Delhi High Court
Hiedelberg Cement India Ltd. vs The Indure Pvt.Ltd on 29 January, 2020
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on: 30.09.2019
Pronounced on: 29 .01.2020
+ O.M.P. (COMM) 413/2019
HIEDELBERG CEMENT INDIA LTD. ..... Petitioner
Through: Mr. Dhruv Mehta, Senior
Advocate with Mr. Ajay Goyal,
Mr. Bikash Mohanty, Mr. Umesh
Agarwal, Mr. A. Animesh Thakur,
Mr. Krishnendu Datta, Advocates
versus
THE INDURE PVT.LTD ..... Respondent
Through: Mr. Sandeep Sethi, Senior
Advocate with Mr. Prashant
Mehta, Advocate
CORAM:
HON'BLE MS. JUSTICE JYOTI SINGH
JYOTI SINGH, J.
1. The present petition under Section 34 of the Arbitration &
Conciliation Act, 1996, („Act‟) lays a challenge to an Award dated
02.07.2019 passed by the Arbitral Tribunal, whereby the Tribunal has
dismissed all the claims of the petitioner and partly allowed the counter
claims of the respondent.
2. The facts as culled out in the petition are that to increase the
cement production capacity of its Narsingarh Cement Plant at Damoh,
Madhya Pradesh, petitioner obtained "Consent to Establish" (CTE) vide
letter dated 31.12.2009 and "Consent to Operate" (CTO) on 04.12.2012,
subject to establishing Waste Heat Recovery Power Plant (WHRPP), as
per Pollution Control Laws of the State of Madhya Pradesh. The
petitioner had to construct a WHRPP with a guaranteed power generation
plant so that the waste heat generated during cement production is not
directly released into the atmosphere and is used for electricity
generation. Petitioner invited competitive proposals for establishing the
WHRPP across the globe from six prospective suppliers which included
Dalian East, a Chinese entity. It was suggested by the tenderers that the
tender should be submitted in collaboration with an Indian Entity to take
a lead role and provide local assistance as well as expertise in installation,
erection and commissioning of WHRPP.
3. Dalian, vide its email dated 14.08.2012 communicated to the
petitioner that they were collaborating with an Indian Company i.e.
Indure Private Limited (respondent herein). The respondent vide its
email dated 21.08.2012 communicated to the petitioner that it would
submit its technical offer by 27.08.2012 and commercial offer by
03.09.2012, with its alliance partner Dalian. Respondent assured total
responsibility of supply, execution and performance of the Project. Its
single point responsibility for successful implementation of the Project
was reassured by a letter dated 24.08.2012.
4. Vide its email dated 19.12.2012, the petitioner requested the
respondent for a copy of the MOU executed between respondent and
Dalian along with Site Organization Chart. The requisite documents
were sent by the respondent vide email dated 20.12.2012.
5. Believing the representation of the respondent on its technological
competence and on account of its lowest bid, the petitioner issued a Letter
of Intent dated 25.01.2013 in favour of the respondent. The petitioner
released an advance amount of 20% of the value of the agreement
amounting to Rs. 15,06,00,000/- against an unconditional, irrevocable, on
demand, Advance Bank Guarantee of an equivalent amount as per Article
10 of the Agreement dated 20.02.2013.
6. Pursuant to the LOI, petitioner entered into three agreements with
the respondent viz Supply Contract dated 20.02.2013; Master Contract
dated 18.03.2013 and Service Contract dated 19.03.2013, on a Turnkey
basis, for installation of WHRPP.
7. Salient features of the Contracts entered into between the parties
are as follows:
Salient features of the Contracts entered between the Parties
Contracts entered between 1. Master Contract:
Applicant and Respondent 18.03.2013
2. Supply Contract:
20.02.2013
3. Service Contract:
19.03.2013
Effective date of Contract Date of Letter of Intent (LOI)
i.e. 25.01.2013
(Article 1 of Master
Contract)
Commencement of work From the date of LOI i.e.
25.01.2013
Price Basis (Article 9 of Fixed price contracts
Supply Contract)
Provisional Acceptance Stage when the plaint is
Certificate (PAC) (Article established and reliability and
1 of Master Contract) performance tests of the plant
have been completed.
Time of delivery of PAC Delivery of PAC is 18 months
Engineering & equipment Delivery of engineering &
equipment as per time schedule
(Article 5 of Supply i.e. Annexure -7.
Contract)
Consequences for delay in Allows the Applicant to
delivery in Delivery of terminate the contract in part or
PAC, engineering & full for delay in delivery of
equipment (Article 6 of engineering & equipment after
the Supply Contract) delay of 12 weeks of delay in
terms of Annexure-7 (time
schedule)
Project period i.e. Contract 18 months
period
(Article 4 of Master
Contract)
RISK PURCHASE & This clause supersedes all terms
SELLER‟S INDEMNITY of the contracts and allows the
AGAINST BREACH Applicant to claim loss or
(Article 27 of Supply damage suffered by the
Contract, Article 5 of the applicant due to breach of
Master Contract, and contract by the respondent. It
Article 62, Service also allows the applicant make
Contract) alternative arrangement to
complete the remaining works
under the contracts after
termination of the contract.
Terminations Clauses of Allows the applicant to
the three contracts (Article terminate the contract for
17 of Supply Contract; material breach of contract
Article 6, Master Contract and/or delay of 12 weeks in
and Article 65, Service terms of time schedule i.e.
Contract) Annexure-7 of the supply
contract.
8. As per the petitioner, from the beginning of the Project itself,
respondent was procrastinating and delaying the commencement of work.
Petitioner raised concerns regarding delay in submitting the date sheet for
the Turbine Generator through its email dated 08.04.2013 and on account
of ordering the equipments vide email dated 23.04.2013. It is the case of
the petitioner that several correspondences exchanged between the
respondent and Dalian reflect that their respective terms and conditions
were unsettled and this resulted in the delay. Requests were received
from Dalian by the petitioner to postpone the meetings for finalization of
the specifications of the equipments. It is averred in the petition that as a
matter of record, there were several issues and disputes interse between
the respondent and Dalian which were hampering the commencement of
the Project.
9. The petitioner further avers that on account of this delay, it was
clear that respondent had committed a material breach of the agreement
by not following the time schedule mentioned in Annexure „7‟ of the
Supply Contract.
