M/S Cwhec-Hcil (Jv) vs M/S Chprcl
2017 Latest Caselaw 3218 Del

*     IN THE HIGH COURT OF DELHI AT NEW DELHI

+       FAO (OS)(COMM) 84/2017 and CM APPL. 14328/2017

                                         Reserved on:      01.05.2017
                                         Date of decision: 13.07.2017

IN THE MATTER OF:
M/S CWHEC-HCIL (JV)                                   ..... Appellant
                         Through: Mr. Arvind Minocha and Mr. Mayank
                         Kshirsagar, Advocates

                         versus

M/S CHPRCL                                           ..... Respondent
                         Through: Mr. Ramesh Kumar, Advocate

CORAM
HON'BLE MS.JUSTICE HIMA KOHLI
HON'BLE MS.JUSTICE SANGITA DHINGRA SEHGAL

HIMA KOHLI, J.

1. The present appeal under Section 37 of the Arbitration and

Conciliation Act, 1996 (hereinafter referred to as „A&C Act‟) assails an

order dated 14.02.2017 passed by the learned Single Judge partly allowing

a petition under Section 34 of the A&C Act filed by the respondent, a joint

venture company, impugning an Arbitral Award dated 22.04.2009,

published by a three member Arbitral Tribunal.

2. A glance at the facts of case that are relevant for deciding the present

appeal are as follows:-

3. The respondent, Calcutta-Haldia Port Road Company Ltd. had

floated a tender for execution of the project i.e., "Four laning of Km 0/500

to Km 52/700 of Kolaghat-Haldia section of NH-41 in the State of West

Bengal -Package WB (Haldia)". The appellant, a joint venture formed

between two companies namely, M/s China National Water Resources &

Hydropower Engineering Company of P.R. China (subsequently named as

Syno Hydro Power Engineering Corporation) and M/s Harish Chandra

(India) Ltd., was a successful bidder in respect of the aforesaid work that

was awarded in its favour at a contract price of Rs.2,19,98,91,379/-. The

Agreement dated 24.07.2002 executed between the parties was an item rate

contract and had stipulated the date of commencement of the work as

10.09.2002. Under the said Agreement, the appellant had quoted rates

for different items, as was detailed in the Bill of Quantities (hereinafter

referred to as „BOQ‟). On disputes and differences arising between the

parties, the appellant invoked the arbitration clause and preferred seven

claims before the Arbitral Tribunal. The first four claims preferred by the

appellant were rejected by the Arbitral Tribunal. Against claim No.5

(raised towards additional payment on account of sand filling under Box

culverts in lieu of earth filling as per BOQ Item No. 5.42), a sum of

Rs.13,03,690/- was allowed as against a sum of Rs.13,03,694/- preferred by

the appellant. Against claim No.6, (raised towards extra payment for using

Grade-III filter media as directed, in place of Grade-I filter media) a sum of

Rs.13,00,495/- was allowed as against a sum of Rs.19,60,167/- preferred by

the appellant. Against claim No.7 (raised towards non-payment for

providing epoxy bonding layer) a sum of Rs.1,42,540/- was allowed as

against a claim of Rs.1,42,543.90 paise preferred by the appellant.

4. Aggrieved by the Arbitral Award, the respondent/company filed a

petition under Section 34 of the A&C Act, on which a limited notice in

respect of claims No.5 and 6 was issued by the learned Single Judge. Under

the impugned judgment, the objections raised by the respondent in respect

of claim No.5 awarded in favour of the appellant, were turned down and it

was held that there was no infirmity in the reasoning given by the Arbitral

Tribunal for granting additional payment to the appellant on account of

using sand instead of earthen material for filling under the box culverts etc.

Coming to the question as to whether the appellant would be entitled to any

additional amount on account of using material conforming to class-III

grading, the learned Single Judge has declined to interfere with the view

taken by the Arbitral Tribunal that the appellant ought to be compensated if

it had incurred any additional cost on that count, by observing that it was a

plausible view which did not deserve any interference. This left the

question as to whether there was any material placed before the Arbitral

Tribunal to ascertain as to whether the appellant had incurred additional

cost for entitlement to a sum of Rs.13,00,495/-.

