Delhi High Court
Ntpc Limited vs Thiess Minecs India Pvt. Ltd. & ... on 28 November, 2018
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ O.M.P. (COMM) 429/2017
Reserved on: 06.08.2018
Date of decision : 28.11.2018
NTPC LIMITED ..... Petitioner
Through: Mr.Vikas Singh, Sr. Adv. with
Ms.Bani Dixit, Ms.Deepika,
Mr.Kapish Seth, Ms.Srishti
Bannerjee, Advs.
versus
THIESS MINECS INDIA PVT. LTD. & ANR. ..... Respondents
Through: Mr.P.Chidambaram, Sr. Adv. with
Mr.Dhruv Dewan, Mr.Rohan
Batra, Ms.Harshita Choubey,
Advs.
CORAM:
HON'BLE MR. JUSTICE NAVIN CHAWLA
1. This petition under Section 34 of the Arbitration and Conciliation
Act, 1996 (hereinafter referred to as the „Act‟) has been filed by the
petitioner challenging the Arbitral Award dated 24.07.2017 passed by the
Arbitral Tribunal consisting of three Arbitrators. The Arbitral Tribunal
has culled out the majority Award in the following words:-
―1) The Claim Petition filed by the Claimants is partly allowed.
2) The Counter Claim lodged by the Respondent is also partly
allowed.
3) The Claimant No.1 is held entitled to a declaration as prayed
for that Respondent NTPC has unlawfully and illegally terminated
the Project Agreement on 7th May 2014.
O.M.P. (COMM) 429/2017 Page 1
4) The prayer made by Claimant No. 1 for specific performance of
Project Agreement against Respondent is rejected.
5) The Claimant No.1 is held entitled to recover from Respondent
an amount of Rs. 123.66 crores towards damages for illegally and
unlawfully terminating the Project Agreement.
6) The Respondent is held entitled to set off an amount of Rs. 56
crores paid by it to the Claimant No. 1 towards Development Stage
Expenditure.
7) The Claimant No. 1 is thus held entitled to recover and the
Respondent is held liable to pay to the Claimant No. 1, an amount
of Rs. 67.66 crores (Rs. 123.66 crores minus Rs. 56 crores)
towards damages for illegally terminating the Project Agreement.
8) The Respondent - NTPC is directed to pay the aforesaid amount
of Rs. 67.66 crores to Claimant no. 1 within 30 days from the date
of the Award;
9) If the aforesaid payment is not made by the Respondent to
Claimant No. 1 as directed, the Respondent shall pay interest on
the said amount of Rs. 67.66 crores at the rate of 10 per cent per
annum with effect from the date of award, till the date of payment.
10) The Respondent - NTPC shall refund the amounts of three
Bank Guarantees amounting to Rs. 91 crores (Rs. 21 crore + Rs.
35 crore + Rs. 35 crore) along with interest accrued thereon in
favour of Claimant No. 1 - Thiess Minecs Pvt. Ltd.
11) The Respondent - NTPC shall refund the amount of one Bank
guarantee amounting to Rs. 7 crore along with interest accrued
thereon in favour of Claimant No. 2 - Thiess Pty. Ltd.
12) The Respondent - NTPC shall also pay interest on the
aforesaid four Bank Guarantees at the rate of 10 per cent annum
to the Claimants with effect from 08 May 2014 till the date of
payment.
13) Rest of the reliefs claimed by the Claimants in the Statement of
Claims as also the reliefs sought by the Respondent in the Counter-
claim are refused/rejected.
14) The prayer of the parties for payment of costs incurred in
various legal proceedings in different courts is rejected.
15) The Parties are directed to bear their own costs in the present
arbitral proceedings.‖
O.M.P. (COMM) 429/2017 Page 2
2. A reading of the Award would show that the Arbitrators were
unanimous in their finding that the petitioner had unlawfully and illegally
terminated the Project Agreement on 07.05.2014 and that though the
respondent no. 1 was not entitled to seek Specific Performance of the
Project Agreement, it was entitled to recover damages for such illegal
and unlawful termination of the Project Agreement. The difference of
opinion was on the quantum of such damages. The Arbitral Tribunal was
also unanimous in its opinion that the petitioner was liable to refund the
amounts of the three bank guarantees wrongfully encashed by it.
3. The disputes between the parties arose in relation to the Project
Agreement for development and operation of Pakri Barwadih Coal Block
(hereinafter referred to as the PB coal block) dated 14.07.2011 executed
between the petitioner and the respondent no. 1.
4. The petitioner had been allocated the PB coal block in 2004. On
08.02.2007 it issued a Request for Proposal to identify and appoint an
internationally competent mine developer and operator for development
and operation of the PB coal block. The respondent no. 1 submitted its
techno-commercial proposal dated 12.04.2007 and thereafter, discussion
and correspondence ensued between the petitioner and respondent no. 1
between 2008 to 2010 resulting in issuance of Letter of Acceptance dated
30.11.2010 by the petitioner in favour of respondent no. 1. The Project
Agreement dated 14.07.2011 was finally executed between the parties.
5. As per the clauses of the Project Agreement, the total contract
period was divided into two stages: 1) Development Stage - to be
completed within 360 days from the date of commencement, which was
O.M.P. (COMM) 429/2017 Page 3
30.11.2010; and 2) Operations Stage - which was to commence
immediately following the Development Stage on the "Coal Production
Start Date", which was defined as the day immediately following the last
day of the Development Stage.
