Delhi High Court
M/S Nhpc Ltd. vs M/S Hindustan Construction ... on 4 December, 2020
Via Video Conferencing
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of Decision:- 04.12.2020
+ O.M.P. (COMM) 484/2020
M/S NHPC LTD. ..... Petitioner
Through: Ms. Maninder Acharya, ASG with
Mr. Viplav Acharya, Mr. Krishnesh
Bapat, Mr. Shikhar Kishore, Mr.
Gauhar Mirza, Mr. Prakhar Deep, Mr.
Nishant Doshi & Mr. Manavendra
Gupta, Advocates
versus
M/S HINDUSTAN CONSTRUCTION COMPANY LTD.
..... Respondent
Through: Mr. Harish Salve, Senior Advocate,
Mr. Dayan Krishan, Senior Advocate
with Mr. Rishi Aggarwala, Advocate
CORAM:
HON'BLE MS. JUSTICE REKHA PALLI
REKHA PALLI, J (ORAL)
IA No.10056/2020
1. This is an application filed by the respondent seeking release of
the awarded amount deposited by the petitioner before this Court,
pursuant to the order dated 25.09.2020 directing the same, as a
precondition for stay of the award.
2. The applicant/respondent is the Award Holder in the arbitral
award dated 14.10.2019 passed by a three-member Tribunal in the
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arbitration conducted between these two parties in relation to disputes
arising out of the turnkey execution of the 330 MW hydroelectric
power plant project on the Kishanganga River in Bandipora, Jammu
& Kashmir (hereinafter referred to as 'the project'). As per the terms
of the contract executed between them on 09.03.2009, the project
involved construction of three generating units, viz. Units I, II and III
carrying power generation capacity of 110 MW each, and 330 MW in
total. Considering the remote and politically charged nature of the
project location, there were delays in executing the project which
caused losses to both the parties and led to disputes between them as
to who was to be blamed for these delays. As a result, the respondent
invoked arbitration on 31.01.2017 and the award impugned in the
captioned petition came to be passed on 14.10.2019. In its award, the
learned Tribunal, after holding the petitioner liable for causing delays,
has granted the applicant/respondent a total extension of time of 514
days in the project timeline and a total sum of INR 163.55 crores
(inclusive of the costs claimed alongwith the pre-award interest
@12% p.a.) along with future interest @ 9% p.a. till the date of actual
payment, provided no future interest would be payable if the awarded
amount was paid within ninety days of the date of the award. It is an
admitted case that the awarded amount was not paid to the respondent
during the ninety day period and the captioned petition has been filed
by the petitioner assailing the findings in this award.
3. When this petition was taken up for the first time on
25.09.2020, this Court while issuing notice and directing stay of the
award dated 14.10.2019, had directed the petitioner to deposit the
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awarded amount with this Court by 05.10.2020. At the time, the
petitioner had sought time till 24.10.2020 to effectuate the deposit,
which request was not accepted by this Court on the ground that
almost ten months had passed since the date of passing of the award.
The quantum and time period contained in the direction for deposit
was assailed by the petitioner before the Supreme Court by way of
SLP(C)No.11777/2020 which was listed for 06.10.2020, which
implied that the direction for deposit remained in suspension till then.
However, the SLP soon came to be dismissed by the Supreme Court
by granting the petitioner time till 25.10.2020 to make the deposit as
directed. When all these court-ordered extensions of time to make the
deposit of the awarded amount came to an end, the petitioner duly
deposited the amount before this Court. Soon thereafter, the
respondent/Award Holder moved the present application seeking
release of the amount deposited before this Court. The petitioner was
granted time to respond to this application and has already filed its
reply opposing release of the deposited amount in favour of the
respondent.
