Delhi High Court
National Highway Authority Of India vs Unitech -Ncc (Jv) on 30 May, 2025
Author: C. Hari Shankar
Bench: C. Hari Shankar
$~
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Reserved on: 23 September 2024
Pronounced on: 30 May 2025
+ O.M.P. (COMM) 23/2017
NATIONAL HIGHWAY AUTHORITY OF
INDIA .....Petitioner
Through: Mr. Vikas Goel, Mr. Vivek
Gupta and Ms. Samiksha Goel, Advs.
versus
UNITECH -NCC (JV) .....Respondent
Through: Ms. Priya Kumar and Mr.
Shivam Goel, Advs.
CORAM:
HON'BLE MR. JUSTICE C. HARI SHANKAR
JUDGMENT
% 30.05.2025
1. This petition under Section 341 of the Arbitration and
1 34. Application for setting aside arbitral award. -
(1) Recourse to a Court against an arbitral award may be made only by an application for
setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if--
(a) the party making the application establishes on the basis of the record of the
arbitral tribunal 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:
Provided that, if the decisions on matters submitted to arbitration can
be separated from those not so submitted, only that part of the arbitral award
which contains decisions on matters not submitted to arbitration may be set
aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was
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Conciliation Act, 19962 assails an arbitral award dated 16 May 2011,
by a three-member Arbitral Tribunal, in an arbitration between the
respondent Unitech-NCC JV3 as the claimant and the petitioner-NHAI
as the respondent.
2. The dispute arose in the context of a Contract Agreement4
executed on 25 May 2001 between NHAI and Unitech. The contract
was for widening and upgradation of the existing 2-lane road in the
State of Andhra Pradesh between the towns of Visakhapatnam and
Ichapuram, a section of NH-5. The date of commencement of the
contract was 8 June 2001 and the scheduled date of completion was 7
February 2004. The contract was actually completed on 20 March
2005.
3. The clauses/provisions of the CA/General Conditions of
Contract5, to the extent they are relevant, may be reproduced thus:
in conflict with a provision of this Part from which the parties cannot derogate,
or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that--
(i) the subject-matter of the dispute is not capable of settlement by
arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1. - For the avoidance of any doubt, it is clarified that an
award is in conflict with the public policy of India, only if,--
(i) the making of the award was induced or affected by fraud
or corruption or was in violation of Section 75 or Section 81; or
(ii) it is in contravention with the fundamental policy of Indian
law; or
(iii) it is in conflict with the most basic notions of morality or
justice.
Explanation 2. - For the avoidance of doubt, the test as to whether
there is a contravention with the fundamental policy of Indian law shall not
entail a review on the merits of the dispute.
(2-A) An arbitral award arising out of arbitrations other than international commercial
arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by
patent illegality appearing on the face of the award:
Provided that an award shall not be set aside merely on the ground of an erroneous
application of the law or by reappreciation of evidence.
2 "the 1996 Act" hereinafter
3 "Unitech" hereinafter
4 "CA" hereinafter
5 'GCC" hereinafter
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"42.2 Failure to Give Possession
If the Contractor suffers delay and/or incurs costs from failure on
the part of the Employer to give possession in accordance with the
terms of Sub-Clause, the Engineer shall after due consultation with
the Employer and the Contractor, determine:
a) Any extension of time to which the Contractor is entitled
under Clause 44, and
b) The amount of such costs, which shall be added to the
Contract Price,
And shall notify the Contractor accordingly, with a copy to the
Employer.
*****
44.1 Extension of Time for Completion
In the event of:
a) The amount or nature of extra or additional work,
b) Any cause of delay referred to in these Conditions,
c) Exceptionally adverse climatic conditions,
d) Any delay, impediment or prevention by the Employer, or
e) Other special circumstances which may occur, other than
through a default of or breach of contract by the Contractor or for
which he is responsible.
Being such as fairly to entitle the Contractor to an extension of the
Time for Completion of the Works, or any Section or part thereof,
the Engineer shall, after due consultation with the Employer and
the Contractor, determine the amount of such extension and shall
notify the Contractor accordingly, with a copy to the Employer.
*****
44.3 Interim Determination of Extension
Provided also that where an event has a continuing effect such that
it is not practicable for the Contractor to submit detailed particulars
within the period of 28 days referred to in Sub-Clause 44.2(b), he
shall nevertheless be entitled to an extension of time provided that
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he has submitted to the Engineer interim particulars at intervals of
not more than 28 days and final particulars within 28 days of the
end of the effects resulting from the event. On receipt of such
interim particulars, the Engineer shall, without undue delay, make
an interim Engineer shall review all the circumstances and shall
determine an overall extension of time in regard to the event. In
both such cases the Engineer shall make his determination after
due consultation with the Employer and the Contractor and shall
notify the Contractor of the determination with a copy to the
Employer. No final review shall result in a decrease of any
extension of time already determined by the Engineer.
*****
47.1 Liquidated Damages for Delay
If the Contractor fails to comply with the Time for Completion in
accordance with Clause 48, for the whole of the Works or, if
applicable, any Section within the relevant time prescribed by
Clause 43, then the Contractor shall pay to the Employer the
relevant sum stated in the Appendix to Tender as liquidated
damages for such default and not as a penalty (which sum shall be
the only monies due from the Contractor for such default) for every
day or part of a day which shall elapse between the relevant Time
for Completion and the date stated in a Taking-Over Certificate of
the whole of the Works or the relevant Section, subject to the
applicable limit stated in the Appendix to Tender. The Employer
may without prejudice to any other method of recovery, deduct the
amount of such damages from any monies due or to become due to
the Contractor. The payment or deduction of such damages shall
not relieve the Contractor from his obligation to complete the
Works, or from any other of his obligations and liabilities under the
Contract.
*****
Sub-Clause 47.3 Bonus for Early Completion
"If the Contractor achieves completion of the whole of the works
prior to the specified period of completion of 32 calendar months
from the date of commencement, the Employer shall pay to the
Contractor a sum stated in the Appendix to Tender as bonus for
every completed month which shall elapse between the date of
completion of all items of works as stipulated in the contract,
including variations ordered by the Engineer and the specified
period of completion of 32 calendar months. In case of any time
extension bonus for early completion considering the extended
time shall NOT be payable.
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*****
53.1 Notice of Claims
Notwithstanding any other provision of the Contract, if the
Contractor intends to claim any additional payment pursuant to any
Clause of these Conditions or otherwise, he shall give notice of his
intention to the Engineer, with a copy to the Employer, within 28
days after the event giving rise to the claim has first arisen.
*****
53.4 Failure to Comply
If the Contractor fails to comply with any of the provisions of this
Clause in respect of any claim which he seeks to make, his
entitlement to payment in respect thereof shall not exceed such
amount as the Engineer or any arbitrator or arbitrators appointed
pursuant to Sub-Clause 67.3 assessing the claim considers to be
verified by contemporary records (whether or not such records
were brought to the Engineer's notice as required under Sub-Clause
53.2 and 53.3).
