Municipal Corporation Bilaspur vs Meinhardt Singapore Pte. Ltd. ...
2022 Latest Caselaw 6054 Chatt

                                   1
                                                      ARBA No.38 of 2018

                                                                     AFR

          HIGH COURT OF CHHATTISGARH, BILASPUR

                   Judgment reserved on 29-08-2022

                   Judgment delivered on 28-09-2022

                         ARBA No.38 of 2018

[Arising out of order dated 3-11-2018 passed by the Commercial
Court, Raipur, in MJC No.7/18]

1.    Municipal Corporation Bilaspur Through Commissioner,
      Municipal Corporation Bilaspur, Vikas Bhawan, Nehru Chowk,
      Bilaspur Chhattisgarh.

                                                            ---- Appellant

                                Versus

1.    Meinhardt Singapore Pvt. Ltd. (India Branch) Having Its
      Corporate Office At A-8, Sector-16, NOIDA 201 301, Uttar
      Pradesh

      Represented Through Arun Kumar Gupta, Director (Contracts)
      Aged About 72 Years , S/o Late Sh. M K Gupta

                                                        ---- Respondent


For Appellant            Shri Ashutosh Singh Kachhawaha, Adv. with
                         Ms Pushpa Dwivedi, Advocate

For Respondent           Shri Sandeep S. Tiwari, Advocate

                 Hon'ble Shri Justice Goutam Bhaduri &
                Hon'ble Shri Justice Radhakishan Agrawal

                            CAV Judgment

      The following judgment of the Court is delivered by Goutam
Bhaduri, J.

1) The instant appeal under Section 37 of the Arbitration

and Conciliation Act, 1996 (henceforth 'the Act, 1996')

read with Section 13(2) of the Commercial Courts Act,

ARBA No.38 of 2018

2015 (henceforth 'the Act, 2015') preferred against the

order dated 3-11-2018 passed by the Commercial Court,

Raipur, in MJC No.7/18 wherein the application filed by

the appellant herein under Section 34 of the Act, 1996

was dismissed.

2) The appellant-Municipal Corporation, Bilaspur,

incorporated under the provisions of the Chhattisgarh

Municipal Corporation Act, 1956 (henceforth 'the Act,

1956') issued a NIT/EOI (Notice Inviting Tender/

Expression of Interest) to carry out the work of planning

and designing for execution of Storm Drainage Water

System for Bilaspur City on 15-7-2010 under the

UIDSSMT (Urban Infrastructure Development Scheme

for Small and Middle Towns), a project of the

Government of India, which is a component of JNNURM

(Jawaharlal Nehru National Urban Renewal Mission).

3) Pursuant to the said NIT/EOI, the respondent herein

submitted its bid, which was accepted by the appellant

and contract agreement dated 24-1-2011 was executed

between the parties and the work order was issued on

27-1-2011 in favour of the respondent for executing the

work. The payment of consultancy fees was 1.18% of

the total project cost. Initially the cost of the project

was Rs.44.28 lacs and it was agreed that actual fees

ARBA No.38 of 2018

would be worked out based on the agreed percentage of

the total final cost of the project.

4) The respondent submitted the Inspection Report,

Preliminary Design Report and Draft Detailed Project

Report (DPR) as a part of execution of work and the

payment was made by the appellant for above work as

per the payment schedule. After approval of final DPR,

the respondent claimed Rs.4,07,03,583/- being 1.18% of

total cost project of Rs.333.93 crores. The said claim

was refused by the appellant and, as such, the dispute

was referred to the Sole Arbitrator for adjudication.

5) The respondent raised its claim for consultancy charges

at the rate of 1.18% of the total project cost i.e.

Rs.333.93 crores as per clause 4(C) of the contract

agreement before the Sole Arbitrator. The learned Sole

Arbitrator after considering the submission, evidence

adduced and documents, allowed the claim of the

respondent herein and passed the award to the tune of

Rs.4,07,03,583/-. It has also been observed by the Sole

Arbitrator that in case the award amount is not paid

within a period of three months from 7-2-2018 it would

carry interest at the rate of 9% per annum on the

awarded amount from the date of expiry of three

months.