4. In support of the application, Mr. Harish Salve, learned senior
counsel for the respondent has made the following submissions:
i. Once the learned Tribunal, after due appreciation of the
evidence on record and the prevailing legal position, categorically
concluded in its award that certain amounts are due and payable to
the respondent, then the petitioner's mere act of assailing the award
before this Court by way of the captioned petition ought not be a
valid ground to deprive the respondent of the amounts rightfully due
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to it. In any event, there are two primary reasons which show that
this petition itself deserves to be rejected at the very outset. The first
and the foremost being that the petition is not maintainable as none
of the grounds raised therein fall within the ambit of scope of
interference set out under Section 34 of the Arbitration &
Conciliation Act, 1996 ('Act' for short). All the grounds set out,
particularly grounds (A), (L), (M), (N), (MM), (ZZ) (AAA) and
(NNN) in the petition, show that the petitioner is deliberately
attempting to raise issues which are factual in nature and, therefore,
fall outside the purview of Section 34 of the Act, especially after the
amendment in 2015. Even on facts, it is clear that the balance of
convenience lies in favour of the respondent, especially since it is
admittedly a company which has executed infrastructure
development projects for over 90 years and even as on date, is
engaged in executing 45 projects of like nature. Considering the fact
that the respondent, as on date, is finding it hard to meet its
obligation to pay the salaries of its 5000 employees on account of the
global pandemic and its pre-existing financial troubles, it is of
utmost importance that this Court direct the deposited monies to be
released to the respondent without being asked to furnish any
security in exchange thereof. Even otherwise, the respondent is a
private contractor which has been continuously carrying out the
project work on the basis of various extensions of time granted by
the petitioner in respect of work arising out of the very same contract
which formed the subject matter of the impugned award. It is not
only the respondent's will to continue carrying out the project work,
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even the actions of the petitioner signify its will to have the
respondent do so. Ultimately, the petitioner's actions ended up
delaying the project, which precipitated the respondent's financial
troubles since it had invested enormous sums in it - all of which
formed the basis of the findings given by the learned Tribunal in the
impugned award. Delaying payment of the awarded amounts would
lead to aggravating the very fire which the award sought to douse,
which was to prevent any further delay and facilitate smooth
continuation in executing the project work. Furthermore, the
respondent's equipment is still lying at the project site which is an
indicator of its commitment to completing the project. In fact, owing
to the efforts put in by the respondent over the years, the project is
operational as on date and has generated electricity for the
inhabitants of remote regions in the union territory of Jammu &
Kashmir. Therefore, this is a fit case wherein the amount deposited
by the petitioner ought to be released in favour of the respondent,
without the requirement of directing the respondent to furnish any
security.
ii. The petitioner's case that the awarded amount deposited with
the court under Section 34 proceedings can only be released in
favour of the applicant/respondent if it furnishes adequate security is
based on a plain misreading of the provisions of the Act. Per contra,
the statute and specifically Section 36(3) thereof makes it clear that it
is only for this Court to ascertain the conditions for stay of the
award. Moreover, any comparison drawn by the petitioner between a
petition of this kind and appellate proceedings against a money
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decree is wholly misplaced, especially in the light of the fact that any
appeal preferred against a money decree is subject to very different
parameters since the scope of interference of a court of first appeal is
much wider than the scope of interference of a court dealing with a
petition under Section 34 of the Act.
5. On the other hand, Ms.Acharya, learned senior counsel for the
petitioner vehemently opposes the application for release and has
contended that the award amount deposited by the petitioner before
this Court in accordance with its orders and merely as a precondition
for stay, cannot be treated by the respondent/the successful claimant
before the learned Tribunal, as its own money. In furtherance of this
submission, she places reliance on Order 41 Rule 5 of the Code of
Civil Procedure, 1908 as also Section 36(3) of the Act to contend that
the latter makes it evident that an arbitral award is akin to a money
decree. Therefore, the same parameters ought to be applied while
directing release of the award amount deposited with a court, as in the
case of money decrees. Thus, if this Court were to direct the release of
the deposited award amount, it ought to be subject to furnishing of
security by the respondent. In support of her contention, Ms.Acharya
places reliance on the decisions in M/s Dewan Chand v. UOI & Anr.
[2015 SCC Online Del 9060], PSL Ramanathan Chettiar & Ors. V.