*****
69.4 Contractor's Entitlement to Suspend Work
Without prejudice to the Contractor's entitlement to interest under
Sub-Clause 60.10 and to terminate under Sub-Clause 69.1, the
Contractor may, if the Employer fails to pay the Contractor the
amount due under any certificate of the Engineer within 28 days
after the expiry of the time stated in Sub-Clause 60.10 within
which payment is to be made, subject to any deduction that the
Employer is entitled to make under the Contract, after giving 28
days prior notice to the Employer, with a copy to the Engineer,
suspend work or reduce the rate of work. If the Contractor
suspends work or reduces the rate of work in accordance with the
provisions of this Sub-Clause and thereby suffers delay or incurs
costs the Engineer shall, after due consultation with the Employer
and the Contractor, determine;
a) any extension of time to which the Contractor is entitled
under Clause 44, and
b) the amount of such costs, which shall be added to the
Contract Price.
And shall notify the Contractor accordingly, with a copy to the
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Employer."
4. In exercise of the rights conferred by an arbitration agreement
existing in the CA, Unitech raised certain claims against NHAI. On
the claims not being considered by NHAI, the matter was referred to a
three-member Arbitral Tribunal. The Arbitral Tribunal came to render
its award on 16 May 2011. This petition assails the said award.
5. NHAI submits, at the outset, that it is restricting its challenge to
the impugned award vis-a-vis Claims 3, 4 and 7.
6. I, therefore, propose to deal with the said claims, the award of
the learned Arbitral Tribunal thereon, and the rival contentions before
this bench in that regard and the sustainability of the said contention,
given the parameters of Section 34 of the 1996 Act.
7. Before that, we deem it appropriate to examine the law
regarding the power of judicial review under Section 34 of the 1996
Act, with arbitral award.
Scope of judicial interference under Section 34
8. I had, in my judgment in NDMC v R & T Enterprises6,
attempted to analyze the scope of Section 34 of the 1996 Act as it
stood on that date, and noted thus:
"55. The decisions on the scope of Section 34 of the 1996 Act
are too numerous to justify any paraphrasing, but the position is,
6 2024 SCC OnLine Del 5436
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by now, certain. UHL Power Co. Ltd. v State of H.P.7 and Dyna
Technologies (P) Ltd. v Crompton Greaves Ltd.8 hold that the
jurisdiction of the Court under Section 34 cannot be likened to
normal appellate jurisdiction. Casual and cavalier interference with
arbitral awards, and proscription from interfering on the ground
that a better, alternative view was possible, stands clearly
foreclosed by Ssangyong Engineering & Construction Co.
Ltd. v N.H.A.I.9 and Parsa Kente Collieries Ltd. v Rajasthan
Rajya Vidyut Utpadan Nigam Ltd.10. The autonomy of the
Arbitral Tribunal was required to be respected and interference
with arbitral awards on factual aspects firmly eschewed. At the
same time, if the award was found to be perverse, or that the
interpretation of the contractual covenants by the Arbitral Tribunal
was one which could not possibly be accepted, the Court was
bound to interfere. Instances where the construction of the
contractual clauses, by the Arbitral Tribunal, was found to be so
unacceptable as to justify interference, are South East Asia
Marine Engineering & Constructions Ltd. v Oil India
Ltd.11 and Patel Engineering Ltd. v North Eastern Electric Power
Corporation Ltd.12.
56. "Perversity", as would justify interference with an arbitral
award, connotes a situation in which the finding of fact, by the
Arbitral Tribunal, was arrived at by ignoring or excluding relevant
material, or by taking into consideration irrelevant material, or
where the finding is so outrageously in defiance of logic as to
suffer from the viced of irrationality13. Associate
Builders v D.D.A. also placed especial reliance, on the concept of
"perversity", on the following clarification, provided in Kuldeep
Singh v Commissioner of Police14:
"10. A broad distinction has, therefore, to be maintained
between the decisions which are perverse and those which
are not. If a decision is arrived at on no evidence or
evidence which is thoroughly unreliable and no reasonable
person would act upon it, the order would be perverse. But
if there is some evidence on record which is acceptable and
which could be relied upon, howsoever compendious it
may be, the conclusions would not be treated as perverse
and the findings would not be interfered with."
7 (2022) 4 SCC 116
8 (2019) 20 SCC 1
9 (2019) 15 SCC 131
10 (2019) 7 SCC 236
11 (2020) 5 SCC 164
12 (2020) 7 SCC 167
13 S.T.O. v Gopi Nath & Sons, 1992 Supp (2) SCC 312; Associate Builders v DDA, (2015) 3 SCC 49
14 (1999) 2 SCC 10
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57. In Associate Builders and Indian Oil Corporation Ltd. v
Shree Ganesh Petroleum15, the Supreme Court clearly held that an
arbitral award can only be set aside on grounds mentioned under
Sections 34(2) and (3) of the said Act and not otherwise. The Court
considering an application for setting aside an award, under
Section 34 of the 1996 Act, cannot look into the merits of the
award except when the award is in conflict with the public policy
of India as provided in Section 34(2)(b)(ii) of the 1996 Act. An
award could be said to be in conflict with the public policy of
India, as per Associate Builders, when it is patently violative of a
statutory provision, or where the approach of the Arbitral Tribunal
has not been judicial, or where the award has been passed in
violation of the principles of natural justice, or where the award is
patently illegal, which would include a case in which it was in
patent contravention of applicable substantive law or in patent
breach of the 1996 Act, or where it militated against the interest of
the nation, or was shocking to the judicial conscience.
58. An award which ignores the specific terms of the contract,
but is not merely a case of erroneous contractual interpretation, is
patently illegal. The Supreme Court, in Indian Oil Corporation
Ltd., found the case before it to be one such. Ssangyong
Engineering also demonstrates an interesting example of a case in
which the error in interpretation of the contract was so fundamental
as to render the award in conflict with the public policy of India:
"76. However, when it comes to the public policy of
India, argument based upon "most basic notions of justice",
it is clear that this ground can be attracted only in very
exceptional circumstances when the conscience of the
Court is shocked by infraction of fundamental notions or
principles of justice. It can be seen that the formula that
was applied by the agreement continued to be applied till
February 2013 - in short, it is not correct to say that the
formula under the agreement could not be applied in view
of the Ministry's change in the base indices from 1993-
1994 to 2004-2005. Further, in order to apply a linking
factor, a circular, unilaterally issued by one party, cannot
possibly bind the other party to the agreement without that
other party's consent. Indeed, the circular itself expressly
stipulates that it cannot apply unless the contractors furnish
an undertaking/affidavit that the price adjustment under the
circular is acceptable to them. We have seen how the
appellant gave such undertaking only conditionally and
without prejudice to its argument that the Circular does not
and cannot apply. This being the case, it is clear that the
15 (2022) 4 SCC 463
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majority award has created a new contract for the parties by
applying the said unilateral circular and by substituting a
workable formula under the agreement by another formula
dehors the agreement. This being the case, a fundamental
principle of justice has been breached, namely, that a
unilateral addition or alteration of a contract can never be
foisted upon an unwilling party, nor can a party to the
agreement be liable to perform a bargain not entered into
with the other party. Clearly, such a course of conduct
would be contrary to fundamental principles of justice as
followed in this country, and shocks the conscience of this
Court. However, we repeat that this ground is available
only in very exceptional circumstances, such as the fact
situation in the present case. Under no circumstance can
any court interfere with an arbitral award on the ground that
justice has not been done in the opinion of the Court. That
would be an entry into the merits of the dispute which, as
we have seen, is contrary to the ethos of Section 34 of the
1996 Act, as has been noted earlier in this judgment."
59. Yet another such example was highlighted by the Supreme
Court in PSA Sical Terminals (P) Ltd. v V.O. Chidambranar Port
Trust16:
"85. As such, as held by this Court in Ssangyong Engg. &
Construction, the fundamental principle of justice has been
breached, namely, that a unilateral addition or alteration of
a contract has been foisted upon an unwilling party. This
Court has further held that a party to the agreement cannot
be made liable to perform something for which it has not
entered into a contract. In our view, re-writing a contract
for the parties would be breach of fundamental principles
of justice entitling a court to interfere since such case
would be one which shocks the conscience of the Court and
as such, would fall in the exceptional category."