ARBA No.38 of 2018

6) Being aggrieved by the said award, the appellant

Corporation challenged the same before the learned

Commercial Court under the provisions of Section 34 of

the Act, 1996. The same has been dismissed by the

Commercial Court by the impugned order. Hence, this

appeal.

7) Learned counsel appearing for the appellant would

submit that

▪ the Arbitrator travelled beyond the Terms of

Reference (ToR) as was envisaged under the

NIT/EOI;

▪ the Arbitrator only considered the Pre DPR

activities, but the Post DPR which contained the

Surveys, Investigation, Data Collection and

providing Implementation Support Post DPR to

BMC, was also part of contract;

▪ the expertise of the consultant/respondent was not

only limited to passing of the project but extended

even after the final project is approved while

implementation of the project;

▪ the Arbitrator was required to arbitrate within the

terms of the contract and he had no power apart

from what the parties have given to him under the

ARBA No.38 of 2018

contract;

▪ the post DPR activities which were required to be

performed by the respondent was not considered;

▪ the Arbitration Tribunal has failed to deal with the

post DPR part, therefore, misdirected itself to

decide the issue;

▪ under the scheme, the sharing of expenditure for

the project was 80:10:10 whereby 80% cost was to

be borne by the Government of India and

remaining 10% each to be shared by the

Government of Chhattisgarh and the Municipal

Corporation/appellant;

▪ the final project was not approved by the Ministry

of Urban Development and the Ministry of

Finance, Government of India, therefore, the

finality of the total project cost of Rs.333.93

crores was never approved;

▪ before this Court an application was filed by the

appellant for taking documents on record to show

the letter dated 11-4-2014 issued by the Ministry of

Urban Development JNNURM Directorate,

Government of India, a copy of the same was not

produced by the officer concerned, which shows

ARBA No.38 of 2018

that the final approval was never granted as such

by playing fraud benefit was allowed to be given to

the respondent; and

▪ apart from it the learned Sole Arbitrator and the

learned Commercial Court failed to notice the

aforesaid fact.

In support of his contention, learned counsel would

place reliance upon the decisions of the Supreme Court

rendered in PSA SICAL Terminals Pvt. Ltd. v Board of

Trustees of V.O. Chidambranar Port Trust Tuticorin

and Others 1 and Oil and Natural Gas Corporation

Limited v Western Geco International Limited 2 .

8) Learned counsel appearing for the respondent, per

contra, would submit that :

▪ as per the guidelines framed under the UIDSSMT

Scheme, the Nodal Agency of the Central

Government had already granted approval;

▪ the payment of Rs.4,07,03,583/- was required to be

paid as per the DPR and as per the agreement, DPR

submitted by the respondent was approved by the

SLSC (State Level Sanctioning Committee) and

NBCC (National Building Construction 1 2021 SCC OnLine SC 508 2 (2014) 9 SCC 263

ARBA No.38 of 2018

Corporation Ltd.), which are the nodal agencies to

approve the final DPR;

▪ initially at the inception of work, as per the

contract agreement the respondent was required to

prepare a detailed cost estimate which finally

worked out to Rs.333.93 crores as such when the

final cost of project has been approved by the

appellant, the respondent was entitled to claim;

▪ the respondent is the consultant and the

consultancy cannot act without taking any financial

sanction against the terms of agreement; and

▪ with respect to scope of jurisdiction of this Court

learned counsel would submit that this Court

cannot sit as a Court of appeal over the finding

arrived at by the learned Sole Arbitrator and it

would only exercise the supervisory role, and, as

such, no illegality can be attached to the order of

the learned Commercial Court.

To buttress his contention, learned counsel would place

reliance upon the decisions rendered by the Supreme

Court in State of Chhattisgarh & Anr. v M/s Sal

Udyog Private Limited 3 , MMTC Ltd. v M/s Vedanta

3 Civil Appeal No.4353 of 2010 (decided on 8-11-2021)

ARBA No.38 of 2018

Ltd. 4 and Associate Builders v Delhi Development

Authority 5 .