6. Clause 8.1 of the Project Agreement sets out the petitioner‟s
obligations, while Clause 8.2 of the Project Agreement sets out the
obligations of respondent no. 1 at the Development Stage. Clause 8.3
provided for extension of the Development Stage and reads as under:-
―8.3 Extension of Development Stage
(a) The Parties shall keep each other informed on the progress
achieved vis-à-vis the Operational Plan in meeting their respective
obligations specified in Clause 8.1 or Clause 8.2, as the case may
be. In the event that either Party expects a delay in fulfilling its
obligations, it shall promptly inform the other Party of such delay
together with reasons for such delay and corrective action(s) taken
(b) In the event that either Party fails to fulfill its obligations
under Clause 8.1 or 8.2, as the case may be, within 360 days from
the Commencement Date, the defaulting Party shall have the right
to seek extension of Development Stage by a period of 450 days
including any extension on account of Force Majeure without any
financial implication on either side. However the extension in
Development period shall be considered for adjustment of Mining
Fee on account of Price escalation. In the event that the defaulting
Party fails to fulfill its obligations even during the extended period
of 450 days for reasons beyond the reasonable control of the
Party, the parties shall have good faith discussions and mutually
agree upon the future course of action depending upon the
circumstances prevailing at that time.‖
7. The petitioner vide letter dated 17.02.2012 granted an extension of
the Development Stage by 450 days, that is, upto 16.02.2013.
O.M.P. (COMM) 429/2017 Page 4
8. As the Development Stage could not be completed, the petitioner
issued a Show Cause Notice dated 10.07.2012 to the respondent no.1
under Clause 24.4(a) of the Project Agreement. The respondent no. 1
replied to the Show Cause Notice vide its letter dated 08.08.2012.
Thereafter the parties held a meeting on 05.09.2012, followed by
respondent no.1‟s letter dated 11.09.2012 and good faith discussions on
07.02.2013 and 20.02.2013. Various letters were also exchanged between
the parties.
9. The petitioner vide its letter dated 26.04.2013 granted a provisional
extension of Development Stage for a further period of 360 days, that is,
upto 11.02.2014, without prejudice to its right to levy liquated damages.
10. On 11.12.2013, the respondent no. 1 applied for further extension
of the Development Stage by a further period of 360 days with effect
from 12.02.2014. The respondent no. 1 further called for good faith
discussions in this regard.
11. In such good faith discussions held on 24.01.2014, the petitioner
agreed to extend the Development Stage by a further period of 360 days
with effect from 12.02.2014, subject to the approval of the competent
authority of the petitioner. However, on 07.05.2014, the petitioner issued
the termination notice as also invoked the Bank Guarantees submitted by
the respondents leading to the disputes between the parties.
12. Respondents invoked arbitration vide their notice dated 19.06.2014
resulting in the constitution of the Arbitral Tribunal, which has passed the
Impugned Award.
O.M.P. (COMM) 429/2017 Page 5
13. Learned senior counsel for the petitioner assails the Impugned
Award on the ground that the same has been passed after almost one and
a half years of reserving the same for pronouncement. He submits that
due to this delay many submissions of the petitioner have escaped
attention of the Arbitral Tribunal and the Award is based only upon the
arguments made by respondent no. 1. He relies upon the following
judgments in support of his contention:-
BWL Ltd. vs. UOI & Anr. (26.11.2012 - DEL HC), [FAO (OS)
398-399/2012]
M/s Satya Parkash & Brothers Pvt. Ltd. vs. North Delhi
Municipal Corporation (08.05.2017 - DEL HC), O.M.P.
(COMM) 75/2016
Harji Engg. Works Pvt. Ltd. vs. Bharat Heavy Electricals Ltd.
and Anr. (22.09.2008-DEL HC), OMP 241/2006
14. I have considered the submission made by the learned senior
counsel appearing for the petitioner, however, find no merit in the same.
A perusal of the Award would show that the Arbitral Tribunal has passed
a detailed Award after considering the submissions made by the counsels
for the parties. It may be true that the Tribunal may have found merit in
the submissions made by the respondent no.1, however, from the same it
cannot be said that the submissions made by the petitioner have been
ignored. Whether the findings of the Arbitral Tribunal deserve any
interference by this Court in exercise of its power under Section 34 of the
Act, would be different from considering that the Award is liable to be
set aside only on the ground of such delay in pronouncement of the
O.M.P. (COMM) 429/2017 Page 6
Award. I may also note that the disputes between the parties involved
perusal of voluminous evidence and facts and therefore, merely on the
ground of delay the Award cannot be set aside.
15. In BWL Ltd. (Supra), the delay was of a period of nearly five
years. It was in those peculiar facts that the Division Bench of this Court
set aside the Awards Impugned therein.
16. In Satya Parkash & Brothers Pvt. Ltd. (Supra) and Harji Engg.
Works Pvt. Ltd. (Supra) there was a delay of three years in passing the
Awards impugned in those petitions. The Court also considered other
circumstances in relation to the arbitration proceedings in those cases for
setting aside the Award.