60. PSA Sical, therefore, holds that if the Arbitral Tribunal
travels beyond the contract, it acts without jurisdiction, being a
creature of the contract, and the award stands vitiated thereby.
Following the precedent in Army Welfare Housing
Organisation v Sumangal Services (P) Ltd.17, it was held that an
Arbitral Tribunal had strictly to act within the boundaries of the
contract, and could not proceed ex debito justitiae. For example, as
observed in Satyanarayana Construction Co. v U.O.I18., the
Arbitral Tribunal could not award a claim at a rate higher than that
16 (2021) 18 SCC 716
17 (2004) 9 SCC 619
18 (2011) 15 SCC 101
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specified in the contract. Rewriting of the contract is completely
proscribed, and fatally imperils the arbitral award, as held
in N.H.A.I. v Bumihiway DDB (JV)19, Union Territory of
Pondicherry v P.V. Suresh20, Shree Ambica Medical
Stores v Surat People's Co-operative Bank Ltd. , IFFCO Tokio
General Insurance Co. v Pearl Beverages Ltd.22, Tata
Consultancy Services v Cyrus Investments (P) Ltd.23.
and Maharashtra State Electricity Distribution Co. v
Maharashtra Electricity Regulatory Commission . 24
61. Comprehensively examining and analysing the entire
gamut of existing case laws and reiterating the above principles,
the Supreme Court, in S.V. Samudram v State of Karnataka25,
further clarified that an arbitral award could not be modified by the
Court, as held in N.H.A.I. v M. Hakeem26 and Dakshin Haryana
Bijli Vitran Nigam Ltd. v Navigant Technologies (P) Ltd.27. The
latter decision, it was noted, further held that, where the Court set
aside the award of the Arbitral Tribunal, the underlying dispute
would be required to be decided afresh in an appropriate
proceeding. In the event of the Court finding the arbitral award to
justify evisceration, the Court, it was held in McDermott
International and Larsen Air Conditioning & Refrigeration
Co. v U.O.I28, could only quash the award leaving the parties to
reinitiate arbitration should they so choose, but could not itself
rewrite or modify the award.
*****
63. These principles also stand exhaustively delineated
in Reliance Infrastructure Ltd. v State of Goa29.
9. The extent to which a Section 34 Court could interfere with the
manner in which an Arbitral Tribunal interpreted the terms of the
contract with which it was concerned has, since, been revisited by a
three Judge Bench of the Supreme Court in DMRC Ltd v Delhi
19 (2006) 10 SCC 763
20 (1994) 2 SCC 70
21 (2020) 13 SCC 564
22 (2021) 7 SCC 704
23 (2021) 9 SCC 449
24 (2022) 4 SCC 657
25 (2024) 3 SCC 623
26 (2021) 9 SCC 1
27 (2021) 7 SCC 657
28 (2023) 15 SCC 472
29 (2024) 1 SCC 479
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Airport Metro Express Pvt Ltd30, which held thus:
"34. The contours of the power of the competent court to set
aside an award under Section 34 has been explored in several
decisions of this Court. In addition to the grounds on which an
arbitral award can be assailed laid down in Section 34(2), there is
another ground for challenge against domestic awards, such as the
award in the present case. Under Section 34(2-A) of the
Arbitration Act, a domestic award may be set aside if the Court
finds that it is vitiated by "patent illegality" appearing on the face
of the award.
35. In Associate Builders v DDA, a two-Judge Bench of this
Court held that although the interpretation of a contract is
exclusively within the domain of the arbitrator, construction of a
contract in a manner that no fair-minded or reasonable person
would take, is impermissible. A patent illegality arises where the
arbitrator adopts a view which is not a possible view. A view can
be regarded as not even a possible view where no reasonable body
of persons could possibly have taken it. This Court held with
reference to Sections 28(1)(a) and 28(3), that the arbitrator must
take into account the terms of the contract and the usages of trade
applicable to the transaction. The decision or award should not be
perverse or irrational. An award is rendered perverse or irrational
where the findings are:
(i) based on no evidence;
(ii) based on irrelevant material; or
(iii) ignores vital evidence.
36. Patent illegality may also arise where the award is in breach
of the provisions of the arbitration statute, as when for instance the
award contains no reasons at all, so as to be described as
unreasoned.
*****
38. In Ssangyong Engg. & Construction Co. Ltd. v NHAI, a
two-Judge Bench of this Court endorsed the position in Associate
Builders v DDA, on the scope for interference with domestic
awards, even after the 2015 Amendment:
"40. The change made in Section 28(3) by the
30 (2024) 6 SCC 357
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Amendment Act really follows what is stated in paras 42.3
to 45 in Associate Builders v DDA (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(2-A).
41. ... 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."
(emphasis supplied)
39. In essence, the ground of patent illegality is available for
setting aside a domestic award, if the decision of the arbitrator is
found to be perverse, or so irrational that no reasonable person
would have arrived at it; or the construction of the contract is such
that no fair or reasonable person would take; or, that the view of
the arbitrator is not even a possible view [Patel Engg. Ltd. v North
Eastern Electric Power Corpn. Ltd.]. 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 under
the head of "patent illegality". An award without reasons would
suffer from patent illegality. The arbitrator commits a patent
illegality by deciding a matter not within his jurisdiction or
violating a fundamental principle of natural justice."
10. The entire law relating to Section 34 has once again been
revisited by the Supreme Court in OPG Power Generation Pvt Ltd v
Enexio Power Cooling Solutions India Pvt Ltd31. The judgment has
captured the essence of nearly every decision of note prior thereto.
The passages, from the decision in OPG Power Generation, which set
31 (2025) 2 SCC 417
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out the law as declared therein, may be reproduced thus:
"Relevant legal principles governing a challenge to an arbitral
award
30. Before we delve into the issue/sub-issues culled out above,
it would be useful to have a look at the relevant legal principles
governing a challenge to an arbitral award. Recourse to a court
against an arbitral award may be made through an application for
setting aside such award in accordance with sub-sections (2), (2-A)
and (3) of Section 34 of the 1996 Act. Sub-section (2) of Section
34 has two clauses, (a) and (b). Clause (a) has five sub-clauses
which are not relevant to the issues raised before us. Insofar as
clause (b) is concerned, it has two sub-clauses, namely, (i) and (ii).
Sub-clause (i) of clause (b) is not relevant to the controversy in
hand. Sub-clause (ii) of clause (b) provides that if the Court finds
that the arbitral award is in conflict with the public policy of India,
it may set aside the award.
Public policy
31. "Public policy" is a concept not statutorily defined, though
it has been used in statutes, rules, notification, etc. since long, and
is also a part of common law. Section 23 of the Contract Act, 1872
uses the expression by stating that the consideration or object of an
agreement is lawful, unless, inter alia, opposed to public policy.
