M/S National Highways Authority ... vs M/S Sew Infrastructure Ltd
2013 Latest Caselaw 1840 Del

*      IN THE HIGH COURT OF DELHI AT NEW DELHI

%                               Judgment delivered on: April 25, 2013

+                        OMP No.95/2013

       M/S NATIONAL HIGHWAYS AUTHORITY OF INDIA
                                                   ..... Petitioner
                    Through Mr.Sudhir Nandrajog, Sr. Adv. with
                            Ms.Meenakshi Sood, Adv.

                         versus

       M/S SEW INFRASTRUCTURE LTD             ..... Respondent
                     Through Mr.Harish Malhotra, Sr. Adv .with
                             Mr.S.K. Chandwani, Adv.


       CORAM:
       HON'BLE MR. JUSTICE MANMOHAN SINGH

MANMOHAN SINGH, J. (Oral)

1. The petitioner has filed the objections under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as „the Act‟) challenging the impugned Award dated 1 st October, 2012 passed by the learned Arbitral Tribunal in respect of dispute raised by the respondent with regard to the work of widening to four/six lane and upgrading of existing two lane road from km 49 to 97 (Chamlavathui River to Srikakulam) of NH- 5 in the State of Andhara Pradesh-Pkg AP-1 (Balance work).

2. The work of this project was originally awarded to M/s You One Maharia. The last date for sale of bid documents at that stage was 9 th February, 2001 and the bids were to be received on 12 th February, 2001.

3. The work had then been awarded to M/s You One Maharia Contractor through letter of acceptance dated 20 th April, 2001 for a contract price of Rs.126,23,80,100/-.

4. The respondent herein was the official sub-contractor in the above contract.

5. Subsequent to the termination of the aforesaid agreement dated 23 rd May, 2001 with the erstwhile contractor, the contract for execution of the balance works of contract package AP-1 was awarded to the respondent. The Letter of Acceptance (LOA) for the execution of balance work of the contract was issued to the respondent on 29 th August, 2005. Infact the said contract for the execution of the balance work of contract package AP-1 was entered between the applicant and the respondent on 7 th December, 2005 for a contract price of Rs.53,87,58,384/-.

6. Time for completion of the said agreement was 12 months. The date of commencement of work and the stipulated date of completion were set out as 26th December, 2005 and 26 th December, 2006 respectively. But, the actual date of completion of the balance work contract was 17 th July, 2007.

7. The Arbitral Tribunal awarded in favour of the respondent, claim No.1 for "Payment of balance amount of escalation for BOQ items" in the amount of Rs.6,52,21,469/-.

7.1 Claim No.2 for "Reimbursement of excess Sales Tax recovered" in the amount of Rs.68,80,585/- totaling Rs.7,21,02,054/- and interest on the amount of Claim No.1 @ 10% per annum for period upto 17 th July, 2007 amounting to Rs.42,66,314/- and further interest from 18th July, 2007 to the date of Award.

7.2 Future interest on the said amounts of Claim No.1 and Claim No.2 for

the period commencing as 30 days after the date of the Award to the date of payment.

8. In the said Award the Arbitral Tribunal has rejected the respondent‟s other claims, being Claim No.3 for "Payment of increase in royalty charges on minerals" and Claim No.4 for "Payment of increased rate for WMM for increased quantity".

9. It is admitted position that after termination of the contract with the said original contractor, the respondent M/s SEW Infrastructure Ltd. by a letter dated 5th January, 2005 submitted to NHAI HQ at New Delhi expressed its interest to execute the balance work and therein stated that "We are willing to execute the work with same B.O.Q. rates with Price- Adjustment formula as applicable." The respondent‟s offer by letter dated 5th January, 2005 for execution and completion of the balance works of the said Contract Package AP-1 "on same rates as per original contract agreement, as an official sub-contractor" was accepted by the petitioner‟s letter dated 29th August, 2005. The respondent was requested to communicate its acceptance for execution of the balance work "as per same conditions of the contract."