ORMPRM Ramanathan Chettiar [AIR 1968 SC 1047], South Delhi
Municipal Corp. v. M/s Radhey Shyam [2014 SCC Online Del
4345], Indian Oil Corp. Ltd. V. FEPL Engineering(P) Ltd.&Anr.
[OMP(Comm) 144/2019 order dated 30.07.2020] and NTPC v.
Ritwik Project Pvt. Ltd. [OMP(COMM)503/2020 order dated
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14.10.2020], all in order to contend that the deposit of the awarded
amount by the party challenging the award for obtaining a stay
thereon, is not akin to paying the money to the opposite party. She,
therefore, submits that this Court ought to keep this principal in
account and not permit any release in favour of the respondent
without any guarantee. Moreover, she has drawn the attention of this
Court to its recent decision dated 28.07.2020 dismissing OMP(I) 150
of 2020, which was a Section 9 petition preferred by the respondent
seeking certain interim reliefs with respect to the bank guarantees it
had furnished to the petitioner. It is her contention that if the Court did
not find any merit in the contentions of the respondent at that time but
instead took the view that the respondent had not been carrying out
work at the requisite pace, then that on its own sufficiently bolsters
the case of the petitioner in its Section 34 petition. She finally submits
that in the light of the respondent's own claims of financial troubles
and the fact that the petitioner is a public sector undertaking, it is all
the more necessary to protect the petitioner's interest by dismissing
this application and rejecting the respondent's prayer to be allowed to
forego the requirement of furnishing sufficient security while seeking
release of the amounts accruing to it under an award which is yet to
withstand the scrutiny of appellate proceedings.
6. I have considered the submissions of the learned senior counsel
for the parties and perused the record with their assistance.
7. At the outset it may be appropriate to note that the
petitioner/non-applicant has not denied that the respondent has been
carrying out work at the project site in Kashmir in terms of the
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agreement between the parties and that it has gathered manpower and
equipment at the project site which continues to be there till date. It is
also not denied that the petitioner has indeed granted repeated
extensions of time to the respondent for carrying out this work.
Further, it is an admitted position that the project is operational as on
date, in that it has been generating electricity for the use of its
intended beneficiaries, i.e., the inhabitants of some of the remote
regions in the union territory of Jammu & Kashmir.
8. It is against this backdrop that the respondent's request for
release of the amount deposited by the petitioner as a precondition for
stay of the award in these proceedings, has to be considered. Although
the petitioner's challenge to the arbitral award is still to be considered
by this Court on merits, it prima facie emerges from a perusal of the
grounds in the petition that the petitioner is indeed trying to assail
findings mainly based on appreciation of facts. The question whether
these findings actually invite interference of this Court under Section
34 of the Act can be decided once and for all only after the pleadings
are complete. However, at the same time, it is a settled position of law
that a court exercising its jurisdiction under Section 34 of the Act does
not sit in appeal over the award passed by an arbitrator, which is
considered final and binding in normal course. This has to be read in
conjunction with the fact that Ms. Acharya, while making her detailed
submissions, has not been able to seriously dispute that most of the
grounds assail factual findings. Therefore, in my view, at this stage,
the award cannot be presumed to be in contravention of the public
policy of India or suffering from a patent illegality as spelt out in
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Section 34 of the Act, or any other illegalities which would render the
award per se illegal or liable to be set aside.