That is, a contract which is opposed to public policy is void.
*****
37. What is clear from above is that for an award to be against
public policy of India a mere infraction of the municipal laws of
India is not enough. There must be, inter alia, infraction of
fundamental policy of Indian law including a law meant to serve
public interest or public good.
*****
The 2015 Amendment in Sections 34 and 48
42. The aforementioned judicial pronouncements were all prior
to the 2015 Amendment. Notably, prior to the 2015 Amendment
the expression "in contravention with the fundamental policy of
Indian law" was not used by the legislature in either Section
34(2)(b)(ii) or Section 48(2)(b). The pre-amended Section
34(2)(b)(ii) and its Explanation read:
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"34. Application for setting aside arbitral award.--
(1) * * *
(2) An arbitral award may be set aside by the
court only if--
*****
(b) the court finds that--
*****
(ii) the arbitral award is in
conflict with the public policy of
India.
Explanation.--Without
prejudice to the generality of sub-
clause (ii), it is hereby declared, for
the avoidance of any doubt, that an
award is in conflict with the public
policy of India if the making of the
award was induced or affected by
fraud or corruption or was in
violation of Section 75 or Section
81."
*****
44. By the 2015 Amendment, in place of the old Explanation to
Section 34(2)(b)(ii), Explanations 1 and 2 were added to remove
any doubt as to when an arbitral award is in conflict with the
public policy of India.
*****
46. The 2015 Amendment adds two Explanations to each of the
two sections, namely, Section 34(2)(b)(ii) and Section 48(2)(b), in
place of the earlier Explanation. The significance of the newly
inserted Explanation 1 in both the sections is two-fold. First, it
does away with the use of words : (a) "without prejudice to the
generality of sub-clause (ii)" in the opening part of the pre-
amended Explanation to Section 34(2)(b)(ii); and (b) "without
prejudice to the generality of clause (b) of this section" in the
opening part of the pre-amended Explanation to Section 48(2)(b);
secondly, it limits the expanse of public policy of India to the three
specified categories by using the words "only if".
Whereas, Explanation 2 lays down the standard for adjudging
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whether there is a contravention with the fundamental policy of
Indian law by providing that a review on merits of the dispute shall
not be done. This limits the scope of the enquiry on an application
under either Section 34(2)(b)(ii) or Section 48(2)(b) of the 1996
Act.
47. The 2015 Amendment by inserting sub-section (2-A) in
Section 34, carves out an additional ground for annulment of an
arbitral award arising out of arbitrations other than international
commercial arbitrations. Sub-section (2-A) provides that the Court
may also set aside an award if that is vitiated by patent illegality
appearing on the face of the award. This power of the Court is,
however, circumscribed by the proviso, which states that an award
shall not be set aside merely on the ground of an erroneous
application of the law or by reappreciation of evidence.
48. Explanation 1 to Section 34(2)(b)(ii), specifies that an
arbitral award is in conflict with the public policy of India, only if:
(i) the making of the award was induced or affected by
fraud or corruption or was in violation of Section 75 or
Section 81; or
(ii) it is in contravention with the fundamental policy of
Indian law; or
(iii) it is in conflict with the most basic notions of
morality or justice.
*****
In contravention with the fundamental policy of Indian law
51. As discussed above, till the 2015 Amendment the
expression "in contravention with the fundamental policy of Indian
law" was not found in the 1996 Act. Yet, in Renusagar Power Co.
Ltd. v General Electric Co.32, in the context of enforcement of a
foreign award, while construing the phrase "contrary to the public
policy", this Court held that for a foreign award to be contrary to
public policy mere contravention of law would not be enough
rather it should be contrary to:
(a) the fundamental policy of Indian law; and/or
(b) the interest of India; and/or
32 1994 Supp (1) SCC 644
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(c) justice or morality.
*****
55. The legal position which emerges from the aforesaid
discussion is that after "the 2015 Amendments" in Section
34(2)(b)(ii) and Section 48(2)(b) of the 1996 Act, the phrase "in
conflict with the public policy of India" must be accorded a
restricted meaning in terms of Explanation 1. The expression "in
contravention with the fundamental policy of Indian law" by use of
the word "fundamental" before the phrase "policy of Indian law"
makes the expression narrower in its application than the phrase
"in contravention with the policy of Indian law", which means
mere contravention of law is not enough to make an award
vulnerable. To bring the contravention within the fold of
fundamental policy of Indian law, the award must contravene all or
any of such fundamental principles that provide a basis for
administration of justice and enforcement of law in this country.
56. Without intending to exhaustively enumerate instances of
such contravention, by way of illustration, it could be said that:
(a) violation of the principles of natural justice;
(b) disregarding orders of superior courts in India or the
binding effect of the judgment of a superior court; and
(c) violating law of India linked to public good or
public interest, are considered contravention of the
fundamental policy of Indian law.
However, while assessing whether there has been a contravention
of the fundamental policy of Indian law, the extent of judicial
scrutiny must not exceed the limit as set out in Explanation 2 to
Section 34(2)(b)(ii).
Most basic notions of morality and justice
57. In Renusagar this Court held that an arbitral award is in
conflict with the public policy of India if it is, inter alia, contrary to
"justice and morality". Explanation 1, inserted by the 2015
Amendment, makes it clear that an award is in conflict with the
public policy of India, inter alia, if it conflicts with the "most basic
notions of morality or justice".
Justice
58. Justice is the virtue by which the society/court/Tribunal
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gives a man his due, opposed to injury or wrong. Justice is an act
of rendering what is right and equitable towards one who has
suffered a wrong. Therefore, while tempering justice with mercy,
the court must be very conscious, that it has to do justice in exact
conformity with some obligatory law, for the reason that human
actions are found to be just or unjust on the basis of whether the
same are in conformity with, or in opposition to, the law [Union of
India v Ajeet Singh33, para 26] . Therefore, in "judicial sense",
justice is nothing more nor less than exact conformity to some
obligatory law; and all human actions are either just or unjust as
they are in conformity with, or in opposition to, the law [P.
Ramanatha Aiyar's Advanced Law Lexicon, 6th Edn., Vol. III, p.
2621.] .
59. But, importantly, the term "legal justice" is not used
in Explanation 1, therefore simple conformity or non-conformity
with the law is not the test to determine whether an award is in
conflict with the public policy of India in terms of Explanation 1.
The test is that it must conflict with the most basic notions of
justice. For lack of any objective criteria, it is difficult to
enumerate the "most basic notions of justice". More so, justice to
one may be injustice to another. This difficulty has been
acknowledged by many renowned jurists, as is reflected in the
observations of this Court in State (NCT of Delhi) v Gurdip Singh
Uban34] , extracted below:
"23. The words "justice" and "injustice", in our view, are
sometimes loosely used and have different meanings to
different persons particularly to those arrayed on opposite
sides. "One man's justice is another's injustice" [Ralph
Waldo Emerson : Essays (1803-82), First Series, 1841,
"Circles"]. Justice Cardozo said: 'The web is entangled and
obscure, shot through with a multitude of shades and
colors, the skeins irregular and broken. Many hues that
seem to be simple, are found, when analysed, to be a
complex and uncertain blend. Justice itself, which we are
wont to appeal to as a test as well as an ideal, may mean
different things to different minds and at different times.