10. By its following letter dated 2 nd September, 2005 the respondent as referring to its letter dated 5 th January, 2005 offering to execute the balance work with the same BOQ Rates with price adjustment formula as applicable and therein pointing out that the said letter of acceptance was silent on the applicability of price adjustment formula, requested the petitioner for issuing necessary amendment in the letter of acceptance making the price adjustment formula applicable to the BOQ rates.

11. In reply to respondent‟s said letter even as not agreeing to its request

for issuing the suggested amendment, the petitioner by its letter dated 2 nd September, 2005 referred to the respondent‟s letter dated 5 th January, 2005 as having expressed its interest "to execute the balance work at same BOQ rates with the price adjustment formula, as applicable" and therein stated : "In this connection, it is to inform you that price adjustment shall be payable only as per provisions contained in the original Contract Agreement.

12. The petitioner by its letter dated 30th September, 2005 as therein referring to respondent‟s said letters dated 5 th January, 2005 and 2 nd September, 2005 and its letters dated 29th August, 2005 and 2 nd September, 2005 stated and informed the respondent that "The matter regarding price escalation on the original BOQ rates, in certain contract agreement which are similarly worded, are under DRB/Arbitration and therefore the admissibility of price escalation on original BOQ rates shall be known only after outcomes of such DRB/Arbitration/Court etc."

13. Thereafter by letter dated 7th November, 2005 the respondent informed the applicant that it was agreeable to execute the balance work of Package AP-1 in terms of the original contract agreement and accordingly the Contract Agreement dated 7 th December, 2005 was made and executed between the parties. For facility of reference, copies of the said letters/correspondence between the parties are annexed as Annexure „A‟ collectively.

14. In para (xii) of the Award it is mentioned : "as per clause 5.2.1 of COPA, if the Contractor discovers and notifies any ambiguities, omissions, errors, faults and other defects in Drawings/Contract Documents, the Engineer is to resolve the ambiguity or correct the error and notify the Contractor of the correct interpretation to be adopted."

15. As dealing with preliminary points raised by the petitioner therein its contention that the contract with the original contractor was concluded taking into consideration certain rates of taxation then prevalent and that in this case the respondent‟s letter dated 2nd September, 2005 needs to be considered as the date of the bid (see award paras (vi) and (vii) at page 15)_, the Arbitral Tribunal at page 16 para (iv) has held : "We, therefore, hold that the terms and conditions have to be applied considering that the effective date for implementation of general terms and conditions is not different from the effective date as was prescribed in the contract with the original contractor."

16. Contentions of the petitioner with respect of claim No.1 i.e. payment of balance amount of escalation for BOQ items is that the similar issue is pending adjudication before the Apex Court in the matter of NHAI Vs. Unitech in Special Leave Petition No.201/2011 wherein the Hon‟ble Apex Court has granted leave to appeal and has issued notice to the respondent/contractor and the same is pending adjudication before the Supreme Court, the Court may wait for the outcome of the decision by the Supreme Court and decide the present issue in line with the final outcome of the said matter pending before the Supreme Court. The said request was strongly opposed by Mr.Harish Malhotra, learned Senior counsel appearing on behalf of the respondent. His submission is that this Court should consider the matter on merit and in case any findings are arrived at in the matter as suggested by the other side, no doubt consequences would have to be followed. On merit he submits that the respondent was fully aware of the applicant‟s views on the issue of price adjustment prior to the execution of the agreement dated 7th December, 2005. The respondent was aware as to