5. On examining the findings of the Arbitral Tribunal on the third

aspect referred to above, the learned Single Judge concluded that the

Award was conspicuously silent as to the basis on which the rate of

Rs.345/- per cubic meter was worked out for arriving at a conclusion that

the appellant was entitled to any additional amount on the said basis.

Holding that the amount awarded in favour of the appellant under claim

No.6 was not based on any evidence and therefore could not be sustained,

that part of the Award was set aside. Aggrieved by the aforesaid findings,

the appellant has filed the present appeal.

6. Mr. Minocha, learned counsel for the appellant contended that the

scope of interference under Section 34 of the A&C Act is very limited and

while returning the findings in the impugned order, the learned Single

Judge has transgressed the said scope by going into findings of fact, which

is impermissible; that there was no dispute that the appellant had executed

the work, which was a variation and not included in the contract

specifications, for which it was entitled to receive additional payment and

that the respondent had never disputed that extra cost was being incurred

by the appellant in doing the extra work and that the analysis of extra cost

submitted by the appellant before the Arbitral Tribunal, was not questioned

by the respondent. He had also referred to the recommendations made by

the Dispute Review Board (DRB), that had recommended

that the Engineer should determine the rate payable to the appellant for the

filter media used by it as per the Grade-III specifications, in accordance

with the provisions of the contract by treating that the BOQ Item No.5.42

gave the rate for Grade-I filter media only and the difference of the two

rates ought to be paid by the respondent. To fortify his submission that

where the Arbitral Tribunal comprises of persons with technical

knowledge, who are well versed with the practice in their respective fields,

as in the present case, they were entitled to use their expertise to decide the

dispute, reliance was placed by learned counsel on the decision of the

Supreme Court in the case of P.R. Shah, Shares and Stock Broker (P) Ltd.

vs. B.H.H. Securities (P) Ltd. and Ors. reported as (2012) 1 SCC 594.

7. Per contra, Mr. Ramesh Kumar, learned counsel for the respondent

supported the impugned judgment and controverted the submission made

by the other side to the effect that the respondent had not disputed the extra

cost allegedly incurred by the appellant in executing the work under claim

No.6 or that it had never questioned the analysis of extra cost submitted by

the appellant before the Arbitral Tribunal. To counter the submission made

by the other side, he drew out attention to the submissions of the parties

recorded in the Arbitral Award in respect of claim No.6 and contended that

it was specifically recorded therein that as per the respondent, there was no

question of any extra payment being released in favour of the appellant,

over and above the rates quoted for BOQ Item No.5.03 and that the said

claim was inadmissible. Learned counsel canvassed that even if the

appellant had failed to produce any evidence to substantiate its claim for

extra payment under claim No.6 and the Arbitral Tribunal was of the view

that the claimant was entitled to extra payment, then nothing precluded the

Tribunal from calling for evidence from any third party or from the party to

the proceedings, as provided for under Section 25 and 27 of the A&C Act,

for arriving at a conclusion as to what was the amount, if any, that was

payable to the appellant towards the difference in the cost for executing of

the same work with material conforming to class-I Grade-A and class-III

Grade-A. But no such measures were taken by the Tribunal in the present

case. Reliance was placed on the decision of the Supreme Court in the case

of Delta Distilleries Limited vs. United Spirits Limited and Anr. reported as

(2014) 1 SCC 113, wherein it was held that if necessary documents are not

produced to justify a claim, then an adverse inference can be drawn by the

Arbitral Tribunal against the defaulting party and in circumstances where a

party fails to appear or produce documentary evidence, the Arbitral

Tribunal can still continue the proceedings and render an Award on the

evidence before it, which evidence can be sought from any third party or

from the party to the proceedings itself.

8. We had carefully considered the arguments advanced by learned

counsels for the parties at the stage of admission before reserving

judgment.

9. In the recent case of Associate Builders vs. DDA reported as (2015)

3 SCC 49, the Supreme Court has gone to great lengths to comprehensively

spell out the law on the aspect of the limitations that are placed on a court

that is hearing objections to an arbitral award under Section 34 of the A&C

Act, which prescribes the grounds on which such an award can be set aside.