17. In the present case, apart from contending that the Award has been
passed with a delay of one and half years, there are no other similar
allegations made by the petitioner regarding the conduct of the arbitration
proceedings by the Arbitral Tribunal. I may also note that in the present
case, the three Arbitrators have written separate opinions, with the
Arbitrators writing their own opinion on the point of difference with the
majority Award.
18. I therefore, find no merit in the above contention of the learned
senior counsel for the petitioner and reject the same.
19. The learned senior counsel for the petitioner has thereafter
submitted that the Award is liable to be set aside as it has failed to take
note of the relevant terms of the Agreement between the parties. He
submits that Clause 3.2 of the Agreement required the Mine Operator to
O.M.P. (COMM) 429/2017 Page 7
inspect the Site of work and it has to inform itself regarding the Site and
the local and other conditions referred to in the RFP document. It further
provided that for such conditions, the Mine Operator was not to be
relieved from its liability to perform the Agreement in accordance with
its terms. He submits that in view of this Clause, respondent no. 1 could
not have contended that the local conditions were such which did not
permit respondent no. 1 to perform its part of the Contract.
20. I have considered the submissions made by the learned senior
counsel for the petitioner, however, find no merit in the same. Clause
3.2(c) of the Agreement is reproduced hereinbelow:-
―Clause 3.2 Acknowledgments and Undertakings:
xxxxx
(c) The Mine operator hereby acknowledges and agrees that
failure by it to inspect the Site to the extent that was practicable
and inform itself regarding the Site, the physical conditions,
geology and geotechnical characteristics and other
information/data relating to the Site and the local and other
conditions referred to in the RFP Documents shall not in any
manner whatsoever relieve the Mine Operator of its liability to
perform this Agreement in accordance with its terms.‖
21. A reading of the Clause would clearly show that the Mine Operator
could not be absolved of its contractual obligations on the ground of
difference in the physical conditions, geology and geotechnical
characteristics or other information/data relating to the Site and the local
conditions referred in the RFP document. The same, however, would not
absolve the petitioner of its obligations under Clause 8.1 of the
Agreement, which is reproduced hereinbelow:-
O.M.P. (COMM) 429/2017 Page 8
―8.1 Owner's Obligations
(a) Approvals
The Owner shall obtain the clearances for the Project set forth in
Clause 16 of Schedule 5
(b) Cross country conveyor system, silo and Railway Siding
The Owner shall construct the necessary cross country conveyor
from the coal stockyard leading to coal load out silo using the
following options
OptionI- Troughed belt conveying system from TP-1 to Silo
OptionII- Troughed belt conveying form TP-1 to TP-3 Single
flight pipe Conveyor from TP-3 to TP-7 Troughed belt conveying
form TP-7 to Silo.
The boundary wall along the conveyor corridor is replaced by
chain link lending and the concrete paving below the conveyor
gallery and other balance areas is replaced with adequate
compacting.
The railway siding and the necessary wagon loading facilities
shall also be constructed by Owner.
(c) Approvals related to use of land and access to Site
(i) The Owner shall obtain, renew and retain mining rights for
the Mining Lease required for the provision of the Mining
Services.
(ii) Pay all rentals payable under the Mining Lease.
(iii) The Owner shall provide the Mine Operator with reasonable
access to the Site to enable the Mine Operator to commence and
undertake Development Stage activities. The access provided by
the Owner to the Mine Operator in accordance with this
Agreement shall always be sufficient to reasonably address the
Mine Operator's requirements as stated in the Mine Plan and the
Operational Plan.
(d) Power arrangement
The Owner shall provide electricity arrangement to the Mine
Operator on the Site for initial mining operation through the main
substation of the PB Block with feeder voltage at 11 KV and
subsequently at 33KV till the HT line at 132 KV is brought to the
Site by the Owner. Further the Owner is also making an
arrangement for backup power of around 10 MVA through the
diesel generator sets. The power supply to the Mine Operator shall
O.M.P. (COMM) 429/2017 Page 9
be at the actual cost at which it is available to the Owner at the
Site.
The current cost at which the power supply is available from
Jharkand state electricity board is:
(i) Demand Charges (for the total contracted MVA)-INR 140
per KVA per month, based on sanctioned load (MVA);
(ii) Variable charge (per unit basis) INR 4 per kWh;
(iii) Monthly minimum charges shall be subject to a minimum
amount of INR 250 per KVA, based on sanctioned load (MVA):
Further the back up power generated from DG set is estimated to
be available at a cost of INR 9.00 per unit based on the current
estimates (considering diesel price of INR 34.65 per litre).
(e) Owner's Facilities
The Owner shall cause the construction and commissioning, of the
Owner's Facilities specified at Clause 2 of Schedule-5 in
accordance with Good Industry Practice as per the schedule
specified in the Operational Plan.
8.1.5A The Owner will ensure that the Owner's Facilities
(including the Cross country conveyor system, silo and railway
sliding) are fit for their purpose and constructed in accordance
with Good industry Practice.‖
22. Clause 14.3 and 14.4 of Schedule 2 of the Agreement are quoted
hererinbelow:-
―14.3 Access
The Owner shall provide safe and reasonably unobstructed access
to the site. However, for special or temporary rights-of-way, if any,
the Mine Operator shall arrange and bear all costs.