9) We have heard learned counsel for the parties and

perused the record.

10) Record shows the letter dated 27-1-2011 issued by the

Municipal Corporation, Bilaspur, addressed to the

respondent to start the work for Planning Designing for

Execution of Storm Water Drainage System. Initially the

project cost was Rs.37.53 crores and an amount of fee

was initially fixed at Rs.44.28 lacs. The contract

agreement purport that the Consultant shall perform the

services specified in Appendix VI of the RFP, Terms of

Reference, which is made an integral part of the

Contract. It is not in dispute that the respondent was the

lowest bidder picked up for the consultancy for Planning

Designing for Execution of Storm Water Drainage

System.

11) Initially, a letter under the Expression of Interest was

issued on 15-7-2010 wherein the Terms of Reference

was given, which is quoted below for ready reference :

Terms of Reference :

Getting prepared DPR for Bilaspur City, including surveys,

4 Civil Appeal No.1862 of 2014 (decided on 18-2-2019) 5 (2015) 3 SCC 49

ARBA No.38 of 2018

investigation, data collection, planning and designing various components, detailed Engineering, cost estimation and assisting in representing BMC at various levels for seeking appraisal and approvals from GOCG/GOI and from State level Nodal Agency.

Providing implementation support post DPR to BMC including detailed engineering tender documentation as defined in REP.

12) Subsequently when the contract agreement was executed

on 24-1-2011 in between the appellant and the

respondent, the services includes the services specified

in Appendix IV of the RFP, Terms of Reference, which

is made an integral part of the Contract. The contract

also includes ToR and its objective. Clauses 2.1 & 2.2

i.e. Objective is quoted below for ready reference :

2. Objective :

2.1 The objective of the consultancy is to provide detailed planning Designing for execution of Storm Water Drainage System to BMC, which includes management, design, detailed engineering services, planning procurement support.

2.2 Comprise surveys, investigations, consultancy activities leading to preparation of detailed project reports, bid documents and further procurement support. It includes all necessary investigation including but not limited to topographic and alignment surveys, geo-technical investigations, soil investigation, finalization of design concepts of Storm Water Drainage infrastructure (gravity based), preparation of

ARBA No.38 of 2018

detailed designs for Storm Water Drainage, estimation of costs, finalization of alignment and routing of drain, preparation of tender documents.

13) The Terms of Reference (ToR) also includes the planing

designing for execution of storm water drainage system

for Bilaspur City that includes the Surveys,

Investigations and Mapping of Drainage Infrastructure,

design and cost estimates, BID process management for

identification of contracts etc. for both particularly

scope of service as specified in Appendix-4 is

reproduced herein under:-

As per contract agreement (Annexure C-1) "scope of services" is specified is Appendix 4 of RFP which is reproduced hereunder:-

"3.1 Specific Services

Planning Designing for Execution of Strom Water Drainage System

(a) Surveys, Investigations and Mapping of Drainage Infrastructure.

(1) Carry out detailed Topological and Alignment surveys as needed; Carry out hydraulic, geotechnical and soil investigations, traffic surveys etc. needed to assess impacts, and design drainage infrastructure. Understand and collect information on the latest growth and development trends for Bilaspur Municipal Corporation Area.

(2) Study existing road infrastructure in the Municipality along with existing road side and

ARBA No.38 of 2018

cross drainage.

(3) Map the existing drainage assets, along with road and drainage network.

(4) Carry out surveys, study and assess drainage flows using appropriate sampling methods.

(b) Designs and Cost Estimates

(1) Based on the updated PEDRs, prepare the detailed designs of drainage infrastructure facilities comprising drainage system (includes collection and transmission based on gravity), in the project area in accordance with applicable standards (including the Manual for Drainage by CPHEEO); using standard software's.

(2) Design appropriate drainage facilities and connecting, systems for improving the access to Urban Poor based on the Urban Poor Strategy or Policy being instituted for the Project.