how the price escalation would be payable under the present contract and the present agreement was signed by the respondent with such knowledge and acceptance. The attention of the court is drawn to respondent‟s letter dated 30th September, 2005 marked as Annexure „C‟, page 46 of SOD filed by the respondent before the Tribunal whereby the petitioner made it clear that the respondent being the sub-contractor in the execution of the original works contract was fully aware of the applicability of the price adjustment formula. The respondent was aware as a sub-contractor that You One Maharia was not allowed price adjustment on the BOQ items. Thus, the correspondences proves that the respondent willingly entered into the present agreement with the knowledge that price adjustment formula would be applied in the same manner as operated in the original works contract with M/s. You-One Maharia. Therefore, having entered into the agreement with such clear information the respondent is stopped from agitating the present claim. Therefore, it reveals that by accepting to execute the present contract with the clear condition that the issue of admissibility of price adjustment would be decided on the basis of the decision of DRB/Arbitration/Court. By agreeing to such a condition, the respondent had agreed not to claim such an amount until the final outcome on this issue is known. The question in issue has not attained finality and is still pending adjudication before the Supreme Court.

17. Relating to claim No.1 for balance amount of escalation payable under Clause 70.1, as stated in the Award at pages 17-18 paras 1.1.1 to 1.1.5, the Engineer in the Pre Final Payment Certificate issued by him certified the total amount of escalation on BOQ items for the entire quantities executed by the respondent, but the applicant released an amount

allowing escalation only on variation items. Lastly after that, the Engineer by his letter dated 12th January, 2008 gave his final opinion that "Escalation, according to Price Adjustment formula for the entire BOQ should be certified i.e. payment should be made for Full Escalation" as included in each IPC.

18. The provisions relating to „Price Adjustment‟ and Adjustment Formula contained in Clauses 70.1 to 70.8 of the Contract are stated in the Award pages 25-28 and therein the Arbitral Tribunal has also considered the provisions relating to „Monthly Payments‟ as contained in Clause 60 through sub-clauses 60.1, 60.2, 60.5, 60.8 and 60.9 and stated in the Award at pages 28-31.

19. The Arbitral Tribunal has interpreted the contract and gave its reasons for its interpretation of the relevant Clauses 70 and 60 through various sub-clauses at pages 31-36 of the Award. Herein as particularly the following paras of the Award may be referred :

"1.3.38 There is no denying fact that the Bid Document condition No.14.4, in quite unambiguous terms tells the bidders that "The rates and prices quoted by the bidder are subject to adjustment during the performance of the Contract in accordance with the provisions of clause 70 of the Conditions of Particular Application...". The clear intention is to allow escalation. The extent, as stated by the employer, may have to be examined by looking elsewhere, which also we have done. Otherwise, the stipulation that the „rates and prices quoted by the bidder are subject to adjustment, loses its significance, as there is no rate or price quoted at the time of bidding for any variation since at that stage there is no variation included in the bidding document. There can be no quoted rate for a non-existent item.

1.3.39 It is also true that the specific list of excluded items as per clause 70.7 does not exclude Permanent Works, the value of

which is based on BOQ rates. There is also substantial force in the assertion that it is illogical to construe that the escalation is admitted to be payable on variation items derived from BOQ items and not on BOQ items themselves. In our perception, this contention is logical.

1.3.40 The provisions of clause 70.1 read with clauses 70.2, 70.3 and 70.7 clearly indicate that the payment made to the Contractor as valued at the base rates and prices in the Interim Payment Certificates issued by the Engineer pursuant to sub-clause 60.1 followed by clause 60.2 shall be adjusted in respect of the rise or fall in the indexed costs of labour, material and other inputs to the works, by the determined addition or deduction, as the case may be.

1.3.43 The adjustment formula itself is spelt out in clause 70.3. Sub-clause 70.7 specifically recognizes five components, which are not to be included in the price adjustment calculations. A harmonious reading of different sub-clauses of Clause 70 unequivocally leads to the only conclusion that it was intended between the parties while entering into the contract that the amount of payment to the Contractor is subject to adjustment to be made in accordance with the formula given in sub-clause 70.3 and that adjustment depends upon rise or fall in the named indices. The increase and the decrease have to be determined before making any addition/subtraction.