Attempts to objectify its standards or even to describe them
have never wholly succeeded.' (Selected Writings of
Cardozo, pp. 223-224, Falcon Publications, 1947)."
(emphasis in original)
*****
62. In the light of the discussion above, in our view, when we
33 (2013) 4 SCC 186
34 (2000) 7 SCC 296
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talk about justice being done, it is about rendering, in accord with
law, what is right and equitable to one who has suffered a wrong.
Justice is the virtue by which the society/court/Tribunal gives a
man his due, opposed to injury or wrong. Dispensation of justice in
its quality may vary, dependent on person who dispenses it. A
trained judicial mind may dispense justice in a manner different
from what a person of ordinary prudence would do. This is so,
because a trained judicial mind is likely to figure out even minor
infractions of law/norms which may escape the attention of a
person with ordinary prudence. Therefore, the placement of words
"most basic notions" before "of justice" in Explanation 1 has its
significance. Notably, at the time when the 2015 Amendment was
brought, the existing law with regard to grounds for setting aside
an arbitral award, as interpreted by this Court, was that an arbitral
award would be in conflict with public policy of India, if it is
contrary to:
(a) the fundamental policy of Indian law;
(b) the interest of India;
(c) justice or morality; and/or is
(d) patently illegal.
*****
Morality
64. The other ground is of morality. On the question of
morality, in Associate Builders, this Court, after referring to the
provisions of Section 23 of the Contract Act, 1872; earlier decision
of this Court in Gherulal Parakh v Mahadeodas Maiya35
and Indian Contract Act by Pollock and Mulla, held that judicial
precedents have confined morality to sexual morality. And if
"morality" were to go beyond sexual morality, it would cover such
agreements as are not illegal but would not be enforced given the
prevailing mores of the day. The Court also clarified that
interference on this ground would be only if something shocks the
Court's conscience [See Associate Builders, para 39].
Patent illegality
65. Sub-section (2-A) of Section 34 of the 1996 Act, which
was inserted by the 2015 Amendment, provides that an arbitral
award not arising out of international commercial arbitrations, may
35 AIR 1959 SC 781
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also be set aside by the Court, if the Court finds that the award is
visited by patent illegality appearing on the face of the award. The
proviso to sub-section (2-A) states that an award shall not be set
aside merely on the ground of an erroneous application of the law
or by reappreciation of evidence.
*****
Perversity as a ground of challenge
69. Perversity as a ground for setting aside an arbitral award
was recognised in ONGC Ltd. v Western Geco International
Ltd.36. Therein it was observed that an arbitral decision must not
be perverse or so irrational that no reasonable person would have
arrived at the same. It was observed that if an award is perverse, it
would be against the public policy of India.
*****
Scope of interference with an arbitral award
74. The aforesaid judicial precedents make it clear that while
exercising power under Section 34 of the 1996 Act the Court does
not sit in appeal over the arbitral award. Interference with an
arbitral award is only on limited grounds as set out in Section 34 of
the 1996 Act. A possible view by the arbitrator on facts is to be
respected as the arbitrator is the ultimate master of the quantity and
quality of evidence to be relied upon. It is only when an arbitral
award could be categorised as perverse, that on an error of fact an
arbitral award may be set aside. Further, a mere erroneous
application of the law or wrong appreciation of evidence by itself
is not a ground to set aside an award as is clear from the provisions
of sub-section (2-A) of Section 34 of the 1996 Act.
*****
Scope of interference with the interpretation/construction of a
contract accorded in an arbitral award
84. An Arbitral Tribunal must decide in accordance with the
terms of the contract. In a case where an Arbitral Tribunal passes
an award against the terms of the contract, the award would be
patently illegal. However, an Arbitral Tribunal has jurisdiction to
interpret a contract having regard to terms and conditions of the
contract, conduct of the parties including correspondences
exchanged, circumstances of the case and pleadings of the parties.
36 (2014) 9 SCC 263
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If the conclusion of the arbitrator is based on a possible view of the
matter, the Court should not intefere [See : SAIL v Gupta Brother
Steel Tubes Ltd.37; Pure Helium India (P)
Ltd. v ONGC ; McDermott International Inc. v Burn Standard
Co. Ltd.39; MMTC Ltd. v Vedanta Ltd.40] . But where, on a full
reading of the contract, the view of the Arbitral Tribunal on the
terms of a contract is not a possible view, the award would be
considered perverse and as such amenable to interference [South
East Asia Marine Engg. & Constructions Ltd. v Oil India Ltd.41]
Whether unexpressed term can be read into a contract as an
implied condition
85. Ordinarily, terms of the contract are to be understood in the
way the parties wanted and intended them to be. In agreements of
arbitration, where party autonomy is the grund norm, how the
parties worked out the agreement, is one of the indicators to
decipher the intention, apart from the plain or grammatical
meaning of the expressions used [Balco v. Kaiser Aluminium
Technical Services Inc.42].
86. However, reading an unexpressed term in an agreement
would be justified on the basis that such a term was always and
obviously intended by the parties thereto. An unexpressed term can
be implied if, and only if, the court finds that the parties must have
intended that term to form part of their contract. It is not enough
for the court to find that such a term would have been adopted by
the parties as reasonable men if it had been suggested to them.
Rather, it must have been a term that went without saying, a term
necessary to give business efficacy to the contract, a term which,
although tacit, forms part of the contract [Adani Power (Mundra)
Ltd. v Gujarat ERC43] .
87. But before an implied condition, not expressly found in the
contract, is read into a contract, by invoking the business efficacy
doctrine, it must satisfy the following five conditions:
(a) it must be reasonable and equitable;
(b) it must be necessary to give business efficacy to the
contract, that is, a term will not be implied if the contract is
effective without it;
37 (2009) 10 SCC 63
38 (2003) 8 SCC 593
39 (2006) 11 SCC 181
40 (2019) 4 SCC 163
41 (2020) 5 SCC 164
42 (2016) 4 SCC 126
43 (2019) 19 SCC 9
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(c) it must be obvious that "it goes without saying";
(d) it must be capable of clear expression;
(e) it must not contradict any terms of the contract
[Nabha Power Ltd. v. Punjab SPCL44, followed in Adani
Power]."
11. The statutory position
11.1 The grounds on which an arbitral award can be challenged stand
statutorily delineated in Section 34. They are
(i) incapacity of a party [Section 34(2)(a)(i)],
(ii) invalidity of the arbitration agreement [Section
34(2)(a)(ii)].
(iii) lack of proper notice regarding appointment of the
arbitrator [Section 34(2)(a)(iii)],
(iv) inability of the party to present his case before the
arbitrator [Section 34(2)(a)(iii)],
(v) if the arbitral award deals with a dispute not falling
within the terms of reference [Section 34(2)(a)(iv)],
(vi) if the arbitral award contains decisions on matters beyond
the scope of the reference [Section 34(2)(a)(iv)],
(vii) if the composition of the arbitral tribunal was not in
accordance with the arbitration agreement, unless the agreement
itself was in conflict with a non-derogable provision in Part I of
the 1996 Act [Section 34(2)(a)(v)], or
(viii) the subject matter of the dispute is non-arbitrable
[Section 34(2)(b)(i)], or
44 (2018) 11 SCC 508
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(ix) the arbitral award is in conflict with the public policy of
India [Section 34(2)(b)(ii)], meaning
(a) the award is induced or affected by fraud or
corruption [Section 34(2)(b)(ii) read with Explanation
1(i) thereto], or
(b) the award violates Section 7545 [Section
34(2)(b)(ii) read with Explanation 1(i) thereto], or
(c) the award violates Section 8146 [Section
34(2)(b)(ii) read with Explanation 1(i) thereto], or
(d) the award is in conflict with the fundamental
policy of Indian law, which would not entail a review on
the merits of the dispute [Section 34(2)(b)(ii) read with
Explanation 1(ii) and Explanation 2 thereto], or
(e) the award is in conflict with the most basic notions
or morality or justice [Section 34(2)(b)(ii) read with
Explanation 1(iii) thereto], or
(x) the award is vitiated by patent illegality appearing on the
face of the award, which would not include an erroneous
appreciation of the law or reappreciation of evidence [Section
34 (2-A)].