9. Ms. Acharya has also contended that as per Section 36(3) of the
Act, a Court which is examining an award even under the limited
scope of Section 34 of the Act ought to apply the same parameters
which are applicable with respect to the stay of an ordinary money
decree under the Code of Civil Procedure, 1908 and the release of the
deposit made as a precondition for such stay. As per her, this would
imply that no order for release of the deposited amount can be passed
by this Court without requiring the applicant to furnish the requisite
security in exchange for the same. On a careful consideration of this
contention, I find myself unable to agree with her on this aspect for
two reasons. Firstly, the two statutes which are sought to be
compared, viz. the Code of Civil Procedure, 1908 and the Arbitration
and Conciliation Act, 1996 contain certain provisions which, in
practice, can be equated on certain basic principles, but at the same
time they are vastly different since the Act is a substantive and
procedural statute on the subject of arbitration and the scope of
interference under Section 34 thereof is a lot narrower. Secondly, the
language of the provision sought to be relied on, i.e., Section 36(3) of
the Act, does not make it binding for the Court to follow the precepts
governing the stay of a money decree, but only lays down a guiding
principle that the Court ought to pay due regard to it. In any event,
Section 36(3) of the Act only deals with the power of the Court to
grant a stay on an award directing money payment and does not deal
with the parameters for releasing the deposited amount in favour of
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the Award Holder. For this purpose, it may be useful to extract the
bare text of Section 36(3) of the Act which reads as under:
"Section 36 : Enforcement
xxx
(3) Upon filing of an application under sub-section (2) for stay of the
operation of the arbitral award, the Court may, subject to such conditions
as it may deem fit, grant stay of the operation of such award for reasons to
be recorded in writing:
Provided that the Court shall, while considering the application for grant
of stay in the case of an arbitral award for payment of money, have due
regard to the provisions for grant of stay of a money decree under the
provisions of the Code of Civil Procedure, 1908"
10. It is therefore evident that the parameters governing the release
of an amount which has been deposited before a court as a
precondition for stay of a money decree under the CPC need not be
strictly followed by this Court in all preconditional deposits for stay
made in petitions arising out of arbitration. Thus, the power of this
Court to stay an award and release the amounts obtained as a
precondition for such a stay as also its power to decide the conditions
thereof, still retains a discretionary characteristic which can be
exercised by this Court in a judicious manner which, in its opinion,
fits the facts and circumstances of the case.
11. On this aspect, the petitioner has placed reliance on four
judgments to oppose release of the deposited amounts in favour of the
applicant today which have been carefully considered by this Court. I
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find that the decision in Dewan Chand (supra) is not applicable here
since the claim raised in that case was for an amount which did not
form a part of the award which was under challenge, but was rather
for certain bank charges which the executing court had held it entitled
to. The decision in PSLR Chettiar (supra) is also not applicable to
this case since this Court is not sitting in appellate jurisdiction over a
money decree, rather it is dealing with an award and, as discussed
hereinabove, the parameters of conditional deposit in the case of a
money decree and arbitration need not necessarily be the same. I have
also considered the decisions in South Delhi Municipal Corporation
(supra) and Indian Oil Corp. Ltd. (supra) and find them inapplicable
as well. In fact, all these decisions have a common thread running
through them wherein the concerned Courts have directed release of
the preconditional amounts deposited before the court subject to
furnishing of requisite security, but neither are these decisions
applicable to the facts of the present case nor do they have a binding
effect of the kind which defeats the discretionary powers vested in
this Court under the Act to make appropriate directions in the facts of
each case.
12. On facts, apart from the admitted positions noted hereinabove,
the petitioner has sought to remind this Court of its decision in the
Section 9 petition which had been filed by the respondent. However, I
am of the opinion that while raising this contention, the petitioner has
failed to pay heed to the observations of this Court towards the end of
that very decision, the relevant extracts whereof read as follows:
"Before I conclude, even though I have not been persuaded by the
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arguments made against invocation of the bank guarantees, I am
constrained to note my dismay at the gridlock prevailing between
the parties in the present case and its likely impact on the
completion of the project. On the one hand, the respondent/NHPC
wants the petitioner to continue with the project, but it does not
want to extend any further financial assistance or leniency at the
same time. On the other hand, the petitioner believes that it is
owed certain amounts from the respondent and, on account of its
financial constraints, has raised a demand for these amounts and
has also opposed encashment of the bank guarantees as it would
deepen its financial woes. Although it is not for this Court to
decide these issues, which are arbitrable at the instance of either
party, it cannot be ignored that a lot of the public exchequer has
been utilised in this project through the Respondent. Permitting
this gridlock to continue and aggravating it by encashing the bank
guarantees would only delay completion of the project at a time
when the nation is already reeling from the lethal outbreak of
COVID-19. Irrespective of the disputes between the parties,
greater regard ought to be given to the fact that ultimately it is the
general public which would benefit from this project and,
therefore, an endeavor should be made to provide them this
benefit at the earliest.