14.4 Site Conditions
The Site shall be provided to the Mine Operator free and clear of
manmade obstructions or interferences, artifacts and hazardous
materials upon commencement of the Work. The Mine Operator
acknowledges that it has investigated and satisfied itself to the
extent set out in Clause 3.2 as to the conditions affecting the work,
including but not restricted to conditions bearing upon
O.M.P. (COMM) 429/2017 Page 10
transportation, disposal, handling and storage of materials, and
the character, quality and quantity of surface and subsurface
materials or obstacles to be encountered insofar as this
information is reasonably ascertainable from an inspection of the
Site. The Mine Operator also acknowledges it is aware of
uncertainties of weather, water runoff characteristics and similar
physical conditions at the site.‖
23. The Arbitral Tribunal, after considering the evidence led by the
parties before it has held that the petitioner was unable to take over
possession of the land and give the same to the respondent no. 1 though
in terms of Clause 8.1, it was the obligation of the petitioner to provide
the site of the project to respondent no. 1. In view of such finding,
reliance of the petitioner on Clause 3.2 of the Agreement cannot be
sustained.
24. I may only note that before the Arbitral Tribunal the petitioner had
placed reliance on Clause 10.1(c)(iii) of the Agreement which reads as
under:-
―10.1 Owner's Obligations
xxx
(c) Land Acquisition
xxx
(iii) The Owner shall endeavour to provide the Mine Operator
land in advance of mining activities sufficient to meet the Mine
Operator's requirement for the next five years. In any case the
Owner shall ensure that at least two years advance land is
provided to the Mine Operator. However, a failure in this regard
shall for the purposes for Clauses 24.2(b), be considered as
Owner's Event of Default. The Owner shall acquire the land and
provides vacant possession on ―As is Where is‖ basis to the Mine
Operator for mining and associated activities in accordance with
Applicable Laws.‖
O.M.P. (COMM) 429/2017 Page 11
25. The petitioner contended that as the land was to be given on "as is
where is" basis, the contention of the respondent no. 1 in relation to
encroachment of land etc. could not be accepted. The Arbitral Tribunal
considered this objection and rejected the same holding as under:-
―We are not impressed by the contention; As rightly submitted by
the learned counsel for the claimant, Clause 10 provides for
―Operations Stage Obligations‖ of the parties. Admittedly,
Development Stage Obligations of the parties were not over and
the contract was terminated prior to commencement of Operation
Stage. But even the said clause, in our opinion, does not help the
respondent inasmuch it states that the Owner shall acquire the
land and provide vacant possession on ―As is Where is‖ basis to
the Mine Operator for mining and associated activities in
accordance with law.
It is, therefore, clear and requires no argument that initial duty to
acquire land and to give possession thereof to the claimant was on
the respondent. Once such possession is handed over to the
claimant, obviously, it was the obligation of the claimant to protect
the land and if thereafter possession of the land is lost or there is
encroachment, the claimant cannot find fault with the respondent
nor it can compel the respondent to restore possession from
encroachers.
From the facts already stated earlier, it is established by the
claimant on the documentary and oral evidence that neither the
respondent was able to take possession of land nor possession
could be given to the claimant. The contention of the respondent,
therefore, has no force and cannot be accepted.‖
26. No fault can be found on the above interpretation of the terms of
the Agreement by the Arbitral Tribunal.
O.M.P. (COMM) 429/2017 Page 12
27. The Supreme Court in Associate Builders vs. Delhi Development
Authority (2015) 3 SCC 49, has held as under:
―42. In the 1996 Act, this principle is substituted by the ‗patent
illegality' principle which, in turn, contains three subheads:
xxxx
42.3(c) Equally, the third subhead of patent illegality is really
a contravention of Section 28(3) of the Arbitration Act, which
reads as under:
28. Rules applicable to substance of dispute.--(1)-92) * * *
(3) In all cases, the Arbitral Tribunal shall decide in
accordance with the terms of the contract and shall take into
account the usages of the trade applicable to the transaction. ‖
This last contravention must be understood with a caveat. An
Arbitral Tribunal must decide in accordance with the terms of the
contract, but if an arbitrator construes a term of the contract in a
reasonable manner, it will not mean that the award can be set
aside on this ground. Construction of the terms of a contract is
primarily for an arbitrator to decide unless the arbitrator
construes the contract in such a way that it could be said to be
something that no fair minded or reasonable person could do.
43. In McDermott International Inc. v. Burn Standard Co.
Ltd.,(2006) 11 SCC 181 this Court held as under: (SCC pp. 225-
26, paras 112-13)
―112. It is trite that the terms of the contract can be
expressed 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
O.M.P. (COMM) 429/2017 Page 13
law. [See Pure Helium India (P) Ltd. v. Oil and Natural Gas
Commission, (2003) 8 SCC 593:2003 Supp (4) SCR 561 and
D.D.Sharma v. Union of India.] (2004) 5 SCC 325.