(3) Designing road restoration where needed subsequent to completion of drainage works as per the codes and standards of the Indian Roads Congress (IRC Codes) and Ministry of Road Transport and Highways (MoRT&H). Design and detailed engineering for restoration of roads along with drainage.

(4) Prepare detailed cost estimates; both capital and O&M (5) Prepare detailed economic analysis of the alternative chosen.

(6) Prepare detailed project reports for Bilaspur Municipal Corporation area.

(7) Prepare detailed Operation and Maintenance Plans for Drainage Systems.

(c) Bid Process Management

ARBA No.38 of 2018

and Identification of Contractors Based on the package identified, prepare Bid Documents as per world Banks model documents, Bill of Quantities (BoOs) and constitution drawings."

(Emphasis supplied)

14) As per EOI (Expression of Interest) dated 15.07.2010

providing of service of consultancy by the respondent

includes implementation support post DPR to BMC

including detailed engineering, tender documentation

and the clause 4 of the agreement speaks about the mode

of payment. For sake of brevity, clause 4 of the

agreement payment is reproduced herein under:-

" 4.PAYMENT 4(A) Schedule of payments for Strom Water Drainage System The Schedule of payments for detailed planning and design period.

      Sr.                    Mile Stone                       % of total amount
      No.                                                     payments      i.e.
                                                              planning & design
                                                              fees
      1.       Submission of Inception Report                      20%
      2.       Submission of final concept plan and                20%

updated preliminary desing reports, with maps and drawings etc.

3. Submission of draft detailed project 20% report for Bilaspur, Municipal Corporation.

4. Approved of final DPR and bid 40% documents

"4 (B) Payment conditions:-

Payment shall be made in the form of cheque of Indian National Rupees not later than 30 days following submssion of invoices in duplicate to the

ARBA No.38 of 2018

Coordinator designated paragraph 5. 4(C) FEES The total fees shall be paid at the rate of 1.18% (One point one eight percent) of the total project cost. The estimated fees workout of approximately Rs. 44.28 lakh based on the estimated cost of project. Actual fees shall be worked out based on the agreed percentage of the total final cost of the project."

15) The cost of the project was to be shared by the

Government of India, State Government and the

Municipal Corporation under the UIDSSMT (Urban

Infrastructure Development Scheme for Small and

Middle Towns). For ready reference the operational

mechanism were as under:-

Operational Mechanism : .....On receipt of Minutes from SLSC the MOUD process the proposal for release of central assistance, sign the Memorandum of Agreement (MOA) for urban reforms with State Govt. and send the release proposal to Ministry of Finance.

The sharing of funds is in the ratio of 80:10 between Central Government & State Government and the balance 10% could be raised by the nodal / implementing agencies including ULBs from the internal resources or from financial institutions......

16) Reading of it would show that the Urban local bodies

were required to prepare the detailed Project Reports

pursuant to their development plan and was required to

be submitted to State Level Nodal Agency (SLNA). The

ARBA No.38 of 2018

SLNA further was required to appraise the DPR either in

house or through outsourcing or through State Level

Technical Agencies and after appraisal it was required to

be submitted to the State Level Sanctioning Committee

(SLSC). Meaning thereby first tier was urban body

sanction from the urban body; second was State Level

Nodal Agency; and at third stage firstly it was required

to send the appraise report to all members of SLSC i.e.

State Level Sanctioning Committee including Ministry

and after approval of all projects are considered by

SLSA on approval of the minutes along with

recommendation are required to be sent by the State

Government to the Ministry of Urban Development. On

receipt of Minutes from SLSC, the MOUD process the

proposal for release of Central assistance and further

sign the Memorandum of Agreement (MoA) were

required to be performed. So the final stage of approval

was on the part of Central Govt., who was required to

pay 80% of the project cost.