45 75. Confidentiality. - Notwithstanding anything contained in any other law for the time being in force,
the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings.
Confidentiality shall extend also to the settlement agreement, except where its disclosure is necessary for
purposes of implementation and enforcement.
46 81. Admissibility of evidence in other proceedings. - The parties shall not rely on or introduce as
evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is the
subject of the conciliation proceedings,--
(a) views expressed or suggestions made by the other party in respect of a possible settlement
of the dispute;
(b) admissions made by the other party in the course of the conciliation proceedings;
(c) proposals made by the conciliator;
(d) the fact that the other party had indicated his willingness to accept a proposal for
settlement made by the conciliator.
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11.2 The Section contains several expressions which make for
fascinating reading, such as "under some incapacity", "fundamental
policy of Indian law", "most basic notions of morality or justice" and,
last but never the least, "patent illegality". These expressions are, to
my mind, deliberately left ambiguous, with an apparent intent at
providing some play in the joints. What "incapacity" does Section
34(2)(a)(i) allude to? "Incapacity" could mean, etymologically,
anything. What is the "fundamental policy" of Indian law? Does, for
that matter, Indian law have anything concrete which can be identified
as its "fundamental policy"? What is the scope of the expressions
"morality" and "justice"? What are their "most basic notions"? Why
has the legislature used the expression "most basic"? Does it imply
that there are some breaches of morality or justice which, even if they
exist, would not vitiate an arbitral award?47 What is the difference
between "illegality" and "patent illegality"? Why has the legislature
qualified the word "illegality" with the adjective "patent"?
11.3 An interpretative excursion into these expressions, and their
true scope, meaning and intent, can provide material for an exhaustive
thesis. Needless to say, this judgment is not intended to be one.
11.4 Ever since Section 34, in its present avatar, incarnated in the
statute on 30 August 2019, Courts have been grappling with these
issues. They have led to a fascinating body of case law, of which this
decision, earlier, has only skims the surface. In our legal system - as
in the case of many other legal systems in the world, the statute has to
47 Such an interpretation, were it to be permissible at all, would be fraught with extremely dangerous
consequences,
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conform to the interpretation accorded to it by the Courts. 48 The
Supreme Court has, through its judgments, lent colour and
complexion to these somewhat befuddling expressions in Section 34,
and we, in the spirit of Articles 141 and 144 of the Constitution of
India, are bound to be guided thereby.
12. I proceed, therefore, to distil some of the relevant principles that
emerge from the decisions cited supra.
13. The principles that emerge
From the decisions cited earlier, the following principles emerge:
(i) An arbitral award cannot be interfered with on grounds
not envisaged by Section 34(2) or (3) of the 1996 Act.
(ii) Section 34 jurisdiction is not appellate. Interference with
arbitral awards is generally proscribed, and is to be limited to
rare and exceptional cases.
(iii) Interference on the ground that another, more appropriate
and perhaps better, view, different from that adopted by the
arbitrator, is possible, is impermissible.
(iv) There can be no interference with factual findings of an
48 The Full Bench of 9 learned Judges of the Supreme Court of the United States noted this truism when, in its
decision in Port Authority Trans-Hudson Corporation v Patrick Feeney, 495 US 299 (1990): 109 L. Ed.
2d 264, it noted, apropos the Eleventh Amendment to the US Constitution, that "actions for prospective relief
against an interstate agency would not be barred by the Eleventh Amendment, as the Court interprets it,
whatever the agency's relationship to the States' treasuries".
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arbitral tribunal, unless they are perverse. A possible view by
the arbitrator, on the facts, has to be respected. The arbitrator is
the ultimate master of the quantity and quality of evidence to be
relied upon.
(v) "Perversity" exists where
(a) the arbitral tribunal ignores or excludes relevant
material, or
(b) the arbitral tribunal takes into consideration
irrelevant material, or
(c) the finding is so outrageously in defiance of logic
as to suffer from the vice of irrationality.
(vi) If there is no evidence, or the evidence is thoroughly
unreliable in the sense that no reasonable person would act on
it, there is perversity. Where there is some acceptable evidence
on record, on which the arbitral tribunal relies, the conclusion
would not be perverse.
(vii) The Section 34 Court cannot look into the merits of the
dispute.
(viii) An award is in conflict with the public policy of India if
it
(a) is patently violative of a statutory provision, or
(b) reflects an approach by the arbitral tribunal which
is not judicial, or
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(c) has been passed in violation of the principles of
natural justice, or
(d) is patently illegal, which would include a case in
which
(i) the award is in patent contravention of
applicable substantive law, or
(ii) the award patently breaches the 1996 Act, or
(iii) the award militates against the interests of
the nation, or
(iv) the award is shocking to the judicial
conscience, or
(v) the award ignores the specific terms of the
contract, which would not include a case of mere
erroneous contractual interpretation, unless the
error of interpretation was fundamental, as in
Ssangyong Engineering, which resulted in the
award being contrary to the "most basic notions of
justice", which shocked the judicial conscience, in
which the arbitral tribunal substituted a clause in
the contract with another.
(ix) The Court cannot interfere with an arbitral award on the
ground that it does not do justice, in the opinion of the Court, as
that would require examination of the merits of the dispute,
which is proscribed.
(x) Infraction of fundamental policy of Indian law includes a
law meant to serve public interest or public good. Mere
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infraction of the municipal laws of India does not render the
award violative of the fundamental policy of Indian law.
(xi) An arbitral award infracts the fundamental policy of
Indian law if it contravenes all or any of the fundamental
principles which provide a basis for administration of justice
and enforcement of law in the country. This would include, for
example,
(a) violation of the principles of natural justice,
(b) disregarding orders of precedentially superior
Courts, or their binding effect, or
(c) violating laws linked to public good or public
interest.
(xii) "Justice" is nothing more or less than exact conformity to
some obligatory law.
(xiii) "Morality" includes agreements which cannot be
enforced given the prevailing mores of the day. That said, an
arbitral award can be set aside on the ground that it is contrary
to the most basic concepts of morality only if it shocks the
judicial conscience of the Court.
(xiv) An unreasoned award is patently illegal.
(xv) In the matter of interpretation of contractual covenants by
the arbitral tribunal, the following principles apply:
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(a) An interpretation which is completely
unacceptable, in that it is one which no fair-minded or
reasonable person would take, merits interference. If the
arbitrator adopts a view which is not a possible view, it
merits interference. An impossible view is one which no
reasonable body of persons could possibly have taken.
(b) The arbitral tribunal, being a creature of the
contract, cannot travel beyond it.