113. Once, thus, it is held that the arbitrator had the
jurisdiction, no further question shall be raised and the court will
not exercise its jurisdiction unless it is found that there exists any
bar on the fact of the award.‖
28. In National Highways Authority of India vs. ITD Cementation
India Ltd. (2015) 14 SCC 21, the Supreme Court reiterated:
―25. It is thus well settled that construction of the terms of
a contract is primarily for an arbitrator to decide. He is
entitled to take the view which he holds to be the correct one
after considering the material before him and after
interpreting the provisions of the contract. The Court while
considering challenge to an arbitral award does not sit in
appeal over the findings and decisions unless the arbitrator
construes the contract in such a way that no fair-minded or
reasonable person could do.‖
29. Learned senior counsel for the petitioner has also placed reliance
on the letter dated 11.09.2012 addressed by the respondent no. 1 to the
petitioner to contend that the respondent no. 1 itself had given a Schedule
for achieving major activities to be undertaken by it between October
2012 to March 2013 on the Project. He submits that this letter itself
falsifies the stand of the respondent no. 1 that the Project could not be
implemented due to breach of obligations on part of the petitioner.
30. In my opinion the said letter cannot be read selectively. The said
letter itself records as under:-
O.M.P. (COMM) 429/2017 Page 14
―We are grateful to you for inviting us to a meeting at tlie NTPC
office in NOIDA on 05.09.2012. During this meeting, we submitted
the present status of the Project, and it was agreed that TM and
NTPC shall jointly work to ensure the start of coal production
from Pakre Barwadih Coal Mining Project (―Project‖) by March
2013.
xxxxxx
As discussed during the meeting we request NTPC to urgently
nominate the Owner, Agent and Manager for the Pakri Barwadih
Coal Mining Project as per DGMS requirements stated in their
letter of 30 August 2012 (herewith enclosed for your ready
reference). This is essential to enable TM to submit the necessary
applications to DGMS (under NTPC's signature) to obtain the
statutory permissions required for commencing mining operations.
As informed to you earlier (vide our letters of 9 August, 2012). TM
has already placed firm orders for mining equipment to be
deployed in the Project, and the ground contouring survey of the
proposed site of mining operations is also underway.
TM submitted the importance of evacuation of coal to which NTPC
agreed to initiate the process for arranging the transportation arid
loading of coal from the mine area.
In view of the positive developments in the Project due to the
sustained efforts of both NTPC and TM, we are confident that TM
will be able to re-start site work in the Project at an early date.‖
31. A reading of the above letter would clearly show that the time
schedule mentioned by the respondent no. 1 was not unconditional in
nature but had been arrived at by the respondent no.1 based on
discussions between the parties held in the meeting on 05.09.2012 and
pre-conditioned on performance of certain obligations by the petitioner.
This letter in no way can be read as an admission of the respondent no. 1
O.M.P. (COMM) 429/2017 Page 15
that there were no issues with respect to discharge of obligations by the
petitioner under the Project Agreement. In any case, the Arbitral Tribunal
has considered the issue of discharge of obligations under the Project
Agreement by the respective parties and therefore, reliance on one
document in isolation would not be proper.
32. One of the major points urged by the learned senior counsel for the
petitioner is the concealment of the arbitration proceedings between the
respondents and Roshni Developers Private Limited (RDL)/Indu Projects
which were pending in Singapore. The said arbitration proceedings had
arisen between the respondent no.1 and RDL/Indu Projects in relation to
the Memorandum of Understanding dated 02.07.2008 executed between
the said parties for removal of over burden / inter burden (OB/IB) to the
extent of 67% of the total OB/IB for 22 years. On 06.03.2012, High
Court of Singapore had passed an order of injunction against respondent
no.1 from granting a sub-contract for performing work relating to the PB
Coal Block. On 12.07.2012, the High Court of Singapore clarified the
scope of its injunction order to the effect that the same did not operate as
a restraint on the respondent no. 1 from sub-contracting 33% of OB
removal work. The said interim order continued till December 2014. It is
contended by the learned senior counsel for the petitioner that not only
were these proceedings initially concealed by the respondent no. 1 from
the Arbitral Tribunal, but also that the disputes between the respondent
no. 1 and RDL/Indu Project were the real reason of the delay/non
performance of the obligations by the respondent no. 1.
O.M.P. (COMM) 429/2017 Page 16
33. The learned senior counsel for the petitioner has further placed
reliance on an e-mail dated 04.05.2012 addressed by Mr.Dilip Kumar
(CW-2) to the Senior Executives of the respondents stating that they were
unable to perform works owing to "ongoing legal case at Singapore". He
submits that this was a clear admission on the part of the respondents that
the litigation at Singapore was the major cause of delay in the
performance of obligations under the Project Agreement.
34. On the other hand, the learned senior counsel for the respondents
submits that the arbitration proceedings between the respondent no. 1 and
RDL/Indu Projects were not relevant for the purposes of the present
arbitration proceedings between the petitioner and the respondents. He
further submits that the allegation of the petitioner that the delay in
execution of the work was caused due to the interim order passed by the
High Court of Singapore is totally incorrect. He submits that the land for
carrying out OB work was identified by the petitioner for the first time
only on 20.06.2012. Before this date no OB removal work could have
started. Almost immediately thereafter, on 12.07.2012 the High Court of
Singapore clarified the scope of the injunction order to the effect that the
same did not operate as a restraint on the respondent no. 1 from sub-
contracting 33% of the OB removal work. He submits that during the
intervening period between 20.06.2012 to 12.07.2012 and thereafter no
OB removal work could have been started as permission from Coal
Controller for opening coal seams was issued only on 18.11.2013. He
submits that till the time the mine opening permission was granted, no
OB removal work could have been carried out. He further submits that
O.M.P. (COMM) 429/2017 Page 17
the contention of the petitioner that mine opening permission from the
Coal Controller had to be obtained by the respondent no.1 and that the
Arbitral Tribunal has given premium to respondent no.1‟s own default in
not obtaining the permission, is incorrect as the same had been delayed
on account of the petitioner‟s failure to appoint the Agent-Cum-Manager,
who was appointed only on 23.03.2013 and even thereafter, there were
delays on the part of the petitioner in giving supporting documentation
and other procedural requisites for obtaining mine opening permission
from the Coal Controller.