It was observed that Section 34 read in conjunction with Section 5 (Extent

of judicial intervention) makes it clear that the arbitral award which is

governed by Part-I of the A&C Act can be set aside only on the grounds

mentioned in Section 34(2) and (3) and not otherwise. The Supreme Court

emphasized that none of the grounds available in Section 34(2)(a) deal with

the merits of the decision rendered by an arbitral award and it is only when

a grievance is raised that the award in conflict with the public policy of

India, can the merits of the said award be examined and that too, under

specified circumstances. The judgment has elaborated on the specific heads

of public policy in the above context. Under the sub-head of "the award

being contrary to the fundamental policy of the Indian law", have been

included the pre-condition of the award being compliant of the statutes and

judicial precedents, the need for a judicial approach, compliance with the

principles of natural justice and the Wednesbury principles of

reasonableness. The said judgment delineated the grounds on which an

award may be set aside as contrary to public policy, which include a

ground that the award is contrary to the interests of India, or is against

justice or morality or one that is patently illegal, i.e., induced or affected by

fraud or corruption.

10. While dealing with the first juristic principle discussed in the case of

Associate Builders (supra), namely, an award that is contrary to the

fundamental policy of Indian law, the Supreme Court has observed as

follows:-

"29. It is clear that the juristic principle of a "judicial approach" demands that a decision be fair, reasonable and objective. On the obverse side, anything arbitrary and whimsical would obviously not be a determination which would either be fair, reasonable or objective.

30. The audi alteram partem principle which undoubtedly is a fundamental juristic principle in Indian law is also contained in Sections 18 and 34 (2)(a)(iii) of the Arbitration and Conciliation Act. These Sections read as follows:

18. Equal treatment of parties - The parties shall be treated with equality and each party shall be given a full opportunity to present his case.

xxx xxx xxx

34. Application for setting aside arbitral award - (1)

xxx xxx xxx

(2) An arbitral award may be set aside by the Court only if-

(a) the party making the application furnishes proof that-

xxx xxx xxx

(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;

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." (emphasis added)

11. Citing an earlier decision in the case of Kuldeep Singh vs.

Commissioner of Police reported as (1999) 2 SCC 10, where it was held

that a broad distinction has to be maintained between decisions which are

perverse and those which are not and if a decision is arrived at on no

evidence or such evidence which is thoroughly unreliable and no

reasonable person would act upon it, the said order would be perverse, the

Supreme Court has explained in para 33 as follows:-

"33. It must clearly be understood that when a court is applying the „public policy‟ test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. ......."

12. We now proceed to test the findings returned in the impugned order,

on the anvil of the guidelines laid down in the captioned decision. The

findings of the Arbitral Tribunal in respect of claim No.6 are as follows:-

"A T's Observations and findings We have gone through the pleadings of both the parties. We have also examined the documents filed by them and heard their respective arguments in the matter.

From the arguments and counter arguments being made by the parties, it is evident that the major area of disagreement is regarding sub-clause No.309.3.2 (B). The contractor is stating that sub-clause No.309.3.2(B) is applicable to the BOQ item No.5.03 against which the work of back filling with filter media behind structure has been done by them. On the contrary, the Respondent has taken a stand that the Cause No.309 of MORTH Specification is applicable to Surface and Sub-surface drains only and accordingly ,its sub-clause No.309.3.2(B) is not at all applicable for determination of the grading requirement of filter media behind Structures. The Respondent has further stated that in the absence of any specific provisions in the Contract regarding the grading of filter media behind the structures the Engineer would decide the same conforming to sound engineering practice. In view thereof, the stand of the Respondent is that decision taken by the Engineer shall be final and binding on the Contractor.

We have gone through Clause 305 of Technical specifications as well as Clause 309 in detail. We find that sub- clause No.305.4.4 of Tech. Specifications deals with the provision of filter media behind the structures wherein it is clearly provided that the material to be used for filter media shall conform to the requirement of filter medium spelt out in sub-clause No.309.3.2(B). We also find that as stated in sub- clause No.309.3.2(B), Table 300-3 governs the grading requirements of filter media.

In view of above clear provisions provided in the Technical Specifications, which is a part of the Contract, we do not find any merit in the contentions of the Respondent.

We are of the considered opinion that in view of the above said stipulations, the Contractor was entitled to use grade - I material for Filter Media against BOQ No.5.03 while the Engineer ordered to use grade - III material and that too with a different methodology of using two different types of Filter Media. Accordingly, the Contractor is entitled to payment as a variation item for the work so done.