17) In the instant case, the Municipal Corporation by letter

dated 13.12.2011 approved the final concept plan and

preliminary design report and further the respondent was

informed by the Municipal Corporation to proceed with

final DPR as per contract agreement clause 4(A). In the

meanwhile, as per the detailed cost estimate that is

ARBA No.38 of 2018

project cost was initially found to be 303.50 crores was

enhanced to 354.07 crores, which was approved by

Municipal Corporation and MIC (Mayor-in-Council) by

order dated 10.12.2012. Subsequently, the second tier

letter was written to the State Urban Development

Agency (SUDA) on 10.01.2014 and thereafter the State

Government written a letter on 13.01.2014 to the

Ministry of Urban Development. The respondent

claimed that on 24 t h of February, 2014 the National

Building Construction Corporation Ltd., which is the

nodal agency, approved in principal above projects

subject to the guidelines of UIDSSMT scheme. The

document shows the National Building Construction

Corporation Limited approved on 24.02.2014 the

estimated value was reduced 33393.00 Lakh. Both the

Arbitrator and the Tribunal have said that the project

was deemed to be approved by the Government of India

as also by the State Government, therefore, the non-

applicant was entitled for consultancy charges @ 1.18%

of the total project cost was of 333.93 crores as per

clause 4C of the agreement. As per the submission of

the parties, the respondent was paid the consultancy

charges as per the schedule of payment of agreement up

till stage 3. It was at the fourth stage of payment which

speaks of approval of final DPR to bid document

ARBA No.38 of 2018

wherein 40% was required to be paid, then the dispute

started.

18) The Municipal Corporation accepted the project cost

initially to 37.53 crores of which the cost of 44.28 Lakh

was paid which was on the estimated cost of project.

The appellant herein claimed thereby until the third

milestone of the payment by interim invoices, the bill

was raised and the payment was made by the BMC lastly

on 23.12.2011 but subsequently when the non-applicant

raised the invoice 4 dated 03.03.2014 at the rate of

actual project cost was of 333.91 crores and it was

refused and having the dispute being referred to

Arbitrator, the award has been passed. Arbitrator has

ordered for payment of around 4 crores the award for

payment of consultancy charges @ 1.18% of the total

project cost of Rs.333.91 crores. Having challenged the

same before the commercial Court, the same was

affirmed.

19) The Supreme Court in the case of MMTC Ltd. (supra)

has held that as far as interference with an order made

under Section 34, as per Section 37, is concerned, it

cannot be disputed that such interference under Section

37 cannot travel beyond the restrictions laid down under

Section 34. In other words, the Court cannot undertake

ARBA No.38 of 2018

an independent assessment of the merits of the award,

and must only ascertain that the exercise of power by

the Court under Section 34 has not exceeded the scope

of the provision.

20) Since the appellate power under Section 37 would be

controlled and would be within the purview of limitation

provided under Section 34 of the Act, 1996, to challenge

the arbitral award, it would be relevant to quote the

provisions of Section 34 of the Act, 1996, which is

reproduced herein below:-

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 furnishes proof that

--

(i) a party was under some incapacity, or

(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

ARBA No.38 of 2018

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,--

ARBA No.38 of 2018

(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.

] (2A) 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.

(3) An application for setting aside may not be made after three months have elapsed from the date on which the party making that application had received the arbitral award or, if a request had been made under section 33, from the date on which that request had been disposed of by the arbitral tribunal:

Provided that if the Court is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub-section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the

ARBA No.38 of 2018

arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award.

(5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement.

(6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party.

21) Before this Court an application to take documents on

record in the appellate stage is filed by the appellant.

Reasons assigned in that two important relevant

documents were not produced by the Officer-in-charge

Sudhir Gupta, Superintending Engineer, Municipal

Corporation, Bilaspur as he was arrested in connection

with the offence punishable under the provisions of

Prevention of Corruption Act and the relevant files were

under his possession therefore at that point of time the

documents were not produced. It is stated further that

after the Award was passed by the Commercial Court, a

communication was made by the Municipal Corporation

on 06.11.2018 seeking sanction of amount of Rs.429.932

Lacs for payment to the respondent and the said letter is

filed as Annexure A/5 which is an internal

ARBA No.38 of 2018

communication. It is further stated that in response to

the aforesaid letter an email communication dated

12.11.2018 was received whereby a letter dated

11.04.2018 issued by the Government of India, Ministry

of Urban Development, JNURM Directorate, New Delhi

was produced which purport that six DPRs submitted to

the Ministry for consideration/sanction has come to an

end. The letter of the Government of India dated 11 t h of

April, 2014 is reproduced hereunder:-

Hkkjr ljdkj Government of India 'kgjh fodkl ea=ky; Ministry of Urban Development JnNURM Directorate fuEkkZ.k Hkou Nirman Bhavan New Delhi - 110108 K-14011/39/2013/UD-1 April 11, 2014