35. I have considered the submissions made by the learned senior
counsels appearing for the parties. The Arbitral Tribunal has also
discussed the issue of suppression and the effect of the injunction order
granted by the High Court of Singapore in great detail. The Arbitral
Tribunal held that though the respondents ought to have informed the
Arbitral Tribunal of the said proceedings in Singapore, the same had not
resulted in delay in execution of the work by the respondent no.1 or non
performance of Development Stage obligations under the Project
Agreement. The Arbitral Tribunal has also considered the effect of each
of the obligations of the parties under Clause 8 of the Project Agreement
to arrive at its conclusion that the termination of the Agreement by the
petitioner was not justified. In view of such finding, the plea of the
petitioner cannot be sustained.
36. The learned senior counsel for the petitioner further submits that
the Arbitral Tribunal has erred in holding that the petitioner failed to
provide land to the respondents in order for the latter to complete their
O.M.P. (COMM) 429/2017 Page 18
Development Stage obligations under the Contract Project. Relying upon
Clause 1.1 of Schedule 5 of the Project Agreement, he submits that the
land was to be provided by the petitioner to the respondent no. 1 in a
phased manner. Land relating to MDO Colony, Coal Stockyard,
Secondary Sizing and Reclaimer Stacker had been provided by the
petitioner to the respondent no. 1, however, no construction had taken
place even on this portion of land till the date of termination. In this
regard he has placed reliance on certain correspondence exchanged
between the parties. He further contends that as on the date of termination
of the Project Agreement nearly 487.78 Hectare of land had been
provided to the respondent no. 1 for dumping in Dump C and 71.65
Hectare for infrastructure, free from encumbrances and the respondent
no. 1 had been requested to start the work. He submits that had the
respondents commenced the execution of the work on the land that was
allotted to them by the petitioner, the protest being faced by them from
the occupier would also have mitigated. Relying upon the e-mail dated
03.11.2011 addressed by R. Srikanth (CW-3) to one Ken Morris of
respondent no. 2 company, he submits that it has been clearly admitted
that the respondent no. 1 has caused delay in obtaining clearance from the
petitioner and wanted to focus only on revenue earning activities in the
beginning. He submits that the adverse conditions prevailing at the Site
were well known to respondent no. 1 at the time of submitting its bid as
acknowledged by it in its letter dated 20.06.2007. Infact, in the said letter
respondent no.1 had assured that on being appointed as the MDO it will
immediately and without delay commence a range of community
initiatives which would be effective in encouraging local communities to
O.M.P. (COMM) 429/2017 Page 19
support and participate positively in the mining Project. It was based on
this assurance that the Project Agreement had been executed between the
parties. He submits that the Arbitral Tribunal has wrongly excluded the
said letter alongwith letter dated 12.04.2007 from consideration on an
erroneous ground that they were in relation to the bidding process and not
at the Development Stage obligations after the Agreement.
37. On the other hand, the learned senior counsel for the respondents
submits that the petitioner has failed to provide adequate land for fixed
infrastructure facilities as well as initial mining. He submits that no land
between the Dump A and Dump B was given to respondent no. 1. There
was a failure on the part of the petitioner to provide access. As far as
reliance on the letters dated 12.04.2007 and 20.06.2007 is concerned, the
learned senior counsel for the respondents submits that the Arbitral
Tribunal has rightly held that after execution of the Project Agreement,
the parties were bound by the express terms and the conditions of the
same. Even otherwise, these letters cannot relieve the petitioner from its
obligations to provide land and implement its R&R policy under the
Project Agreement.
38. The Arbitral Tribunal has considered the above issue in detail and
relying upon the terms of the Agreement, the correspondence exchanged
between the parties, as well as the representations made by the petitioner
to the Government of India in Parliament, as also submissions made by it
before the Supreme Court, has held that the initial duty to acquire land
and give possession thereof to the respondents was on the petitioner. It
was established that neither the petitioner was able to take possession of
O.M.P. (COMM) 429/2017 Page 20
the land nor could possession be given to the respondents. The Arbitral
Tribunal held as under:-
―We have already considered this aspect earlier. On the basis of
documentary evidence and material placed on record, we have
recorded a finding that under the Project Agreement, it was the
duty of the respondent to acquire land and to give possession of the
site free from all encumbrances to the claimant which the
respondent failed to fulfil. For several reasons, such as, failure to
frame and implement R & R Policy, failure to remove
encroachment, failure to pay compensation to land-owners,
adverse and unfavourable "law and order" situation, lack of
proper infrastructure, etc.; the respondent could not make the Site
free from all encumbrances available to the claimant so as to
enable Thiess to commence work and to perform Development
Stage Obligations.
