of the Act.
k. Award of significant monetary sums cannot be granted
based on vague and unreliable certifications. Arbitral
tribunal in such a situation, before coming to a conclusion,
must take into account documentary evidence to back its
reliance placed on such certifications. Such certifications
and oral testimony without any material evidence to
support them have little to no evidentiary value.
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l. Arbitral tribunal is the sole master of all the evidence
placed before it and courts under Section 34 of the Act are
generally not permitted to interfere with the arbitral
tribunal's interpretation of evidence, or a finding arrived
based on such interpretation. Nevertheless, if the arbitral
tribunal's interpretation of evidence or a finding arrived
based on such interpretation is so perverse and
unreasonable that it could not have been arrived at by any
reasonable mind, then the courts under Section 34 of the
Act are empowered to set aside such finding. Furthermore,
a finding which has been arrived in absence of any cogent
evidence or if reliance has been placed on thoroughly
unreliable evidence, then such a finding would be termed
as a finding based on no evidence at all and will invite the
courts to exercise their powers under Section 34 of the Act.
m. The limitation period for issuance of a notice under Section
21 of the Act commences from the date when the disputes
between the parties reaches a "breaking point". For a
reasonable person, the "breaking point" would mean a
point beyond which both the parties would abandon any
chance of an amicable settlement. However, while
computing the "breaking point", the period during which
the parties were genuinely negotiating has to be excluded.
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34. Epilogue
34.1 While penning down this judgment, apart from the legal and
factual disputes raised in the instant lis, I am also intrigued by
the larger issues raised before me.
34.2 India is a developing country with increasing infrastructural
needs which are growing at an exponential rate. There is
rampant construction to the point where every day one sees a
construction project popping up. With such growing demand,
there is a significant rise in commercial disputes arising out of
the contracts that form the bedrock of these projects. Being
cognizant of the fact that the number of such commercial
disputes seems to be escalating, arbitration has become the
preferred forum of choice for parties to seek resolution.
Arbitration has been envisaged as a mechanism of dispute
resolution which is free from the clutches of redundancy,
inefficiency, and delay that plague our litigation system. Having
said that, presently, it seems that arbitration process in India
itself is finding it hard to bear the weight of the increasing
judicial interference at every stage of the process. This not only
impacts the viability of arbitration as a dispute resolution
mechanism, but further demotes India's standing as a business-
friendly destination in a globalised world. Such demotion can be
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seen in the World Bank's Ease of Doing Business Report,
published in 2020 where India was ranked 163rd vis-a-vis
Enforcement of Contracts. To amend such a standing, there is
dire need of arbitration reform in India. This reform must not
only reflect in the legislation itself, but also in the mindset of all
the stakeholders.
34.3 Courts are an important stakeholder in the arbitration process,
however they must be weary of unnecessary judicial interference
at every stage of the arbitral process. For instance, in this
Section 34 application before me, the petitioner attempted to
evade the arbitral award dated December 21, 2019, on each
possible avenue. While a party cannot be barred from raising
any particular ground, I feel there needs to be shift in the
tendency of parties challenging an arbitral award to treat courts
under Section 34 as an appellate forum. As expanded upon in
this judgement, the arbitral tribunal is the sole competent judge
of questions of facts and law between the parties. It is axiomatic
that how a particular dispute has to be dealt with and
adjudicated falls squarely within the arbitral tribunal's domain.
The above is particularly significant in disputes arising out of
large construction contracts, where facts are often convoluted,
issues involved are too complex, and amounts claimed are
colossal. Whatever is the arbitral tribunal's approach to reach a
particular conclusion on the issues raised, or the final award
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itself, the same cannot be and should never be interfered with
by the courts under Section 34 of the Act unless there is severe
infirmity or patent illegality involved. Such infirmity or patent
illegality must be visible on the face of award, and courts cannot
embark upon a deep journey in search of such infirmity or
patent illegality.
34.4 While the petitioner before me raised a challenge to the
entitlement of the respondent to the claim for damages itself, it
more specifically challenged the method of quantification
adopted by the arbitral tribunal. However, the arguments
adopted by the petitioner failed to find favour before me. One
needs to remember, that in absence of any specific contractual
bar, a party cannot be estopped from availing the statutory right
to damages available under Section 73 of the Indian Contract
Act, 1872. Every contractual dispute is distinct and therefore,
the Legislature has not penned any specific method of
quantifying the loss/damages suffered by a party at the
receiving end of a contractual breach as each dispute involves
its own complexities and intricacies. Keeping in mind the
cardinal principle of party autonomy, parties entering a contract
have been left at liberty to opt for any particular
process/formula for arriving at the quantification of
damages/loss in the event of breach. Such formula can either
be fixed or dynamic. In the instant case, the contract between
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the parties envisaged 5% of liquidated damages payable by the
respondent to the petitioner in case of any breach on the
former's part.