10. Finally, Dalian East exited as a technology partner of the
respondent and the respondent approached the petitioner pursuant to
which a meeting was scheduled on 07.06.2013 for incorporating some
changes in the terms of the contract including the contract price, due to
inclusion of a new technology partner, Sinoma. Petitioner avers that the
selection of Sinoma was an independent action of the respondent having
no connection with the petitioner. Petitioner agreed to the entry of
Sinoma in the interest of expediting the already delayed Project so that
the installation work could commence at the earliest. It was agreed
between the parties that the points discussed and agreed in the meeting
were subject to approval of the Steering Committee of the petitioner and
other terms of the earlier three agreements would remain unaltered.
Subsequently, an Amended Agreement dated 26.06.2013 was forwarded
to the respondent to bring changes in the Master and the Supply Contract,
after approval of the Steering Committee, subject to it signing and
returning of a duplicate copy as a token of acceptance. Respondent did
not, however, accept and sign the Amendment Agreement and refused to
incorporate the proposed changes. Thus, the Contract between the parties
was never amended. Accordingly, the petitioner avers that the original
timelines as mentioned in Annexure 7 of the Supply Contract and other
terms remained unchanged and the respondent was in material breach of
the same. Respondent‟s own letter dated 05.09.2013 shows that issue of
further changes continued till 05.09.2013, with no actual ground work.
11. Petitioner was shocked to receive a communication dated
28.06.2013 from the respondent pointing out that it was facing financial
difficulties because of fall in the Dollar rate and calling upon the
petitioner to introduce a change in the Contract, by substituting the mode
of payment from Indian Rupees to US Dollars. It was clearly stated that
delivery of imported equipments would start only by the end of year
2013, which was a clear breach of the timelines. The petitioner rejected
this request of the respondent, but as a goodwill gesture, it was amenable
to increase the contract price by Rs. 3 Crores, on the request of the
respondent. This was followed by several letters by the respondent
requesting for currency change, but the petitioner was firm in its stand
and rejected the requests.
12. When the respondent failed to carry out its obligations under the
Contract, petitioner was constrained to issue a show cause notice dated
23.09.2013 to cure the defects in 21 days and it also listed several
breaches therein. In response, respondent denied the delay and rather
raised an allegation of corruption against the petitioner on the basis of an
alleged email from an employee of Dalian East to the respondent in its
reply dated 14.10.2013. The allegation related to illegal gratification
sought by an employee of the petitioner and was raised as an afterthought
after six months, as a ploy against invocation of the Bank Guarantee and
to wriggle out of the Contract. Respondent also intimated closure of the
contract.
13. Petitioner finally vide its letter dated 18.10.2013 confirmed the
termination of the contract and approached the concerned Bank for
encashment of the Bank Guarantee. Respondent thereupon approached
this Court in a suit for Declaration and Permanent Injunction. An ex-
parte ad interim injunction was granted to the respondent restraining the
petitioner from invoking the Bank Guarantee. Detailed reply was filed by
the petitioner and finally, vide order dated 23.05.2017, the stay order was
vacated and the petitioner was allowed to encash the Bank Guarantee,
which it did.
14. It is further averred that the Contract contained a term permitting
the petitioner risk-purchase upon failure of the respondent to confirm the
timelines. Since the respondent had done no work, the petitioner got the
work of WHRPP completed through various contractors, but the result
was that the Project which was to be originally completed by June 2014
was completed only in February 2016. It is averred by the petitioner that
a substantial loss was caused to the petitioner, more particularly, it
incurred additional costs in getting the work completed, amounting to Rs.
37,50,00,000/-.
15. The Contract provided for dispute resolutions through Arbitration.
Notice dated 19.05.2016 was sent by the petitioner invoking arbitration
pertaining to all disputes. Both parties appointed their respective
Arbitrators who in turn appointed the Presiding Arbitrator.
16. The petitioner being the claimant raised a claim for an amount of
Rs.37.50 Crores towards Claim no.1, for loss suffered by it on account of
getting the contract completed through third party. Claim no.2 was for
Rs.34.85 Crores towards damages and loss incurred by it due to delay of
nearly two years in completion of the project. It was claimed that due to
the delay, the petitioner had to consume electricity from the State Grid
leading to huge financial burden. The petitioner also claimed advance
amount of Rs.15,06,00,000/- plus interest at the rate of 12% from January
13, 2013 till actual date of realization on the ground that the said amount
was an advance forwarded by it in good faith and had been usurped by
the respondent.
17. After the Statement of Claim was filed by the petitioner before the
Tribunal, the respondent filed its Statement of Defence and Counter
Claims. Finally, after recording evidence and hearing the parties, the
Tribunal passed the Award on 02.07.2019. The Tribunal rejected all the
claims of the petitioner. Some of the counter claims of the respondent
were disallowed, while some were totally allowed or partly allowed. The
Tribunal also granted interest at the rate of 9% p.a. from the date of
termination of contract i.e. 18.10.2013 till the date of payment.
18. The first and foremost contention of learned Senior Advocate for
the petitioner is that the award is erroneous on facts and law and patently
illegal, vitiated by untenable interpretation of the terms of contract. It is
argued that the Tribunal has erroneously interpreted Article 6 of the
Supply Contract and arrived at a conclusion that the termination of the
Contract by the petitioner was pre-mature. It is argued that it was a grave
error on the part of the Tribunal in holding that the petitioner was not
entitled to terminate the contract, not only during the contract period but
also upto 12 weeks beyond the Provisional Acceptance Certificate
(hereinafter referred to as „PAC‟). The Tribunal has re-written the
contract between the parties merely because the wording of the Article 6
indicates that the buyer may terminate the contract "after a delay of 12
weeks after the PAC" i.e. the 18 months‟ contract period. The Tribunal
by holding that the contract could not be terminated till expiry of 21
months (18 months + 12 weeks) has virtually held that no contract can be
terminated during its currency. This according to the Senior Counsel is
against the fundamental principles of law of contracts that a contract can
be terminated during its currency, as once the contract period expires, the
contract in any case comes to an end by efflux of time.
19. It is further argued that Article 6 only restricts the petitioner from
imposing Liquidated Damages upto a period of 21 weeks in case the
supply of the engineering drawings and equipment, etc. is delayed.
20. It is also argued that the Tribunal failed to appreciate the fact that
the petitioner had only issued a show cause notice dated 23.09.2013 for
rectification of breaches of the contract committed by the respondent and
did not terminate the contract. In fact it was the respondent who through
its reply dated 14.10.13 chose to end the contract. The petitioner only
confirmed the closure of the contract by the respondent vide its letter
dated 18.10.2013, as it had no other option.