To The Secretary & Commissioner, Urban Development Department, Govt. of Chhattisgarh Dau kalyan Singh Bhawan, Mantralaya, Raipur-492001

Subject: Sanction of projects under UIDSSMT during the Transition Phase of JnNURM-reg.

Sir, I am directed to return herewith 06 DPRs (as per list enclosed) submitted to the Ministry for consideration/sanctioned under UIDSSMT during Transition Phase of JnNURM as the mandate to sanction new projects under Transition Phase has come to an end on 31.03.2014. The DPRs may be resubmitted to the Ministry as and when called for.

Encl.: as above.

Yours faithfully

ARBA No.38 of 2018

(RAJESH JAISWAL) Under Secretary to the Govt. Of India

011-23061407

Copy to:-

1. SLNA of the concerned State

2. PS to Secretary(UD)

3. PS to JS (UD&MD), MoUD, Nirman Bhawan, NeW Delhi

4. Sh. Rakesh Raina, MIS/Team Leader, Technical Cell.

5.Chief Town Planner, TCPO (Kind Attn. Sh. K.K. Joadar, Addl. Chief Town Planner, TCPO)

22) As per UIDSSMT after receipt of the Minutes from

SLSC the MOUD process for release of central

assistance, sign the Memorandum of Agreement (MoA)

for urban reforms with State Govt. and send the release

proposal to Ministry of Finance and the sharing of the

fund would in the ratio of 80:10 between Central

Government & State Government and the balance 10%

could be raised by the nodal/implementing agencies.

The contract agreement payment clause 4 t h milestone

speaks about approval of final DPR which also includes

bid document. It is obvious that if the finance was not

accorded from the Central Government, which is a major

stake holder to finance to the extent of 80% of finance

how there can be deemed sanction because of the fact

State bodies and the agencies of the Central Government

have sent it to the Ministry. The proposal unless is

sanctioned by the Central Government by grant of

ARBA No.38 of 2018

amount for all practical purpose, it cannot be said that

approval of final DPR had passed.

23) The Supreme Court in the case of M/s Sal Udyog

Private Limited (supra) has reiterated the law laid down

in the case of Delhi Airport Metro Express Pvt. Ltd. Vs.

Delhi Metro Rail Corporation Ltd. 6 wherein the Court

has held as under:-

15. In Delhi Airport Metro Express Pvt. Ltd. (supra) referring to the facets of patent illegality, this Court has held as under:

"26. 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 re-appreciate 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 6 (2021) SCC Online SC 695

ARBA No.38 of 2018

domestic award under Section 34 (2A) 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 supplied to the other party is a facet of perversity falling within the expression 'patent illegality."

24) Both the finding of the learned Arbitrator and also the

finding by the Commercial Court would show that the

payment of 1.18% of total cost project of Rs.333.93 has

been ordered on the premises of deemed approval of

project by Central Govt. for the reason that the final

DPR was submitted was approved by the State Body

SLSC and NBCC Limited a nodal agency of Central

Govt. The letter placed before this Court about shelving

ARBA No.38 of 2018

of project is as back as of the year 2014 and was issued

by the Government of India, Ministry of Urban

Development. Therefore, the finding by both the

Arbitrator and the Commercial Court would be a patent

illegality which goes to the root of the matter in dispute.

This finding is not of re-appreciation of the evidence.

Inasmuch as, Arbitrator has taken a view which is not

even a possible by anyone to be more specific, has

interpreted a clause in the contract in such a manner

which no fair-minded or reasonable person would.