34.5 However, no provision/stipulation of damages in event of breach
on petitioner's part were provided for by the contract. In such a
case, if the employer itself breaches its contractual obligations,
the contractor cannot be left hanging. The arbitral tribunal,
although under a mandate to follow the specifics contained in
the contract between the parties by virtue of the mandate
contained under Section 28(3) of the Act, is also competent to
chart its own course in absence of any specific contractual
stipulation. If a party has been held entitled to claim for
damages, and no specific provision for arriving at the quantum
of such damages is contained within the contractual provisions,
arbitral tribunal is competent to adopt any legally sound
formula/procedure to arrive at such quantification of damages.
So long as there is no infirmity or patent illegality in the arbitral
tribunal's decision, it is beyond the scope of challenge as
envisaged under Section 34 of the Act.
34.6 I also feel compelled to put forth a pertinent concern that I faced
while adjudicating the instant Section 34 application. While a
party at the suffering end of a contractual breach can claim
damages, there is a need to keep certain principles in mind
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while claiming such damages. As penned by Sanjiv Khanna, J.
in Batliboi Environmental Engineers (supra), in no
circumstance, a party can be allowed to 'thicken' its claim for
damages by raising irrelevant and nonessential claims. What a
party did not lose, it cannot be allowed to recover. The same was
the case with the claim for overheads involved in Issue No. 27 in
the arbitral award dated December 21, 2019. It would be apt to
point out that while the suffering party must be made whole by
the party responsible for the contractual breach, it cannot be
unjustly enriched. Penalty accorded for a particular
contravention can never exceed the contravention itself and
what was never spent cannot be claimed back. Claims such as
overheads, workforce expenses, etc. which can be too difficult to
affix to a particular project/breach, need to be backed by
compelling evidence and cannot be claimed on the back of vague
certifications that are not buttressed by hard corroboration.
35. Conclusion and Directions
35.1 In view of the aforesaid discussion and findings, the arbitral
award dated December 21, 2019 partially succeeds and is
accordingly upheld.
35.2 However, with respect to the arbitral tribunal's findings under
Issues 17, 18, 21, and 27, this Court has come to a conclusion
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that the award suffers from patent illegality appearing on the
face of the award with respect to these issues only. The said
issues in no manner effect or are related to other issues in the
arbitral award dated December 21, 2019, and need to be
severed accordingly. As a result, by virtue of this Court's power
under Section 34(2A) of the Act, this Court sets aside the
findings of the arbitral tribunal only with respect to Issues No.
17, 18, 21, and 27.
35.3 Accordingly, AP 40 of 2020 is disposed of. There shall be no
order as to the costs.
35.4 This Court would like to put on record its deep word of
appreciation for Mr. Ratnanko Banerjee, Senior Advocate, Ms.
Vineeta Meharia and Ms. Urmila Chakraborty for their
assiduous and painstaking efforts in assisting this Court in
presenting the case of the petitioner which was indeed an uphill
task keeping in mind the limited scope of interference available
under Section 34 of the Act as elucidated by the Hon'ble
Supreme Court. Mr. Harish Salve and Mr. Tilak Bose, Senior
Advocates assisted by Mr. Anuj Singh were gracious in being
prepared with all the queries that fell from my end and
answered the same with alacrity and brilliance. Though with
deep respect to both of them, this Court was not convinced
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enough to support the entire award as would appear from the
conclusions reached.
35.5 This Court further acknowledges the valuable insights and
dexterous research rendered by judicial clerks cum research
assistants Mr. Anirudh Goyal and Mr. Labeeb Faaeq. This Court
would also like to put on record its deep appreciation for the
consummate efforts of the new judicial clerks cum research
assistants Ms. Aarya Srivastava and Ms. Millia Dasgupta in
proof-reading and formatting of this voluminous judgment. A
special word of appreciation for judicial intern Mr. Jaspreet
Singh who has laboured for days, given valuable insights and
brought to my notice several important judgments on the
various issues raised.
35.6 Urgent photostat certified copy of this order, if applied for, should
be readily made available to the parties upon compliance with the
requisite formalities.
(Shekhar B. Saraf, J.)
September 29, 2023