We have also held that whatever might have been stated by
the parties prior to entering into contract, once the Agreement is
entered into and the rights and liabilities are crystallized in
writing, the parties were bound to act in accordance with the
written Agreement and cannot go back or rely on what they had
stated prior to entering into contract.
xxxxxx
It is thus clear that the grievance raised by the claimant that
the respondent did not provide sufficient land appears to be well-
founded and must be upheld. It is also proved that the respondent
is not right in contending that other contractors had done the
work.‖
39. Learned Arbitral Tribunal considered the effect of the letter dated
20.06.2007 addressed by the respondent no. 1 to the petitioner and held
as under:-
―Even this contention has no force. Firstly, it was in relation to
bidding process and not at the Development Stage Obligations
O.M.P. (COMM) 429/2017 Page 21
after the agreement. The Project Agreement was entered into on
14 July 2011, i.e. long after letter dated 20 June 2007. Secondly,
the letter itself stated that the claimant will take up Community
Initiatives "in parallel to the NTPC's land acquisition and
rehabilitation activities". Thus, even in 2007, it was clear that it
was the obligation of NTPC to initiate appropriate proceedings for
acquisition of land as also to rehabilitate project affected persons.
As already seen earlier, the respondent had failed to take
appropriate proceedings for acquisition of land and for preparing
and implementing R & R Policy for project affected persons.
Thirdly, once the Project Agreement had been executed, rights and
liabilities have to be determined on the basis of the provisions of
such Agreement. As noted earlier, under Clause 8.1, it was the
obligation of the respondent to provide site to the claimant. The
parties to the Agreement cannot ignore express terms and
conditions of such Agreement.‖
40. The above being finding of fact arrived at by the Arbitral Tribunal
on appreciation of the evidence led before it, cannot be interfered with by
this Court as a Court of appeal. In Associate Builders (supra) the
Supreme Court has held as under:-
―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[1]. Once it
is found that the arbitrators approach is not arbitrary or
capricious, then he is the last word on facts. In P.R. Shah, Shares
& Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd., (2012) 1
SCC 594, this Court held:
―21. A court does not sit in appeal over the award of an
Arbitral Tribunal by reassessing or reappreciating the evidence.
O.M.P. (COMM) 429/2017 Page 22
An award can be challenged only under the grounds mentioned
in Section 34(2) of the Act. The Arbitral Tribunal has examined the
facts and held that both the second respondent and the appellant
are liable. The case as put forward by the first respondent has
been accepted. Even the minority view was that the second
respondent was liable as claimed by the first respondent, but the
appellant was not liable only on the ground that the arbitrators
appointed by the Stock Exchange under Bye-law 248, in a claim
against a non-member, had no jurisdiction to decide a claim
against another member. The finding of the majority is that the
appellant did the transaction in the name of the second respondent
and is therefore, liable along with the second respondent.
Therefore, in the absence of any ground under Section 34(2) of the
Act, it is not possible to re-examine the facts to find out whether a
different decision can be arrived at."
41. This Court in Jhang Cooperative Group Housing Society Ltd. vs.
Pt. Munshi Ram & Associates Pvt. Ltd. 2013 SCC OnLine Del 1886
reiterated the narrow scope of judicial scrutiny under Section 34 in the
following terms:
―14. With respect to the objections filed by the appellant against
the final award dated 27.09.2002 we may note that the law laid down by
the Hon'ble Supreme Court restricts the supervisory role of the courts
while testing the validity of an Arbitration Award. In the case of
McDERMOTT INTERNATIONAL INC. v. BURN STANDARD CO. LTD.,
(2006) 11 SCC 181, the Hon'ble Supreme Court has held as under:--
―The 1996 Act makes provision for the supervisory role of
courts, for the review of the arbitral award only to ensure fairness.
Intervention of the court is envisaged in few circumstances only,
like, in case of fraud or bias by the arbitrators, violation of natural
justice, etc. The court cannot correct errors of the arbitrators. It
can only quash the award leaving the parties free to begin the
arbitration again if it is desired. So, the scheme of the provision
aims at keeping the supervisory role of the court at minimum level
and this can be justified as parties to the agreement make a
conscious decision to exclude the court's jurisdiction by opting for
O.M.P. (COMM) 429/2017 Page 23
arbitration as they prefer the expediency and finality offered by
it.‖
It is in the parameters as laid down by the Apex Court vis-a-
vis the scope of judicial intervention that the present appeal
impugning the order dated 24.02.2012 has to be dealt with in
respect to the final award published by the sole arbitrator dated
27.09.2002. It is seen that the Arbitrator has elaborately
considered the various documents, submissions and evidence led
by the parties in respect of each claim which was left to be
adjudicated by the interim award. The Arbitrator has extensively
gone into the evidence and evaluated the entire material before
him and has published a detailed speaking award.