21. It is next contended that the Tribunal failed to appreciate that the
breaches set out in the Cure Notice dated 23.09.2013 were all material
breaches of the respondent‟s obligations under the Supply Contract and
thus, in any case the petitioner was entitled to terminate the contract
under Article 17 of the Contract by giving a 21 days‟ notice to the
respondent. It is submitted that the power under Article 17 cannot be
taken away from the petitioner for terminating the contract by an
erroneous interpretation of Article 6. It is also argued that the Tribunal
has merely confused the power under Article 6 and Articles 14 and 17 of
the Contract. Under Article 14, the petitioner has the power to levy
Liquidated Damages due to delay in Provisional Acceptance Certification
(PAC). The right of the petitioner under Article 6 and Article 14 are
completely independent and separate from the right to terminate under
Article 17 on account of „material breach‟, which is one of the grounds
under Article 17. It is thus argued that the interpretation given by the
Tribunal that the Contract could not be terminated till expiry of 12 weeks
from the PAC date would make Article 6 of the Master Contract and
Article 17 (1)(b) of the Supply Contract totally redundant and this could
never have been the intention of the parties.
22. The next contention of the petitioner is that the Tribunal while
examining the legal validity of the Termination Letter erroneously
concluded that the contract was illegally and prematurely terminated, in
as much as the Tribunal has itself observed in para 132 of the Award that
there is material on record to show that the respondent was slow in the
execution of the work as per milestones agreed between the parties.
23. It is contended that the Tribunal failed to appreciate that the
respondent in its own letter dated 14.10.2013 had stated that the Contract
was void ab initio having been induced by immoral and corrupt practices
on account of the allegation of demand of 1% commission as illegal
gratification by the officer of the petitioner. The Tribunal having rejected
the said allegations, ought to have concluded that the respondent
abandoned the project and the petitioner was entitled to terminate the
contract and claim damages and losses on account of breach by the
respondent.
24. It is argued that the Tribunal fell into a grave error by holding that
time was not of essence of the contract. The contract was a Turnkey /
EPC Contract for Commissioning of a WHRPP and was required to be
completed in a time bound manner. Further in Article 4 in Part B of the
Service Agreement dated 19.03.2013, it was agreed between the parties
that the time was of essence of the contract. The Tribunal erroneously
placed reliance on the judgment in the case of Hind Construction
Contractors vs. State of Maharashtra (1979) 2 SCC 70 without
appreciating that it does not lay down that if time ceases to be of essence
of the contract, termination cannot be resorted to by an innocent party.
All that the judgment holds is that in case time is not of essence, then the
innocent party may give a notice to the other party and terminate the
contract. In the present case, despite Cure notice, the respondent failed to
rectify the defects and was guilty of breaches. Reliance is placed on the
judgment in the case of Arosan Enterprises Ltd. vs. Union of India
(1999) 9 SCC 449, wherein three types of cases have been carved out
where time is termed to be the essence viz where the parties expressly
stipulate that the time must be complied with and two, where the
circumstances of the contract or the nature of subject matter indicates a
fixed date for completion of the contract. It is argued that the petitioner‟s
case falls in the two classifications and even assuming the time was not of
essence, then also the case would fall under the third category, where
though time is not originally of essence of the contract, but if one party is
guilty of undue delay then the other party can give a notice to perform the
contract within a reasonable time, depending on the nature of
transactions.
25. Learned Senior Counsel further argues that no Amendment to the
contract ever took place. The parties in the meeting held in Singapore on
07.06.2013 decided to consider the proposed suggestions, subject to
approval of the Steering Committee of the petitioner. Article 29 of the
Supply Agreement stipulated that no Amendment could be made without
it being in writing and duly executed by Authorised Representatives of
the parties. Though correspondences were exchanged between the parties
by giving proposals and counter proposals, but the parties could not agree
on the terms and hence no final decision on the Amendment was ever
taken. The Tribunal has completely ignored letter dated 05.09.2013
issued by the respondent where it had stated that it was still awaiting
petitioner‟s confirmation on the counter proposal by the respondent for
the proposed amendment in the Agreement. It is also contended by
learned Senior Counsel that the Tribunal has failed to make a distinction
between the induction of a new technology partner, Sinoma-EC and the
proposed Amendments discussed in the meeting dated 07.06.2013.
Substitution of a technology partner is not a matter covered under the
contract, as this was an arrangement between the respondent and its
technology partner. The petitioner had no privity with either the new or
the old technology partner and thus this could not form the basis of any
Amendment proposed in the meeting dated 07.06.2013. Learned Senior
Counsel vehemently disputes any role of the petitioner in selection of the
technology partner and submits that this is a patently illegal finding by
the Tribunal.
26. It is argued that under Article 3.1 read with Article 3.2 of the
Master Agreement, the respondent had acknowledged its sole
responsibility for execution of the entire project, including the
performance of its sub-contractors. In terms of the agreement, the
petitioner had made a payment of Rs.15.06 Crores to the respondent at
the time of signing of the LOI, against Advance Bank Guarantee. No
payment had been made to any of the technology partner of the
respondent and the payment of Rs.8.9 Crores was made by the respondent
to Sinoma.
27. Per contra, learned Senior Counsel for the respondent contends that
the Arbitral Tribunal has adjudicated upon the disputes between the
parties after considering at length, the pleadings, documents and evidence
and after having heard the parties who made extensive arguments and
also filed written submissions. The Tribunal is the sole Judge of quality
and quantity of the evidence, including interpretation of the Agreements
of the contract and appreciation of the documents. It is not open to this
Court under Section 34 of the Act to interfere with the findings of fact or
interpretation of the terms of the contract. Re-appreciation of evidence
led before the Tribunal is also not the domain of this Court in the present
proceedings. Reliance is placed on the judgements in the case of
Sudarshan Trading Company vs. Government of Kerela & Anr. (1989)
1 SCR 665, Hindustan Construction Company Limited vs. State of
Jammu and Kashmir AIR 1992 SC 2192, Associate Builders vs. Delhi
Development Authority (2015) 3 SCC 49, Eastern Coalfields Limited &
Ors. vs. Rungta Projects Limited & Ors. 2018 (6) ARBLR 370 (Cal).
28. The Tribunal after a detailed analysis of the documents and
evidence has come to a finding that the petitioner had substantial role in
selection of the technology partner. Dalian was selected by the petitioner
and was introduced to the respondent as its business partner for executing
the project in India. Upon Dalian exiting, the parties mutually agreed
upon inducting Sinoma as a technology partner, in a meeting held on
07.06.2013. The contract with Sinoma was executed pursuant to the said
meeting and the Amendment of the contract was approved by the
Steering Committee of the petitioner. The Tribunal has also come to a
finding that the respondent had never taken a stand that it would not abide
by the terms and conditions agreed in the meeting dated 07.06.2013 and
issue of foreign exchange variation did not effect the performance of the
respondent. The Tribunal has categorically concluded that respondent
was not in breach of the terms of the contract and time was not of
essence. There is a finding that termination was premature and contrary
to Articles 6 and 17 of the Supply Agreement and was thus, illegal. None
of the findings can be said to be perverse so as to call for interference
under Section 34 of the Act.