1.3.56 In view of our analysis, we are of the considered opinion that the Contractor is entitled to price adjustment on all items, except those specifically excluded as per terms of sub-clause 70.7, due to rise and fall in the cost indices on the basis of sub-clause 70.3 and not only on items described in clause 60.1 (d) and day work."

20. The respondent has also attached the other contentions of the petitioner that the claim No.1 is premature or not within the jurisdiction of this Arbitral Tribunal, on the grounds of the purported understanding between the parties that the decision on admissibility of price escalation on BOQ items would be taken after the outcome of decision by DRB/Arbitration/Court became available from other cases that were then

before these adjudicating for a in similarly worded other contracts, the Arbitral Tribunal has referred to the relevant facts and given its view or finding as stated in the Award at page 47-48, that is :

"(vii) As stated earlier, we were told that several decisions have already become available from other arbitral tribunals in other similarly worded contracts. We were also told that some decisions have become available from High Court also in the meantime. Our particular attention was drawn to the Delhi High Court decision in NHAI vs. Unitech-NCC (by Single Judge as well as later by Division Bench). Still the matter is not considered by the respondent as having been concluded for the purposes of interpreting the condition imposed at the time of signing of the agreement dated 7 th December, 2005.

(x) Keeping in view what is stated above, we are of the view that the contractor‟s claim is not premature. It cannot be left hanging for a long time and allow it to land in an arena to open up possibilities of pleas of being hit by „limitation‟.

(xi) We are of the view that it is not necessary for the contractor to wait till all NHAI cases are decided before embarking upon the other contractually accepted process for resolution.

(xiii) Accordingly, this Arbitral Tribunal has the jurisdiction to deal with the caase and examine the interpretations put up by the parties before it and adjudicate on the claim preferred.

21. The Arbitral Tribunal has again referred to the decision of the learned Single Judge and the judgment of the Division Bench in the aforesaid case of NHAI vs. Unitech-NCC (JV) in which similar issue was decided against the petitioner whose petition now is pending before the Hon‟ble Supreme

Court.

22. Relating to the same issue of price escalation the Arbitral Tribunal has noticed the decision dated 8 th March, 2010 of the learned Single Judge of High Court of Delhi in OMP No.362/2008 National Highways Authority of India Vs. Unitech-NCC JV dismissing the petitioner‟s petition for setting arise the award in that case, made under Section 34 of the Arbitration and Conciliation Act, 1996 and further therein the judgment of Division Bench of High Court in FAO (OS) No.338/2010 NHAI Vs. Unitech-NCC JV upholding the judgment and order dated 8 th March, 2010 of the learned Single Judge and dismissing NHAI‟s appeal with additional costs. In both the said judgments relevant findings of that Arbitral Tribunal are itself reproduced as affirmed without reservation by the learned Single Judge and approved by Division Bench. Therefore, the matter relating to the price adjustment under clause 70 of the Contract is fully covered by the judgment of Division Bench of this Court in the said FAO No.338/2010 NHAI Vs. Unitech-NCC JV, reported as 178(2011) DLT 496.

23. The respondent has also placed the reliance on the orders passed by the Division Bench of High Court of Delhi dismissing several appeals filed by the applicant in FAO (OS)No.143/2011 NHAI Vs. ITD Cementation India Ltd., FAO (OS)No.144/2011 NHAI Vs. ITD Cementation India Ltd., FAO (OS)No.375/2011 NHAI Vs. Elsamexs-TWS-SNC (JV) as the matter being covered by the decision of Division Bench in the said FAO (OS)No.338/2010 NHAI Vs. Unitech-NCC JV.