(c) An arbitral tribunal cannot rewrite the contract, or
substitute one clause with another.
(d) An arbitral tribunal cannot foist, on a party, a
covenant which is not to be found in the contract and is
not binding on it.
(e) An arbitral tribunal cannot proceed ex debito
justitiae, de hors the contract.
(f) The arbitral tribunal must also take into account
the usages of trade applicable to the transaction, while
interpreting the contract.
(g) An arbitrator has the jurisdiction to interpret a
contract having regards to its terms and conditions,
conduct of the parties including correspondences
exchanged, circumstances of the case, the manner in
which the parties worked out the contract, and pleadings
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of the parties. Thus viewed, if the interpretation accorded
by the arbitrator to the contract is based on a possible
view, the Court would not interfere.
(h) An unexpressed term can also be read into an
agreement if such a term was always and obviously
intended by the parties thereto. It must be a term which
goes without saying, which is necessary to give business
efficacy to the contract and which, although tacit, forms
part of the contract. It must, however,
(a) be just and equitable,
(b) be necessary to give business efficacy to the
contract, in that, if the contract is effective without
it, the term will not be implied,
(c) be obvious, in that it "goes without saying",
(d) be capable of clear expression, and
(e) not contradict any term of the contract.
14. With this background, I proceed to examine whether the
grounds on which the petitioner challenges the impugned award can
sustain as valid grounds, within the meaning of Section 34 of the 1996
Act.
15. To facilitate this, a tabular depiction of the grounds on which
the learned Arbitral Tribunal has allowed the claims of the respondent,
the grounds of challenge by the petitioner thereto, and the response of
the respondent thereto is separately provided as an Annexure-A to this
judgment.
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Analysis
16. A prismatic precedential view of the grounds of challenge, as
urged by NHAI, do not make out a case that suffices to set aside the
impugned award.
17. Re. Claim 3
17.1 Claim 3 was for losses suffered by Unitech owing to additional
mobilisation which it had to do, because of breach, by NHAI, with the
covenants of the CA with respect to the manner in which the project
site was to be handed over. From a reading of the grounds on which
NHAI has sought to challenge the award of the learned Arbitral
Tribunal on this Claim, it becomes apparent that there is no serious
dispute, by NHAI, with respect to the fact that delay was occasioned,
and that the project site had not been handed over by NHAI to Unitech
in the manner stipulated in the CA. NHAI has also not been able to
dent the finding of the learned Arbitral Tribunal, supported by letter
dated 5 December 2003 of the PE, that the site was handed over in bits
and pieces, and that Unitech had to work on whatever fragment of the
site was made available to it at a particular point of time. The PE
clarified that, while the CA envisaged handing over of the project site
to Unitech in 5 instalments, the site was handed over in 36 bits.
17.2 Once, on this factual aspect of the matter, NHAI has not been
able to put up any serious contest, the challenge by NHAI to the award
of the learned Arbitral Tribunal, qua Claim 3, loses much of its
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momentum.
17.3 It is not necessary to reiterate, here, the specific considerations
which prevailed on the Arbitral Tribunal to award Claim 3 to Unitech,
albeit in part, as they stand exhaustively set out in the tabular
statement annexed to this judgment. Suffice it to note that the Arbitral
Tribunal placed reliance on the letter dated 5 December 2003 of the
PE, while recommending grant of Extension of time49 till 20 April
2005, in which it was specifically noted that the project plan was not
provided by NHAI to Unitech in the manner envisaged by the CA and
that, as a result of having to work on the bits and pieces of the land
which was made available from time to time, massive time and
financial implications resulted to Unitech. It was also noted, in the
said letter, that the bits provided were not in kilometre sequence, with
the longest bits having been provided more than 13 months after the
commencement date. The Arbitral Tribunal also noted that, by
granting EOT without levying any liquidated damages as permissible
under Clause 47.1 of the GCC, NHAI had effectively acknowledged
the fact that no delay was attributable to Unitech. The very grant of
EOT was acknowledgement of the said fact, in Clause 44.1 of the CA.
17.4 NHAI's contention that Annexure I to the CA was only an
indicative list of the plant and equipment, and not the requirement that
Unitech was required to mobilise, is contrary to the very wordings of
Annexure I itself, which clearly stated that it was the "minimum plant
and equipment to be deployed by the contractor" and, further, that it
was the "Employers estimate of the minimum essential basic holding
49 "EOT" hereinafter
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of plant and mechanical equipment which the Contractor will require
in order to meet all of his performance obligations under the
Contract". The Arbitral Tribunal was, therefore, corrected its view
that Annexure I to the CA represented the plant and equipment which
was contractually required to be mobilised by Unitech in order to be
able to complete all its obligations under the CA. In any event, this is
a plausible interpretation of Annexure I to the CA and cannot,
therefore, merit interference under Section 34 of the 1996 Act.
17.5 NHAI's contention that, in para 17(ii) of the impugned award,
the Arbitral Tribunal had acknowledged the fact that Annexure I was
merely an indicative list of plant and equipment, and not the only
equipment or plant required to be mobilised by Unitech in order to be
able to complete the project, is incorrect on facts. There is no such
acknowledgement or acceptance in para 17(ii) of the award. In fact,
the Arbitral Tribunal has clearly noted, in the said paragraph, that,
while the machinery and equipment enlisted in Annexure I to the CA
did represent the minimum machinery required to complete the work
in the stipulated period, it was necessary to supplement the said
machinery with a number of other machines/equipments to make them
productive and that the details of such additional machinery and
equipment which Unitech had to deploy and employ were reflected in
the Monthly Project Reports, under the signature of the Team Leader.
These Monthly Project Reports were found, by the Arbitral Tribunal
to constitute "contemporaneous record", within the meaning of Clause
53.4 of the CA. This, again, is a purely subjective view of the Arbitral
Tribunal, based on its interpretation and understanding of the
expression "contemporaneous record" as employed in the CA, and
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cannot warrant judicial interference.
17.6 As has been correctly pointed out by Unitech, NHAI did not
lead any evidence to discredit, on facts, the assertion of Unitech
regarding deployment of additional plant and machinery, or the
findings of the Arbitral Tribunal in that regard. Inasmuch as Arbitral
Tribunal had relied on the working provided by NHAI itself with its
written submissions, after discarding the worksheet provided by
Unitech and substantially reducing the claim, from the amount of ₹
17,23,41,950/- claimed by Unitech to ₹ 3,59,78,180/-, actually
awarded by the Arbitral Tribunal, it cannot be said that NHAI has
succeeded in putting up any substantial opposition to the arbitral
award, qua Claim 3.
17.7 The reference, by NHAI, to the CA certificate provided by
Unitech was also, as Unitech correctly points out, misguided. NHAI
seeks to contend that the amount of ₹ 23,11,07,825/-, certified as
having been spent by Unitech between 8 June 2001 to 8 February
2004, as per the CA certificate, was discovered with the rate at which
Unitech was racing its claim for additional deployment of plant and
machinery. If the said rate were applied, NHAI's contention is that,
during the period of 32 months, even for the minimum plant and
machinery deployed by Unitech as per Annexure I to the CA, it should
have spent ₹ 30,72,57,600/-. As Unitech correctly points out, the
certificate of the CA is with respect to the claims as originally raised,
which included expenses towards POL50 and inherent idling. These
amounts had to be reduced from the figure of ₹ 30,72,57,600/-
50 Petroleum Oil and Lubricants
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certified by the CA, which would result in a net scheduled expenditure
of ₹ 8,17,61,247 which amount, from the actual expenditure of ₹
31,48,33,060/- reflected in the CA certificate, would result in
additional expenditure incurred by Unitech of ₹ 23,30,71,813/-. The
CA certificate, therefore, did not indicate that Unitech had not
incurred any additional expenditure, as NHAI sought to contend.