29. It is argued by the Senior Counsel that the Tribunal has considered
the impact of Article 17 of the Supply Agreement and has found as a
matter of fact that there was no material breach on the part of the
respondent and therefore, the termination was illegal. The argument is
that interpretation given to Article 6 of Supply Agreement is not
erroneous, without prejudice of course to the fundamental argument that
interpretation of an Article of a contract is in the domain of the Tribunal.
It is contended that the Tribunal in para 103 of the Award has clearly
considered Article 6 of Supply Agreement and held that the plain
language makes it clear that the contract could not be terminated till the
expiry of 12 weeks beyond the PAC. This interpretation cannot be said to
be such that no reasonable person would give such an interpretation, apart
from the fact that the language itself is plain and clear and needed no
interpretation. In any case, the petitioner cannot even agitate these issues,
as their adjudication was in the domain of the Tribunal.
30. It is contended that the petitioner is wrong in arguing that the
Tribunal has given contrary findings in para 132 and 105-107. In para
105-107, the Tribunal considered the evidence and held that there was no
material breach by the respondent. Going slow in a project on account of
several hurdles faced by the respondent, did not cause a material breach
as per the terms of the contract and law and moreover, when time was not
of essence, there could not have been a breach in the respondent being
slow in its work. Observations in all the paragraphs are in harmony with
each other.
31. It is argued by learned senior counsel for the respondent that the
Tribunal has rightly rejected the claims of the petitioner. Once the
Tribunal concluded that the termination was illegal as there was no
material breach by the respondent, the rejection of the submission in
respect of the 1% commission as illegal gratification would have no
impact.
32. In so far as the grant of interest is concerned, it is a settled law that
grant of interest is in the discretion of the Arbitrator. The Tribunal has in
its discretion on analyzing the conduct of the parties and quality and
quantity of the evidence awarded the interest and this Court cannot
interfere in the award of interest. Reliance is placed on Hindustan
Construction Company Limited (supra).
33. I have heard the learned counsels for the parties and examined their
rival contentions.
34. A bare perusal of the Arbitral Award shows that the Tribunal
examined the issue whether parties intended time to be of essence of the
contract, by analyzing the terms of the contract and the conduct of the
parties. It specifically analyzed Articles 3.8 and 3.12 of the Master
Agreement for the said purpose. The said Articles are as under :-
"3.8 The various activities under each Contract must be
concluded in an integrated fashion and be coordinated
and managed by the EPC Contractor with the objective of
completing the project no later than the Long Stop Date.
3.12 As the leader of the Co-Ordinators with overall
responsibility for the project, the EPC Contractor shall be
fully authorized to take all actions and receive all
instructions, notices and communications under the
Contract and in general deal in all matters related thereto
for and on behalf of all the Co-Ordinators, including but
not limited to the following:
(f) taking all necessary action to ensure timely
achievement of the Functional Guarantee values for all
the equipments and start-up of the plant."
35. Reliance was also placed on Article 4 of the Master Agreement as
per which the parties agreed that the project would be completed and
provisional acceptance of the plant would be not later than 18 months
from the effective date of the contract. Having examined the same, the
Tribunal came to a finding that the stipulation of time being of essence of
the contract stood diluted. Reliance was also placed on the judgment in
Hind Construction Contractors (supra) to hold that even where time is
provided to be of essence of the contract, the other provisions of the
contract like Liquidated Damages, etc. would override this stipulation.
The Tribunal also examined the subsequent conduct of the parties,
specially the terms and conditions of the meeting held on 07.06.2013. In
the meeting, it was recorded that the parties had agreed to revise the PAC
date and petitioner had also agreed for changes in the technical
specification requested by Sinoma. The fact that the respondent had to
execute a fresh MOU with Sinoma was known to the petitioner and the
deviations suggested by Sinoma were agreed to by the petitioner. The
Tribunal observed that once the petitioner knew that there was a third-
party involvement which was crucial to the completion of the project, it
would cause some delay and thus time being of essence, lost its
relevancy. Relevant paras of the Award are as under :-
"95. The Tribunal has referred to the above mentioned
provisions contained in the various Contracts entered into
between the parties so to examine whether the parties
through these provisions intended "time as the essence of
the Contract. In the services agreement as already
indicated the contact stipulates "time is the essence of the
contract" but when we go through the other provisions
quoted above, what emerges is that the stipulation that
time is the essence of the contract stood considerably
diluted. Law is settled that even where the parties have
expressly provided that time is the essence of the contract,
such a stipulation will have to be read along with other
provisions of the Contract and such other provisions may,
on construction of the Contract, exclude that the
completion of work by a particular date might not be so
fundamental as to terminate the Contract. Provisions like
imposition of liquidated damages, extension of time, etc.
would override the stipulation that the time is the essence
of the contract. In this connection reference may be made
to few judgments of the Supreme Court of which the often
quoted judgments are Hind Construction Contractors v.
State of Maharashtra (1979 (2) SCC 70) and Arosan
Enterprises Ltd. v/s UOI and another (1999) 9 SCC 44.
96. Tribunal relying on the principles laid down by the
Supreme Court in the above judgments are clearly of the
opinion, after examining the various contractual
provisions, that time was never intended to be the essence
of the contract in this case.
97. Tribunal also would like to examine the subsequent
conduct of the parties as well, especially in the light of the
various terms and conditions agreed between the parties
in the meeting held on 7.6.2013. Learned counsel
appearing for the Respondent referred to few
communications to establish the conduct of parties that
the time was not the essence of the contract. Tribunal is of
the view, in the facts and circumstances of the case it is
unnecessary to go through all these communications
exchanged between the parties prior to 7.6.2013 because
the main controversy centres round the facts which
emerge subsequent to the crucial meeting held on
7.6.2013. Meeting held on 7.6.2013 recorded that the
parties had agreed to revise the PAC date as September
25.1.2014 (20 months from the LOI. Further, the
Claimant had also agreed for certain changes in the
technical specifications requested by the new technology
partner of the Respondent. Letter dated 1. 7.2013 of the
Claimant clearly recognizes the fact that there was
inordinate delay in the Project due to the reason that the
Respondent could not keep its earlier technology partner
on Board. Exit of the earlier technology partner Dalion,
who was selected by the Claimant itself, was also brought
to the notice of the Claimant Following the exit of Dalion
the Respondent, for completing the Project, had to get the
assistance of a new technology partner Sinoma - EC,
whose induction was also approved by the Claimant. The
fact that Respondent had to execute a fresh MOU with
Sinoma EC with changed technical specifications was
known to the Claimant and a copy of the MOU executed
as well as the Supply Contract dated 16.6.2013 entered
into between the Respondent and Sinoma EC were also
called for by the Claimant. Even the Claimant as evident
from the minutes of the meeting held on 7.6.2013 agreed
to incorporate clarifications/deviations suggested by
Sinoma.