15. The law is no longer res Integra and is settled that
where the Arbitrator has assessed the material and evidence
placed before him in detail, the court while considering the
objections under Section 34 of the said Act does not sit as a court
of appeal and is not expected to re-appreciate the entire evidence
and reassess the case of the parties. The jurisdiction under Section
34 is not appellate in nature and an award passed by an Arbitrator
cannot be set aside on the ground that it was erroneous. It is not
open to the court to interfere with the award merely because in the
opinion of the court, another view is possible. The duty of the court
in these circumstances is to see whether the view taken by the
Arbitrator is a plausible view on the facts, pleadings and evidence
before the Arbitrator. Even if on the assessment of material, the
court while considering the objections under Section 34 is of the
view that there are two views possible and the Arbitral Tribunal
has taken one of the possible views which could have been taken
on the material before it, the court would be reluctant to interfere.
The court is not to substitute its view with the view of the
Arbitrator if the view taken by the Arbitrator is reasonable and
plausible.
16. If the Arbitrator has taken a view which the court
finds reasonable and plausible, the court would certainly not
interfere.‖
O.M.P. (COMM) 429/2017 Page 24
42. I do not find the finding of the Arbitral Tribunal to warrant any
interference of this Court in exercise of its power under Section 34 of the
Act. The submissions made by the learned senior counsel for the
petitioner are on the merits of the claims and Counter Claims and seek re-
appreciation of the evidence led by the parties before the Arbitral
Tribunal. As discussed before, the same does not fall within the scope of
Section 34 of the Act.
43. Learned senior counsel for the petitioner has further submitted that
the Arbitral Tribunal has erred in relying upon the correspondence
exchanged and the submissions made by the petitioner before the
Government of India and before the Supreme Court. He submits that such
correspondence could not be relied upon as the petitioner was merely
trying to protect its rights as also of respondent no. 1; however, between
the petitioner and respondent no. 1, the obligations had to be considered
on their own facts.
44. I am unable to appreciate the arguments made by the learned
senior counsel for the petitioner. The petitioner being a Public Sector
undertaking, cannot be heard to say that the contradictory correspondence
with Government of India and submissions before the Supreme Court
were misrepresentation of the facts and that such submissions were
irrelevant. In my opinion, the Arbitral Tribunal has rightly relied upon
such correspondence and submissions made by the petitioner. The same
were relevant to the facts and issues before the Arbitral Tribunal.
45. Learned senior counsel for the petitioner further submits that the
Arbitral Tribunal has erred in holding that the time was not of essence to
O.M.P. (COMM) 429/2017 Page 25
the Contract. He submits that even if time was not of essence, the
obligations must be completed within reasonable time. He submits that in
terms of Clause 8.3(b) of the Project Agreement, it was the defaulting
party who had to make an application seeking extension of time. The said
application having being made by the respondent no. 1, shows that the
respondent no. 1 admitted that it was in default of performance of its
obligations. He further submits that the second extension of time granted
in favour of the respondent no. 1 was without prejudice to the levy of
liquidated damages and therefore, not only was time of essence of the
Contract but also, the respondent no. 1 was in default of performance of
its obligations.
46. I am unable to agree with the submissions made by the learned
senior counsel for the petitioner. The Arbitral Tribunal has rightly
considered the law in relation to the time being of essence to the Contract
and thereafter relied upon the fact that the Project Agreement does not
contain any provision which contemplates the time to be an essence of
the Contract. Clause 8.3 of the Project Agreement provides for grant of
extension of time and such extension being granted on two occasions,
while the third had been granted subject to the approval of the competent
authority, it could not be said that under the Project Agreement time was
the essence of the Contract. As far as the duty of the parties to perform
their respective obligations even within reasonable time, the Arbitral
Tribunal has gone in detail and considered the performance of such
obligations of each party and thereafter arrived at its final conclusion.
The learned senior counsel for the petitioner is therefore, wrong in
O.M.P. (COMM) 429/2017 Page 26
submitting that the Arbitral Tribunal has not considered this issue in the
right perspective.
47. Learned senior counsel for the petitioner has further made
submissions regarding the findings of the Arbitral Tribunal on the failure
of the petitioner to construct approach roads and canal. He further
submits that the Arbitral Tribunal has not considered the evidence
pertaining to the sequence of mining.
48. In my opinion, these arguments of the petitioner require the re-
appreciation of the evidence by this Court. The Arbitral Tribunal having
considered these issues alongwith other obligations of the parties in
detail, this Court cannot convert itself into a Court of appeal or interfere
with the Award passed on such re-appreciation of evidence. The Arbitral
Tribunal is the final judge of the evidence led before it and merely
because the petitioner may be able to show through a maze of arguments
that some findings of the Arbitral Tribunal are incorrect or suspect, the
Award cannot be set aside.
49. The learned counsel for the petitioner also made submissions that
the new MDO who had been appointed after the termination of the
Contract with the respondent no. 1 has been successfully fulfilling its
obligations under the Project Agreement. He submits that this would
show that the pleas raised by the respondents were merely an eye wash in
order to justify their own defaults.
50. I am unable to appreciate the said arguments on behalf of the
learned senior counsel for the petitioner. The action of termination of the
O.M.P. (COMM) 429/2017 Page 27
Project Agreement by the petitioner has to be judged on the facts as
prevailing on the date of the termination and not thereafter.
51. In view of the above I find no merit in the present petition and the
same is accordingly dismissed, with no order as to cost.
NAVIN CHAWLA, J
NOVEMBER 28, 2018/rv
O.M.P. (COMM) 429/2017 Page 28