24. It is settled law that finality is attached with the decision of the Arbitral Tribunal which is the final judge of both the questions of fact and law referred to it. The petitioner has no such case that the Arbitral Tribunal

has no jurisdiction to adjudicate the disputes referred to the Arbitral Tribunal. When the petitioner has no such contention that the Arbitral Tribunal has no jurisdiction to decide the claim, the merit of the decision of the Arbitral Tribunal cannot be challenged by a party to the contract merely because the interpretation given by the Arbitral Tribunal to the contract terms is not to its liking. In this regard, the Supreme Court has held in the case of Maharashtra State Electricity Board Vs. Sterilite Industries (India) & Anr. (2001) 8 SCC 482, in paragraph 9 of the said judgment, as under:

"9. ...the arbitrator's award both on facts and law is final; that there is no appeal from this verdict; that the court cannot review his award and correct any mistake in his adjudication, unless the objection to the legality of the award is apparent on the face of it."

25. Thus, I agree with the finding arrived at by the Arbitrator Tribunal with regard to Claim No.1. Under the scope of Section 34 of the Act, the objections raised by the petitioner are not tenable in view of settled law on this aspect.

26. With regard to Claim No.2 i.e. reimbursement of excess sales tax recovered it is submitted by the petitioner that execution of the contract with the respondent on the same terms and conditions did not mean that the said original contract was to be used for execution of the balance works. It simply meant that only the terms would be the same but a separate contract would be executed for the execution of the work.

27. It was alleged that Sl. No.9 at page 105 of Part 2 of the contract has no applicability in the present contract in light of the present facts and circumstances. There is no sale of bids in the present case. It was also pointed out that the said provision mentions construction package AP-1 as

the name of the contract and does not talk about AP-1 Balance Works which is the name of the present contract. This can be seen on the cover page of Part-2 of the present contract. It was submitted that the contract awarded to the respondent is not a routine contract wherein the Bid is submitted. A comparison needs to be drawn in case of the present contract from a routine contract awarded by the applicant in the ordinary course. The question of which date is to be taken as the latest date of bid in the peculiar facts and circumstances of the case can only be considered in view of the above explained chain of events occurring prior to entering into contract with the respondent. It was submitted that in view of the facts and circumstances of the present case, it is the respondent‟s letter dated 2 nd September, 2005, (Annexure B, page 44 of SOD) which can be treated as the latest date of Bid.

28. It is submitted by the petitioner that the reliance placed by the respondent on the various dates relevant for the purpose of the original contract is meaningless and cannot be the basis for claiming the present claim. It is submitted that for the adjudication of the present claim the aforementioned sequence of event should be looked into. The present claim should be analyzed in view of the above stated correspondence exchanged between the applicant and the respondent inter se. In the present contract there was no bid, but a unilateral offer by the respondent to undertake the balance work on its own. Pursuant to the same, the applicant alongwith the conditional letter of acceptance (LOA) dated 29 th August, 2005 had also enclosed the entire bid document to the respondent for its perusal and reference. The same was made available to the respondent so that the respondent ensured that all the conditions and requirements set out in the same as well as its implications were in its knowledge. The bidding

documents were also provided to the respondent so as to afford an opportunity to the respondent to seek clarifications with respect to any of the terms therein. However, the respondent preferred not to do so but continued to offer to undertake the present work at the same rates and conditions.

29. The attention of the Court is drawn to Clause 14.3 of the Instruction to Bidders which states as under :

"All duties taxes and other levies payable by the contractor under the contract, or for any other cause, as on date 28 days prior to the deadline for submission of bids, shall be included in the rates and prices and the total bid price submitted by the bidder and the evaluation and comparison of bids by the employer shall be made accordingly."

Therefore, it was for the respondent to ensure that the levies as payable by them were in consonance with the rates prevailing 28 days prior to the submission of its offer dated 2 nd September, 2005 to undertake the present work.

30. Until 8th September, 2005 (Ex. C-24) the respondent had not agitated the issue of enhanced rate of tax by virtue of Andhra Pradesh Value Added Tax Act, 2005. The respondent before entering into the present contract for balance work, had never pointed out that there would be additional cost to the respondent on account of enhanced VAT which would have an impact on the contract price.