98. The Tribunal has indicated these facts also to
demonstrate the involvement of a third party in the
completion of the Project. When a third party's
involvement is crucial andinevitable in the completion of
the Project and if there was any delay on the part ofthe
third party, then also the stipulation that the time is the
essence of the contract between the Claimant and the
Respondent, loses its relevancy. The fact that there was
delay on the part of the new technology partner also
cannot be ignored. Looking into all those aspects
Tribunal is of the considered view that time was never
intended to be the essence of the contract."
36. The Tribunal also examined the issue of the alleged novation of the
contract. The minutes of the meeting held on 07.06.2013 had
incorporated certain new terms and conditions. The Tribunal then
examined the question as to whether the petitioner had acted on the new
terms. The Tribunal observed that the respondent had sent a letter dated
06.07.2013 acknowledging the Amendments sent by the petitioner. The
respondent reiterated its commitment to execute the project and visited
the project site with Sinoma. Following the agreement reached between
the parties, respondent on 08.08.2013 released Rs.8.9 Crores to Sinoma.
The petitioner by its email dated 14.08.2013 accepted receipt of several
engineering documents from the respondent. Thus, a finding was arrived
at by the Tribunal that the petitioner had acted upon the terms and
conditions agreed to in the meeting held on 07.06.2013. Relevant paras
of the Award read as under :
"99. The Tribunal in the light of the above recorded
finding has to examine the further issues. The Tribunal
will now consider whether the terms and conditions
recorded in the minutes of meeting held on 7.6.2013 came
into effect, and whether parties have acted upon those
terms and conditions. The terms and conditions discussed
and agreed between the parties in the meeting held on
7.6.203 at Singapore were already noted in the earlier
part of this award. Let us first examine as to whether the
Claimant had acted upon the terms and conditions of this
Agreement dated 7/6/2013 followed by the Amendment -1.
As already noticed by the Tribunal, the Respondent sent a
letter dated 6.7.2013 acknowledging the Amendment- I
sent by the Claimant and the Claimant in its letter dated
6.7.2013 appreciated the pro-active approach of the
Respondent to meet all the committed timelines and to
complete the Project as per the terms agreed in the
Contract. The Respondent in its letter dated 20.7.2013
reiterated its commitment to execute the Project.
Respondent along with Engineers of Sinoma- EC the new
Technology Partner had visited the Project site and held
several meetings with the Project team of the Claimant on
various occasions. Following the agreement reached
between the parties the Respondent on 8.8.2013 released
an amount of Rs.8.9 Crores to Sinoma - EC. The Claimant
in fact in its email dated 14.8.2013 recognised the fact
that it had received the big lot of engineering documents
from the Respondent and those documents had been taken
for review one by one by the Claimant and its consultant.
Even though the Respondent had failed to forward the
duplicate copy of the Amendment- I, as the token of its
acceptance, the fact remains that it had acted upon the
terms and conditions agreed upon by the parties and
recorded in the minutes of the meeting held on 7.6.2013."
37. The Tribunal has also dealt with the issue of the stand of the
respondent on the change of the foreign currency. It has come to a
conclusion that though the respondent was requesting for change of
currency due to currency fluctuations but this was only highlighting its
grievances and it never took a stand that it would not comply with the
obligations under the contract. Relevant para is as under :
"100. Tribunal finds after going through the various
letters, e-m ails, etc. written by the Respondent after the
meeting held on 7.6.2013 that it was facing a very crucial
problem when it deals with a Technical Partner because
the equipments were to be imported to the country.
However, the Respondent reiterated that it was committed
to complete the Project as per the terms and conditions
agreed upon between the parties on 7.6.2013. In fact it is
seen recognized by the Claimant on various occasions.
The crucial problem that the Respondent was facing
pertains to "currency fluctuation". Respondent stated that
it was incurring heavy losses since it had to enter into a
fresh Contract with the new technology partner situated
abroad in the place of Dalian - East. The stand of the
Claimant was that this Respondent should have
anticipated when it had entered into various agreements
in February and March 2013. The Respondent's stand is
that the situation one gets at that time cannot be
compared with the situation which one faces after the
acceptance of a new technology partner after the meeting
held on 7.6.2013. Facts would indicate Respondent was
only highlighting its grievances and on that ground, it
cannot be concluded, that the Respondent was not
committed to complete the Project or not complying with
its obligations under the Contracts."
38. The Tribunal has elaborately dealt with the termination of the
contract as well as the Articles 6, 14, and 17 of the Supply Agreement in
this regard. Interpreting Article 6 of the Supply Agreement, the Tribunal
held that the petitioner had the power to terminate the contract only after
12 weeks of delay after PAC. The original contractual date of completion
was 25.07.2014 but with Liquidated Damages it was upto 25.09.2014.
For genuine reasons, the contract could be terminated after 17.10.2014,
but after the meeting of 07.06.2013 the date of completion stood extended
upto 25.09.2014 without Liquidated Damages and upto 25.11.2014, with
Liquidated Damages. The date would advance upto 18.12.2014, if 12
weeks from the PAC date are added. Since this was the time schedule
agreed upon, premature termination of the contract on 18.10.2013 could
not be sustained.
39. The Tribunal has also extensively considered Article 17 of the
Supply Agreement and held that the respondent had neither abandoned
the contract nor was guilty of any material breach. A finding has been
arrived at that the respondent had not selected Dalian and it was the
petitioner who had selected the technology partner. Delay due to change
over from Dalian to Sinoma was never considered as a delay by either of
the parties. In fact, the petitioner approved the induction of Sinoma on
13.06.2013 and only thereafter the respondent could have entered into a
contract with Sinoma. Technical assistance of Sinoma was very crucial
for the balance work and hence respondent had not committed any
material breach so as to call for termination of the contract. The Tribunal
thus came to a conclusion that the contract was illegally and prematurely
terminated, though the respondent had repeatedly informed the petitioner
of its readiness and willingness to complete the work under the contract.