13. Thus, the fact remains that even while deciding against the
respondent in its Section 9 petition, for reasons which were strictly
based on the peculiar facts thereof and the prevailing position of law
relating to bank guarantees, this Court had noted that the respondent's
exacerbating financial troubles could not simply be brushed aside and
had to be considered in the light of the fact that it had completed
significant portions of the project by then and had invested enormous
sums in doing so. Being mindful of this, the Court had urged the
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parties to proceed in a manner which balances the respondent's
precarious financial position with the larger national interest which
lay in ensuring completion of the project. Thus, even at that time, the
Court had observed that it was crucial for the respondent to have
sufficient funds to ensure that it can finish the project. All of these
considerations have to be seen in the light of the fact that the entire
world is reeling under the devastating and compounding financial
consequences of the COVID-19 global pandemic. Therefore, when it
has been clear all along that (i) the respondent does not have adequate
funds to sustain work at the project site, (ii) any further shortage of
funds is likely to hamper the progress of the remaining work in a
timely and efficient manner and that (iii) the respondent holds an
award in its favour which is yet to be tested within the limited scope
of interference under Section 34 of the Act, I find merit in the grounds
raised and relief sought in this application.
14. In arriving upon this conclusion, due regard has been paid to
the fact that the respondent is admittedly a company of repute in the
infrastructure development sector, with over 90 years of experience in
carrying out work of this kind. It is also presently engaged in
executing 45 projects which are similar to the project in this case, and
by necessary implication also require equally enormous investments
in carrying out the work effectively. Ultimately, the primary
consideration of the Court is to ensure that the project work continues
and is completed soon. To that end, it appears important to
accommodate the company engaged in this endeavour which is
presently finding it difficult to sustain its employees. To let this
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situation aggravate any further would mean to indirectly cost us a
project of great national significance since it is serving the important
function of providing electricity to a remote and sensitive areas of the
nation. I am therefore, of the view that it will be in the interest of
justice to release the amount deposited by the petitioner before this
Court, in favour of the respondent, without requiring the respondent to
furnish any security.
15. At the same time, the petitioner's apprehension that the
recovery of any amount released to the respondent at this stage may
become impossible owing to the respondent's precarious condition, is
justified. Therefore, for this reason, it is deemed appropriate to direct
the release to be subject to an affidavit ̉ filed by the respondent
undertaking to restitute the released amount with interest @ 7 % per
annum in case the captioned petition were to succeed. The respondent
is directed to file the affidavit within three days from today.
16. In these circumstances, the application is allowed.
17. At this stage, learned senior counsel for the applicant submits
that on account of the restricted functioning of this Court's registry
and the possible health risks associated with a physical visit to collect
the amount as directed to be released hereinabove, this Court may
consider directing the Registry to release the amount directly in its
bank account. The respondent's apprehensions cannot be said to be
unfounded and, therefore, the prayer for digitally remitting the
amount to the respondent's account deserves to be accepted.
18. It is, accordingly, directed that upon receiving the affidavit of
undertaking from the respondent, the Registry shall release the
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awarded amount, as deposited by the petitioner along with interest
accrued thereon, in favour of the respondent by digitally remitting the
same in the bank account of the respondent bearing the following
particulars:-
Account Details: Hindustan Construction Co. Ltd.
Bank ICICI Bank Ltd
Address CIBD Mumbai Branch
Account No. 039305005472
RTGS/ IFS Code ICIC0000393
19. It is made clear that the direction for release of the deposited
amount in favour of the applicant/respondent shall be subject to the
final outcome of the captioned Section 34 petition and is being passed
in the peculiar facts and circumstances of this case.
20. The application is disposed of in the aforesaid terms.
O.M.P(COMM) 484/2020
21. At request, list on 15.04.2021.
REKHA PALLI, J.
DECEMBER 04, 2020
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By:MANJU BHATT
Signing Date:05.12.2020
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