31. It is also submitted by the petitioner that the contention of the respondent that the AP Value Added Tax Act, 2005 can be treated as subsequent legislation is baseless and not at all acceptance in view of the fact that the AP Value Added Tax Act, 2005 came into being in March, 2005

and the rate of 4% VAT was made applicable from 28 th March, 2005 (Annexure-R) which was much prior to the entering to contract with the respondent. The above date is relevant in light of the chronology of events stated above which shows that though the respondent had made an offer to carry out the balance works in January, 2005, the conditional letter of acceptance came only in August, 2005. Even after the said conditional LOA the respondent was still negotiating with the petitioner. However, though the change in rate to 4% became known to the respondent in March, 2005, there was no correspondence by the respondent with regard to the same. Subsequently also when the correspondences were being exchanged between the petitioner and the respondent regarding the terms and conditions of the proposed contract, never once did the respondent state that the change in rate of taxation ought to have been incorporated in the present contract. On the contrary the respondent kept silent despite knowledge of this fact at the relevant point of time and consented to execute the balance work on the same rates. The fact that the respondent continued to do the work on the old rates despite the introduction of the new rates of VAT by the AP Govt. makes it clear that the respondent had waived its right to claim the alleged additional cost.

32. It is submitted that the contention of the respondent that their case is covered under Clause 70.8 COPA is misplaced and incorrect. It was submitted that the respondent has not justified as to how the said change in legislation can be said to occur 28 days post the submission of its final offer to accept the work. The correspondences exchanged between the applicant and the respondent in the month of October-November, 2005 show that the respondent was still not clear as to whether it wished to undertake the said

works, which is why the applicant asked it to clarify its stand regarding its offer to undertake the said works. Admittedly on such date, the legislation in issue was already in existence and the respondent was required to take cognizance of the same and include its implications in the agreement. Therefore, it cannot be said that the conditions required for the operation of Clause 70.8 was in any manner fulfilled. All the submissions made by the petitioner are denied by the respondent who have referred to various paras of Award passed by the Arbitral Tribunal as well as the pleadings.

33. Claim No.2 for "Reimbursement of excess Sales Tax recovered", Clause 70.8 of the Contract provides that if after the date 28 days prior to the latest date of submission of tender for the Contract, there occur changes in any law which causes additional or reduced cost to the contractor, other than under the preceding sub-clauses of this clause, in the execution of this contract, such additional or reduced cost shall be determined by the Engineer and shall be added to or deducted from the contract price.

34. The respondents‟ pleadings/arguments which were noted in para 55 of the Award, it is mentioned that the tax liability for deduction of sales tax at source in Andhra Pradesh as effective from 17 th August, 2000 was 2% applied on 70% of bill value (i.e. 1.4% of bill value) and as herein the respondent had offered to execute the balance works on the same terms and conditions as contained in the contract with the original contactor M/s. You One Maharia. It is contended by the respondent that in view thereof as effective from March, 2005 the Government of Andhra Pradesh under the provisions of A.P. Value Added Tax Act, 2005 increased the tax deduction at source to 4% i.e. 2.6% of the gross bill amount and accordingly the petitioner made recovery at the increased rate of 2.6% as compared to the

recovery at the rate of 1.4% under the terms of Contract with the said original contractor.

35. Subsequently on 27th January, 2007 the Govt. of Andhra Pradesh issued an order restoring the VAT tax deduction at source back to 2% on 70% of the gross bill value i.e. 1.4% of bill value as retrospectively with effect from 1st September, 2006. The respondent therefore, claimed the refund of excess amount of tax recovered by the petitioner. The petitioner‟s pleadings/arguments are stated in the Award at page 56-57.