Relevant paras of the impugned Award are as under:-
"101. The Claimant without paying heed to what has been
indicated to it by the Respondent, issued cure notice dated
23.9.2013, alleging that there was complete failure on the
part of the Respondent to fulfil its obligations under the
Contract dated 20.2.2013 and hence there had been an
automatic breach on its part of the obligations under the
Contract dated 19.3.2013. The main breaches highlighted
in the cure notice were with regard to the failure to
provide the mechanical designs drawing, civil
construction drawings, electrical and automation design
drawings and the delay in ordering major equipments,
delivery of steel, delivery of equipments, installation and
erection works. It was stated therein that the notice of
termination was issued in terms of Article 6 of the Master
Agreement dated 18.3.2013, Article17 of Supply
agreement and Clause 65 of the Contract Agreement
dated 19.3.2013 for civil and structural construction. The
Respondent was called upon to cure the defects within 21
days. The Respondent in its reply dated 14.10.2013
highlighted the fact that the nature of work is such that
the involvement of Technology Partner Sinoma was of
crucial in the matter of mechanical design drawing , civil
construction drawing, etc. Major equipments were to be
supplied by Sinoma -East and that it had already paid an
amount of Rs.8.9 Crores to Sinoma on 8.8.2013 for
executing the Project well in time as agreed upon between
the parties. The Respondent had also highlighted the fact
that there was no factual foundation on the allegation of
delay and the delay was not that crucial or significant so
as to terminate the Contract, especially when time was not
the essence of the contract.
102. The Claimant however vide its communication dated
18.10.2013 terminated the Contract alleging material
breaches on the part of the Respondent and not curing
those breaches within the time granted in the cure notice.
Before examining the sustainability or otherwise of the
grounds stated for terminating the Contract, the Tribunal
has to examine whether by terminating the Contract the
Claimant had violated the time schedule agreed upon by
the parties in the meeting held on 7.6.2013.
103. Clause 6 empowers the Claimant to terminate the
Contract only after 12 weeks of delay after PAC. The
original contractual date of completion was 25.7.2014
without the amendment/extension of time and with
liquidated damages upto 25.9.2014. Certainly, for
genuine reasons, the Contract could be terminated after
17.10.2014 but with the extension of time agreed upon by
the parties in the meeting held on 7.6.2013 read with
email dated 13.6.2013 by which the date of completion
stood extended upto 25.9.2014 without liquidated
damages and upto 25.11.2014 with liquidated damages.
The date could even advance upto 18.12.2014 if we
reckon 12 weeks from the PAC date of 25.9.2014. That
being the time schedule agreed upon between the parties,
and time was not the essence of the contract, the Tribunal
is of the view that the premature termination of the
Contract on 18.10.2013 cannot be sustained on facts as
well as on law.
104. The cure notice refer to three letters dated 3.7.2012,
12.7.2012 and 18.7.2013, wherein according to the
Claimant it had indicated the breaches committed by the
Respondent. It was stated therein that it was the
Respondent who had selected Dalion which is factually
incorrect. In fact it was the Claimant, who had selected
Dalion East. Delay due to change over from Dalion to
Sinoma was never considered as a delay by both the
parties. In fact, the Claimant approved Sinoma only on
13.6.2013 and only after approval, the Respondent can
enter into Contract with Sinoma. In fact, in the letter
dated 12.7.2013, the Claimant had appreciated the
proactive approach of the Respondent. The letter dated
18.7.2013 only reminds the Respondent not to delay the
Project.
105. The cure notice also refers to Article 6 of the Master
Agreement, Article 17 of the Supply Agreement and clause
65 of the Contract Agreement. The Claimant has no case
that the Respondent has abandoned or failed to comply
with any valid instructions The Claimant placed reliance
on Articles 2.2 and 2.3 of the Master Agreement and
submitted, if there is any ambiguity or inconsistency
between the terms of the agreements, the terms of the
Master Agreement would prevail and the Claimant can at
any time terminate the Contract, once there is a material
breach of the terms of any agreement. The expression
material breach as such is not defined in the Contract. In
commercial parlance, material breach is a breach, a
failure of which strikes at the root of the Contract, that it
renders the Contract "irrevocably broken" and defeats the
very purpose of making the Contract. Material breach is
committed only where a party breached a condition or an
innominate term, the consequence of which are so serious
that the breach justifies the termination. In the instant
case both the Claimant and Respondent recognize the role
of Sinoma-EC situated in China. The real work of
Respondent would start, once Sinoma fulfills its part
being a Technical Partner. Technical assistance of
Sinoma was very crucial for the rest of the work to be
performed by the Respondent. BTG Boiler and other
equipments were yet to be supplied by Sinoma even
though Contract was already entered into by the
Respondent and Sinoma and advance was already paid.
In such a factual Scenario the Tribunal is of the view that
the Respondent has not committed any material breach of
the Contract, so as to terminate the Contract especially
when time was not the essence of the contract.
106. The Tribunal once finds that the termination order
passed by the Claimant cannot be sustained, and the
Claimant is in breach for not following the time schedule
and there is no material breach of the Contract committed
by the Respondent, needless to say, none of the claims
raised by the Claimant calls for adjudication. The
Tribunal therefore need only examine the Counter Claims
raised by the Respondent.
107. The Tribunal is of the view that the Contract was
illegally terminated prematurely though the Respondent
had repeatedly informed the Claimant of its readiness and
willingness to complete the Contract within the stipulated
time. Due to the induction of the new technology partner
Sinoma- EC a fresh Contract had to be entered into with
the approval of the Claimant which included new terms
and conditions. Due to the exit of Dalion and entry of
Sinoma - EC, the terms and conditions changed so also
the situations like fluctuation in the rate of US dollars.
The Respondent was making a fervent request to the
Claimant to effect payment in dollars directly to Sinoma -
EC subject to the condition that in case value of rupee
increases, benefit would be given to the Claimant The
Claimant without paying any attention to those requests
whether it is genuine or not, terminated the Contract
prematurely causing heavy losses to the Respondent
which are reflected in the Counter Claims raised."
40. Learned senior counsel for the respondent in the opinion of this
Court is right in its contention that the petitioner is seeking to assail pure
findings of fact arrived at by the Tribunal, based on documents and
evidence on record and cannot be interfered with by this Court under
Section 34 of the Act. Interpretation of the Articles of contract is again
the domain of the Arbitrator. It has been held by the Supreme Court in
Associate Builders (supra) as under:-
"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)-
(2)***
(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."