We have analyzed the rate payable to the Contractor as extra expenditure incurred for using the Grade - III filter media in two columns of 300 mm thickness each, using different sizes of materials as per instructions/methodology approved by the Engineer. This analysis has been done, keeping in view the contract provisions.

We find that additional rate, over and above the rate quoted by the Contractor against BOQ item No.5.03, comes to Rs.345/- per CUM. So the Contractor is entitled to payment of 3769.55 cum x Rs.345/- = Rs.13,00,495.78 say Rs.13,00,495/-.

The Contractor is also entitled to price adjustment of the above said amount of Rs.13,00,495/-. For this purpose, the base index would be considered on the basis of the date on which the methodology was approved by the Engineer.

The Contractor is entitled to interest on the delayed payment. The rate of interest and period of interest would be governed by the provisions of sub-clause 43.1 and 43.2 of the Contract."

13. As noted above, though the Award records that the Tribunal has

analyzed the rates payable to the contractor as extra expenditure incurred

for using Grade-III filter media in two columns, there is no discussion with

respect to the material evidence that forms the basis of the said analysis.

Except for the appellant submitting before the Arbitral Tribunal, a

calculation sheet of the extra expenditure allegedly incurred by it for filter

media, admittedly, it did not lead any evidence to prove the said

computation. In such circumstances, we are of the opinion that the findings

returned by the learned Single Judge to the effect that the Award is

conspicuously silent as to the basis on which the rate of Rs.345/- per cubic

meter was worked out by the Arbitral Tribunal, cannot be faulted.

14. The next contention of the learned counsel for the appellant that the

calculation of extra expenditure submitted by the appellant before the

Arbitral Tribunal was not disputed by the respondent and therefore, there

was no requirement for the appellant to adduce evidence to prove the same,

is unacceptable in the light of the specific objection taken by the

respondent before the Arbitral Tribunal which has been so recorded in the

Award. In fact the stand of the respondent all along has been that the use of

class-III grade filter media was completely in consonance with the contract

specification and therefore, there was no question of making any extra

payment on the said head and the BOQ Item No.5.03 and the contract did

not make any mention about the grading of the material to be used in the

work. Having notice of a categorical objection taken by the respondent for

release of extra payment to the appellant, it was incumbent for the latter to

have produced material evidence to justify its claim of extra expenditure

for the work done beyond the BOQ items, which is completely absent in

the present case. Had the appellant produced some evidence, however

sketchy it may have been and the Arbitral Tribunal relying on that and

using its expertise in the field, had accepted the same and then proceeded to

recommend release of extra payment in its favour, then the decision in the

case of P.R. Shah, Share and Stock Brokers (P) Ltd. (supra) would have

had application to the said fact situation. However, in the absence of any

evidence produced by the appellant, neither the recommendations made by

the DRB, nor the Calculation Sheet submitted before the Arbitral Tribunal

would be of any value.

15. We may emphasize that the review that an Appellate Court

undertakes under Section 37 of the A&C Act, is not of the award published

by the Arbitral Tribunal but of the view taken by the learned Single Judge

in the impugned judgment. In other words, the scope of review available

under Section 34 of the A&C Act, is further constricted in appeal. Only if

the learned Single Judge has taken a view that is glaringly preposterous or

has overlooked a patent error, the same can be set right in appeal. But when

all the facts and the law on the aspects argued have been examined in the

impugned judgment and the decision taken is one which is found to be

plausible, even if it is not the only one that can be arrived at in law, the

Appellate Court would forbear from substituting the said view by its own

in appeal. In the present case, the learned Single Judge has reviewed the

Arbitral Award within the parameters of Section 34 of the A&C Act and

thereafter returned his findings. We are of the opinion that there is no

infirmity in the observation of the learned Single Judge that the findings

based on no material would fall foul of the public policy test laid down

under Section 34(2)(b)(ii) of the A&C Act and therefore they cannot be

sustained.

16. For the reasons stated above, we are inclined to concur with the view

taken in the impugned judgment in respect of the observations made with

respect to claim No.6. Accordingly, the present appeal is dismissed as

being devoid of merits, but with no orders as to costs.

(HIMA KOHLI) JUDGE

(SANGITA DHINGRA SEHGAL) JUDGE JULY 13, 2017 rkb/ap/mk/sk