36. It is submitted by the respondent that in the Award at page 57 para 23.1 it is stated that the Arbitral Tribunal has already observed that the terms and conditions have to be applied considering that the effective date for implementation of general terms and conditions is the same that was the effective date as petitioner in the contract with the original Contractor. Therefore, as stated in para 23.2, the increase in the tax deduction at source to 4% i.e. 2.6 % of gross bill amount is clearly a subsequent modification brought about by legislation for purposes of sub-clause 70.8 and there is no denying the fact that the said sub-clause 70.8 is attracted.

37. In the Award at page 57-59 paras 23.5 to 23.12 the Arbitral Tribunal has stated or observed that as illustratively, in case the amount deducted was not deposited with State Govt. authority it should have been possible to make a refund thereof and on the other hand, in the case the amount deducted had been deposited with the concerned authority then it could have been adjusted against VAT charges of further work and/or bills, and even if such an adjustment was not possible the respondent could have been given the certificates of deduction well in time to enable him to claim the excess amount from concerned State Govt. authority by filing appropriate returns.

38. It is further stated or observed by Arbitral Tribunal that during the proceedings the petitioner told the Arbitral Tribunal that the deductions made have all been deposited with State authority but did not produce any details nor even copies of any certificates of deposits made and delivered to the respondent. As further stated, the deductions were made way back in 2006 and the respondent stated that no certificates of deduction have been available to it so far and as such it would not be possible for the respondent to get the refund at this stage. Therefore, as observed by the Arbitral Tribunal, it should be possible for the petitioner to approach the State Authority with the details of deposits made and seek the refund of excess payment and that in any case since the excess deduction has caused additional cost to the contractor under VAT legislation, it has even otherwise to be reimbursed to the respondent under the provisions of Sub-Clause 70.8.

39. For the aforesaid reasons, the Arbitral Tribunal has accepted the respondent‟s plea for reimbursement of additional cost for the period from 7th December, 2005 to 1st September, 2006 and also the refund of excess deduction made thereafter, the Arbitral Tribunal has awarded the amount of Rs.68,80,585/- in favour of the respondent to cover both the periods as claimed by it.

40. The Arbitral Tribunal has gone into the facts relating to the contract and relevant clauses thereof as referred by the parties and dealt with the same in the Award, exhaustively and decided the disputes and controversies between the parties by interpreting the terms of the contract. The interpretation of the contract and contractual clauses as stated in the Award is just and equitable and in accordance with law. The Arbitral Tribunal has

given sufficient and cogent reasons for the findings and conclusions as arrived by it and stated in the Award. The contentions or grounds of challenge to the Award as set up by the applicant in the present application under Section 34 of the Act were variously raised by it before the Arbitral Tribunal and have been adequately discussed or dealt with and decided as stated in the Award. The petitioner‟s contentions or grounds of challenge that the Award is opposed to explicit terms of the contract or contrary to fundamental policy of Indian Law or not in accordance with the sustentative law in force in India re without basis and devoid of merit or substance.

41. It is within the jurisdiction of the Arbitrators to interpret the contract or particular clauses of the contract. As held in M/s. Sudarsan Trading Co. Vs. Govt. of Kerala, (1989) 2 SCC 38 (para 32) : "Once there is no dispute as to the contract, what is the interpretation of that contract, is a matter for the arbitrator and on which court cannot substitute its own decision."

42. In the case of McDermott International Inc. Vs. Burn Standard Co. Ltd., (2006) 11 SCC 181 it is held as under :

"112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement, is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. (See Pure Helium India (P) Ltd. v. ONGC and D.D. Sharma v. Union of India) (2003) 8 SCC 593 & (2004) SCC 325."