41. Since the interpretation of the Articles of the agreement is in the
domain of the Tribunal, the Tribunal having interpreted the same in a
particular manner cannot be interfered with. The interpretation given is
neither unreasonable nor perverse. Article 6 of the Supply Agreement
reads as under :
"Article 6 :Consequence of Delay in Delivery
In the event of any delay in supply of the Engineering and
Equipment (inclusive of tools & tackles required, two
years Operation & Maintenance spares, commissioning
spares, consumable, First fill, lube oil, other lubricants,
flushing oil, chemicals etc.) beyond the stipulated
shipment delivery schedule and corresponding delay in
"PAC" due to reasons solely attributable to the Seller.
Liquidated damages may be imposed as mentioned under
Article 14. The aforesaid liquidated damages shall be
recovered from the payments due to the Seller against
delivery of machinery I equipment or otherwise at the
options available to Buyer. Recovery of Liquidated
Damages shall not absolve the Seller from his obligations
under the Contract.
The Buyer may by written notice to the Seller terminate
this whole or any part of the Contract after (12) weeks of
delay, due to factors I reasons attributable to the Seller.
Deduction from Contract Price: All costs, damages I
losses or expenses which the Buyer may have paid,
suffered or incurred for reasons solely attributable to the
Seller, may be deducted by the Buyer from any money due
or become due by the Buyer to the Seller under the
contract or may be recovered by suit or otherwise from
the Seller as an arrear in terms of the provisions under
this contract."
A bare perusal of the aforesaid provision indicates that the parties
had clearly agreed that in the event of any delay in supply of Engineering
and Equipment beyond the stipulated delivery schedule and
corresponding delay in PAC due to reasons solely attributable to the
seller, Liquidated Damages may be imposed under Article 14. The
Article further stipulates that the Buyer may by written notice to the
Seller terminate the contract by 12 weeks of delay, due to factors
attributable to the Seller. It is thus clear that the right of the Buyer to
terminate under Article 6 could arise only after the passage of 12 weeks
from the PAC and this is exactly the interpretation given by the Tribunal.
It can hardly be argued that no reasonable person would give the said
interpretation. In my view, the interpretation of the Articles and the
findings of fact rendered by the Tribunal is not only a possible, but a
plausible view.
42. Law of Judicial Review and Interference in proceedings under
Section 34 of the Act is no more res integra. In Associate Builders
(supra), the Supreme Court has held has under:-
"19. When it came to construing the expression "the
public policy of India" contained in Section 34(2)(b)(ii) of
the Arbitration Act, 1996, this Court in ONGC Ltd. v. Saw
Pipes Ltd. [(2003) 5 SCC 705 : AIR 2003 SC 2629] held:
(SCC pp. 727-28 & 744-45, paras 31 & 74)
"31. Therefore, in our view, the phrase „public policy of
India‟ used in Section 34 in context is required to be
given a wider meaning. It can be stated that the concept
of public policy connotes some matter which concerns
public good and the public interest. What is for public
good or in public interest or what would be injurious or
harmful to the public good or public interest has varied
from time to time. However, the award which is, on the
face of it, patently in violation of statutory provisions
cannot be said to be in public interest. Such
award/judgment/decision is likely to adversely affect the
administration of justice. Hence, in our view in addition
to narrower meaning given to the term „public policy‟
in Renusagar case [Renusagar Power Co. Ltd. v.
General Electric Co., 1994 Supp (1) SCC 644] it is
required to be held that the award could be set aside if it
is patently illegal. The result would be--award could be
set aside if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality, or
(d) in addition, if it is patently illegal.
Illegality must go to the root of the matter and if the
illegality is of trivial nature it cannot be held that award
is against the public policy. Award could also be set
aside if it is so unfair and unreasonable that it shocks the
conscience of the court. Such award is opposed to public
policy and is required to be adjudged void.
***
74. In the result, it is held that:
(A)(1) The court can set aside the arbitral award under
Section 34(2) of the Act if the party making the
application furnishes proof that:
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law
to which the parties have subjected it or, failing any
indication thereon, under the law for the time being in
force; or
(iii) the party making the application was not given
proper notice of the appointment of an arbitrator or of
the arbitral proceedings or was otherwise unable to
present his case; or
(iv) the arbitral award deals with a dispute not
contemplated by or not falling within the terms of the
submission to arbitration, or it contains decisions on
matters beyond the scope of the submission to
arbitration.
(2) The court may set aside the award:
(i)(a) if the composition of the Arbitral Tribunal was not
in accordance with the agreement of the parties,
(b) failing such agreement, the composition of the
Arbitral Tribunal was not in accordance with Part I of
the Act,
(ii) if the arbitral procedure was not in accordance with:
(a) the agreement of the parties, or
(b) failing such agreement, the arbitral procedure was
not in accordance with Part I of the Act.
However, exception for setting aside the award on the
ground of composition of Arbitral Tribunal or illegality
of arbitral procedure is that the agreement should not be
in conflict with the provisions of Part I of the Act from
which parties cannot derogate.
(c) If the award passed by the Arbitral Tribunal is in
contravention of the provisions of the Act or any other
substantive law governing the parties or is against the
terms of the contract.
(3) The award could be set aside if it is against the public
policy of India, that is to say, if it is contrary to:
(a) fundamental policy of Indian law; or
(b) the interest of India; or
(c) justice or morality; or
(d) if it is patently illegal.
(4) It could be challenged:
(a) as provided under Section 13(5); and
(b) Section 16(6) of the Act.
(B)(1) The impugned award requires to be set aside
mainly on the grounds:
(i) there is specific stipulation in the agreement that the
time and date of delivery of the goods was of the essence
of the contract;
(ii) in case of failure to deliver the goods within the
period fixed for such delivery in the schedule, ONGC was
entitled to recover from the contractor liquidated
damages as agreed;
(iii) it was also explicitly understood that the agreed
liquidated damages were genuine pre-estimate of
damages;
(iv) on the request of the respondent to extend the time-
limit for supply of goods, ONGC informed specifically
that time was extended but stipulated liquidated damages
as agreed would be recovered;
(v) liquidated damages for delay in supply of goods were
to be recovered by paying authorities from the bills for
payment of cost of material supplied by the contractor;
(vi) there is nothing on record to suggest that stipulation
for recovering liquidated damages was by way of penalty
or that the said sum was in any way unreasonable;
(vii) in certain contracts, it is impossible to assess the
damages or prove the same. Such situation is taken care
of by Sections 73 and 74 of the Contract Act and in the
present case by specific terms of the contract."