Therefore, the both the findings and the conclusion of

the Arbitrator and the Commercial Court is based on no

evidence and only on presumption and patent wrong

interpretation. Therefore, would be perverse and can be

set aside on the ground of patent illegality. The letter

dated 11.04.2014 which is produced before this Court

was held back by the employee of the corporation for

the best reason known to them which raises fair

questions at times.

25) The Municipal Corporation is a body incorporate and

acts through its officers. The Supreme Court in the

matter of MMTC Ltd. (supra) while reiterating the view

in the case of Associate Builders (supra) also has

reiterated that after the 2015 amendments to Section 34, the

above position stands somewhat modified. Pursuant to the

ARBA No.38 of 2018

insertion of Explanation 1 to Section 34(2), the scope of

contravention of Indian public policy has been modified to the

extent that it now means fraud or corruption in the making of the

Award.

26) If certain important document is held by an officer of a

corporation, which is a body incorporate and in absence

thereof certain awards are passed, it would be an award

pursuant to fraud & corruption at the instance of some

officers of the appellant.

27) The public funds are to be maintained and protected

prudently. The public servants are bound to act in the

interest of public and in accordance with the rule of law.

Integrity and honesty must be the predominant character

of a public servant and there cannot be any leniency

either by the courts or by the State in respect of these

characters to be maintained by the public servants

without any fail.

28) This Court cannot take a hyper technical view when

general public at large are made to suffer for some

independent deliberate act of officers of State. To arrive

at a contrary view, it would amount to precipitate the

fraud by officer of a corporation to allow suffer public

exchequer by sitting at the fence.

ARBA No.38 of 2018

29) Further the Arbitrator also failed to take into account

that payment for the Clause 4 stage milestone would not

only come into play after approval of final DPR and the

BID documents. The BID documents denotes that after

final sanction followed by inviting tender for the

purpose to carry out a job necessarily of bid document

would come to fore and not before. Therefore, the

expression of interest which takes within its sweep the

terms of reference includes providing implement

support, Post DPR to BMC including detailed

engineering tender documentation etc. would in ordinary

sense points out that post DPR role was also required to

be discharged by respondent. Therefore, the Arbitrator

traveled beyond its scope and the Award was passed on

deeming fiction only on the basis of the total final cost

of project was accepted by the Municipal Corporation.

The approval of final DPR since eventually was not

approved by the Union of India as such the finding of

Arbitrator was based on no evidence more so the

Arbitrator traveled beyond the scope of reference.

30) It is the well proposition of law that the role of the

Arbitraotr is to arbitrate within the terms of the contract

and he has no power apart from what the parties have

given him under the contract. {See: PSA SICAL

Terminals Pvt. Ltd. (supra)}.

ARBA No.38 of 2018

31) In view of the aforesaid facts & circumstances of the

case and applying the well settled principles of law to

the facts of the case at hand, we are of the considered

opinion that the finding arrived at by the Arbitrator

would be perverse and is required to be set aside.

Accordingly, we allow the appeal. Consequently, the

arbitral award and the order impugned passed by the

learned Commercial Court are set aside.

32) There shall be no order as to cost(s).

                            SD/-                                  SD/-


                       (Goutam Bhaduri)                 (Radhakishan Agrawal)
                             Judge                                Judge
Gowri/Ashu

                                                    ARBA No.38 of 2018

                    Head note

(1) An award allowed to be passed by withholding important document by officer of corporation would be a fraud and amounts to patent illegality to set aside the arbitral award.

(2) Arbitrator cannot arbitrate apart from what the parties have given under the contract.

1-fuxe ds vf/kdkjh }kjk egRoiw.kZ nLrkost vius ikl j[kk x;k Fkk fQj Hkh izdj.k eatwj dj iapkV ikfjr fd;k x;k ,slk iapkV ,d diV gksxk vkSj fof/k }kjk vekU; gksus ls ,slh e/;LFke~ iapkV vikLr fd;k tk ldsxkA

2-ftu fcUnqvksa ds vk/kkj ij vuqca/k dk fu"iknu gqvk gS e/;LFk mu fcUnqvksa ls ijs e/;LFkrk ugha dj ldrk gSA