As further relevant herein, reference may be made to para 111 of the aforesaid judgement in McDermott‟s case, which is as under :

"111. In State of U.P. v. Allied Constructions (2003) 7 SCC 396 this Court held : (SCC p.398, para 4))

"4. Any award made by an arbitrator can be set aside only if one or the other term specified in Sections 30 and 33 of the Arbitration Act, 1940 is attracted. It is not a case where it can be said that the arbitrator has misconducted the proceedings. 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 the arbitrator to determine (see Sudarsan Trading Co. v. Govt. of Kerala). 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. An error apparent on the face of the records would not imply closer scrutiny of the merits of documents and materials on record. Once it is found that the view of the arbitrator is a plausible one, the court will refrain itself from interfering (see U.P. SEB v. Searsole Chemicals Ltd. and Ispat Engg. & Foundry Works v. Steel Authority of India Ltd.)"

43. The other Claim No.2 for refund of excess amount of tax under Clause 70.8 of the Contract, the Arbitral Tribunal has again interpreted the

Contract and relevant Clauses thereof and given its findings and decision as supported by well sufficient and cogent reasons. Therefore, the Award relating to the said Claim No.2 and therein the interpretation as made or given by the Arbitral Tribunal cannot be treated beyond the clauses of contract. The said plausible view taken by the Arbitral Tribunal cannot be interfered with as per settled law.

44. The case of the petitioner is that instead of the interpretation placed on the contract terms by the Arbitral Tribunal, another interpretation of the contract terms is possible. The respondent‟s case is that the interpretation given by the Arbitral Tribunal is reasonable which was possible as per facts and circumstances of the present case in the arbitral award. Even if an alternative interpretation is possible it is submitted by the respondent that the Supreme Court has repeatedly held that even if two interpretations are possible, if the interpretation given by the Arbitral Tribunal is a possible view, even though the Court may have a different view, the Award will not be interfered with by the Court under Section 34 of the Act. The Supreme Court in the case of M/s. Arosan Enterprises Ltd. Vs. Union of India, (1999) 9 SCC 449, in paragraph 39 of the said judgment, has held as under:

"39. ....The court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined."

45. The Arbitral Tribunal is the final arbiter of the disputes between the parties referred to it. In the present case the parties by themselves have agreed in the contract to accept the Award as final and conclusive. The Supreme Court has expounded on the principle as to the sanctity of the

decision of the arbitrator in the case of Markfed Vanaspati and Allied Industries Vs Union of India, (2007) 7 SCC 679, where in paragraph 17 of the said judgment it was observed as under:

"17. Arbitration is a mechanism or a method of resolution of disputes that unlike court takes place in private, pursuant to agreement between the parties. The parties agree to be bound by the decision rendered by a chosen arbitrator after giving hearing. The endeavor of the court should be to honor and support the award as far as possible".

46. It is settled law that the Award is not open to challenge on the ground that the Arbitral Tribunal has reached a wrong conclusion or that the interpretation given by the Arbitral Tribunal to the provisions of the contract is not correct. The entire objections of the petitioner, as contained in the grounds, are contrary to the scheme of Section 34 of the Arbitration and Conciliation Act, 1996. There is no averment in the petition as to the existence of any illegality that is apparent on the face of the arbitral award.

47. In the present case there is no error in the interpretation of the contract clauses by the Arbitral Tribunal. However even if it were to be assumed, without admitting, that the contention of the petitioner is correct even then this Court would not interfere with the arbitral award for the reason that it is settled law that an error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction. The Hon‟ble Supreme Court in the case of Steel Authority of India Ltd. Vs. Gupta Brother Steel Tubes Ltd., (2009) 10 SCC 63 has summarized the law on this point, in paragraph 26 of the said judgment, as follows:

"26. (ii) An error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not

amenable to correction by Courts as such error is not an error on the face of the award."

48. The findings of the learned Arbitral Tribunal under claim no.2 are also correct findings which are in consonance with the contract between the parties. The objections of the petitioner are thus without any merit.

49. Thus, there is no merit in the petition filed by the petitioner under Section 34 of the Act. Thus, the objections are dismissed.

50. No costs.

(MANMOHAN SINGH) JUDGE APRIL 25, 2013