43. In McDermott International Inc. vs. Burn Standard Co. Ltd. &
Ors. (2006) 11 SCC 181, the Supreme Court has held as under:-
"52. 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, 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 arbitration as they prefer the expediency and
finality offered by it."
44. In the very recent judgments, the Supreme Court has once again
reiterated the law related to the examination by a Court of an Award
under Section 34 of the Act. In Ssangyong Engineering & Construction
Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC
OnLine SC 677, the Supreme Court has held as under:-
"35. What is clear, therefore, is that the expression
"public policy of India", whether contained in Section 34
or in Section 48, would now mean the "fundamental
policy of Indian law" as explained in paragraphs 18 and
27 of Associate Builders (supra), i.e., the fundamental
policy of Indian law would be relegated to the
"Renusagar" understanding of this expression. This
would necessarily mean that the Western Geco (supra)
expansion has been done away with. In short, Western
Geco (supra), as explained in paragraphs 28 and 29
of Associate Builders (supra), would no longer obtain, as
under the guise of interfering with an award on the
ground that the arbitrator has not adopted a judicial
approach, the Court's intervention would be on the merits
of the award, which cannot be permitted post amendment.
However, insofar as principles of natural justice are
concerned, as contained in Sections 18 and 34(2)(a)(iii)
of the 1996 Act, these continue to be grounds of challenge
of an award, as is contained in paragraph 30 of Associate
Builders (supra).
36. It is important to notice that the ground for
interference insofar as it concerns "interest of India" has
since been deleted, and therefore, no longer obtains.
Equally, the ground for interference on the basis that the
award is in conflict with justice or morality is now to be
understood as a conflict with the "most basic notions of
morality or justice". This again would be in line with
paragraphs 36 to 39 of Associate Builders (supra), as it is
only such arbitral awards that shock the conscience of the
court that can be set aside on this ground.
37. Thus, it is clear that public policy of India is now
constricted to mean firstly, that a domestic award is
contrary to the fundamental policy of Indian law, as
understood in paragraphs 18 and 27 of Associate
Builders (supra), or secondly, that such award is against
basic notions of justice or morality as understood in
paragraphs 36 to 39 of Associate Builders (supra).
Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to
Section 48(2)(b)(ii) was added by the Amendment Act only
so that Western Geco (supra), as understood in Associate
Builders (supra), and paragraphs 28 and 29 in particular,
is now done away with.
38. Insofar as domestic awards made in India are
concerned, an additional ground is now available under
sub-section (2A), added by the Amendment Act, 2015, to
Section 34. Here, there must be patent illegality
appearing on the face of the award, which refers to such
illegality as goes to the root of the matter but which does
not amount to mere erroneous application of the law. In
short, what is not subsumed within "the fundamental
policy of Indian law", namely, the contravention of a
statute not linked to public policy or public interest,
cannot be brought in by the backdoor when it comes to
setting aside an award on the ground of patent illegality.
39. Secondly, it is also made clear that re-appreciation of
evidence, which is what an appellate court is permitted to
do, cannot be permitted under the ground of patent
illegality appearing on the face of the award.
40. To elucidate, paragraph 42.1 of Associate
Builders (supra), namely, a mere contravention of the
substantive law of India, by itself, is no longer a ground
available to set aside an arbitral award. Paragraph 42.2
of Associate Builders (supra), however, would remain, for
if an arbitrator gives no reasons for an award and
contravenes Section 31(3) of the 1996 Act, that would
certainly amount to a patent illegality on the face of the
award.
41. The change made in Section 28(3) by the Amendment
Act really follows what is stated in paragraphs 42.3 to 45
in Associate Builders (supra), namely, that the
construction of the terms of a contract is primarily for an
arbitrator to decide, unless the arbitrator construes the
contract in a manner that no fair-minded or reasonable
person would; in short, that the arbitrator's view is not
even a possible view to take. Also, if the arbitrator
wanders outside the contract and deals with matters not
allotted to him, he commits an error of jurisdiction. This
ground of challenge will now fall within the new ground
added under Section 34(2A).
42. What is important to note is that a decision which is
perverse, as understood in paragraphs 31 and 32
of Associate Builders (supra), while no longer being a
ground for challenge under "public policy of India",
would certainly amount to a patent illegality appearing on
the face of the award. Thus, a finding based on no
evidence at all or an award which ignores vital evidence
in arriving at its decision would be perverse and liable to
be set aside on the ground of patent illegality.
Additionally, a finding based on documents taken behind
the back of the parties by the arbitrator would also qualify
as a decision based on no evidence inasmuch as such
decision is not based on evidence led by the parties, and
therefore, would also have to be characterised as
perverse."
45. Recently, in Hindustan Construction Company Limited & Anr.
Vs. Union of India & Ors., 2019 SCC OnLine SC 1520, the Apex Court
has held as under:-
"55. Further, this Court has repeatedly held that an
application under Section 34 of the Arbitration Act, 1996
is a summary proceeding not in the nature of a regular
suit - see Canara Nidhi Ltd. v. M. Shashikala 2019 SCC
OnLine SC 1244 at paragraph 20. As a result, a court
reviewing an arbitral award under Section 34 does not sit
in appeal over the award, and if the view taken by the
arbitrator is possible, no interference is called for -
see Associated Construction v. Pawanhans Helicopters
Ltd. (2008) 16 SCC 128 at paragraph 17.
56. Also, as has been held in the recent
decision Ssangyong Engineering & Construction Co.
Ltd. v. NHAI 2019 SCC OnLine SC 677, after the 2015
Amendment Act, this Court cannot interfere with an
arbitral award on merits."
46. The Tribunal after extensively examining the evidence, documents
and the submissions of the parties has held that the respondent was not in
breach of the Agreement and the petitioner had illegally and prematurely
terminated the Agreements. Having examined the various contentions of
the petitioner on the touchstone of the parameters of interference as
explicitly laid down by the Supreme Court in several judgments referred
to above, I am of the view that the impugned Award does not call for any
interference. This Court cannot re-appreciate evidence or interpret the
Articles of the Agreement which the petitioner is calling upon the Court
to do. The contentions of the petitioner are thus rejected having no
merit.
47. In view of the aforesaid, there is no merit in the petition and the
same is hereby dismissed.
IA No.13744/2019 (stay)
48. In view of the order passed above, the present application is
dismissed.
IA No.13746/2019 (call for records)
49. The application is dismissed as not pressed.
JYOTI SINGH, J
JANUARY 29th , 2020
rd/yg