17.8 Insofar as NHAI's contention that the Arbitral Tribunal erred in
deducting, from the amount found to be payable to Unitech against
Claimed 3, the bonus of ₹ 3,87,01,242/-, is concerned, this aspect
stands correctly answered by Unitech both in its response with respect
to Claim 3 and with respect to Claim 7. Owing to the preachers on the
part of NHAI, Unitech was prevented from claiming bonus on account
of early completion of the work. It was for this reason that the Arbitral
Tribunal decided to uphold Unitech's claim to bonus under Claim 7
but failed twice not to duplicate the claim by also awarding an
equivalent amount towards additional mobilisation of plant and
machinery. Otherwise, Unitech could have been awarded ₹
7,46,79,422/- against Claim 3, as was correctly worked out by the
Arbitral Tribunal.
17.9 None of the submissions advanced by NHAI, to challenge the
impugned award , insofar as it awards Claim 3 to Unitech , albeit to
the extent of ₹ 3,59,78,180/-, therefore, impress.
18. Re. Claim 4
18.1 The awarding of Claim 4 of Unitech was but a sequitur the
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findings by the Arbitral Tribunal while awarding Claim 3. While
awarding Claim 3, the Arbitral Tribunal had specifically held the
MPRs for the period August 2001 to January 2005 to constitute
"contemporary record" within the meaning of Clause 53.4 of the
GCC, of the number of machinery, plant and equipments actually
deployed by Unitech. While awarding Claim 3, the Arbitral Tribunal
had also found the delay in completion of the project, beyond the
scheduled contract period, to be attributable to NHAI. Inasmuch as the
total value of the contract was ₹146,96,67,435/-, to be executed
within 32 months, the average work to be executed by Unitech per
month works out to ₹ 4,59,27,107/-. The total was executed by
Unitech was to the clone of ₹ 156,22,44,345/-. At the rate of rupees
for pros 59,27,107/- per month, it would take 34 months to execute
work valued at ₹ 156,22,44,345/-. This would imply 10 months
additional period of work, for which period Unitech would naturally
have to keep its plant, machinery and equipment mobilise, entitling it
to mobilisation charges as claimed. The amount awarded was worked
out on the basis of the Hire Charges from the Date at Book of the
MORTH51 , on the basis of which the idling cost of equipment for 10
months worked out to ₹ 3,29,95,870/-, which was, therefore, awarded.
18.2 NHAI's contention that the claim was allowed without evidence
is, therefore, incorrect, as the Arbitral Tribunal relied on the MPRs of
constituting contemporary record. Inasmuch as this was an exercise of
appreciation of evidence, and cannot be said to be initiated by
perversity, no case for interference therewith is made out. Notice it
possible to fault the Arbitral Tribunal for holding that Unitech was
51 Ministry of Road Transport and Highways Signature Not Verified
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entitled to additional payment for mobilisation of machinery, labour,
materials, overheads and site establishment during the period which
the contract was performed on account of NHAI's breaches. This
constituted a distinct claim, upon from Claim 3, which was for
additional plant and machinery, over and above the scheduled plant
and machinery enumerated in Annexure I to the CA.
18.3 It cannot be said, therefore, that, in awarding Claim 4, the
Arbitral Tribunal committed any such as would invite interference
under Section 34 of the 1996 Act. The reliance, by the Arbitral
Tribunal, on Section 73 of the Contract Act is also, in my view,
justify, as the charges which had to be spent by Unitech towards
mobilisation of plant, machinery, infrastructure, overheads, etc, during
the period performance of the contract was delayed owing to NHAI's
breaches, entitled Unitech for compensation under Section 73.
18.4 In working out the amount awardable to Unitech against this
Claim, the Arbitral Tribunal applied Hire Charges from the Data Book
of the MORTH, as was done in the case of Claim 3. As in the case of
Claim 3, once NHAI was found not to have any effective defence
against the findings of breaches of the CA in the matter of handing
over of the project planned for performance of the contract by
Unitech, and the consequent loss suffered by Unitech on that score, no
substantial defence to the awarding of Claim 4, by the Arbitral
Tribunal, can be said to exist. The claim has been awarded by the
Arbitral Tribunal for the period during which the minimum plant and
machinery, as envisaged by Annexure I to the CA could not be
operated to optimum capacity owing to the erratic manner in which
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the project land was made available to Unitech, and yet had to remain
mobilised at Unitech's expense. This was an additional expenditure
incurred by Unitech, over and above the expenditure in deploying
additional plant, machinery and equipment which formed subject
matter of Claim 3, and the decision of the Arbitral Tribunal to allow
the claim of Unitech, in that regard, even if only in part, cannot be said
to suffer from any patent legality or any of the other inhibiting factors
envisaged by Section 34 of the 1996 Act.
18.5 The submissions of Unitech, as contained in the tabular
statement and to this judgment, by way of response to NHAI's
objections to the awarding of Claim 4 are, therefore, convincing, and
merit acceptance.
18.6 NHAI's objections to the awarding of Claim 4 to Unitech are,
therefore, devoid of substance.
19. Re. Claim 7
19.1 The entitlement of Unitech to Claim 7, as awarded by the
Arbitral Tribunal, is self-evident, once the award in respect of Claim 3
is found to be sustainable. In fact, Claims 3, 4 and 7 merely represent
3 consequences which had necessarily to visit NHAI as a result of the
breach, by, of the covenants of the CA in the manner of handing over
of the project site and providing of the land in bits and pieces. NHAI
has not even attempted to dispute these facts and, therefore, the entire
challenge raised by it to the impugned award is fundamentally without
a foundation.
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19.2 NHAI's primary ground of challenge, to the awarding of Claim
7 by the Arbitral Tribunal, is that the award is contrary to Clause 47.3
of the Conditions of Particular Application52, which forbade grant of
bonus in cases where EOT was granted.
19.3 The argument, superficially seen, is undoubtedly attractive at
first blush. It may also be possible to argue that the Arbitral Tribunal,
as a creature of the CA, could not have declared Clause 47.3 to be
illegal or in conflict with Section 73 of the Contract Act.
19.4 However, in my opinion, the impugned award has to be read
holistically. It is clear that Unitech could not have been awarded
bonus, as bonus is payable, under Clause 47.3, only in the case of
early completion of the project. Inasmuch as the completion of the
project was delayed, no bonus, strictly speaking, could have been
awarded to Unitech.
19.5 The Arbitral Tribunal has, while adjudicating Claim 7, not
returned any finding that Unitech had completed the project work
early, or before time - as, indeed, it very well could not have. The
amount awarded under Claim 7 cannot, therefore, be regarded as
award of bonus as envisaged by Clause 47.3.
19.6 What the Arbitral Tribunal has in effect held is that Unitech was
handicapped from claiming bonus, or completing the work before
time, because of the delays on the part of NHAI. It has been
52 "COPA" hereinafter
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specifically observed, by the Arbitral Tribunal, that, though the PE
had, vide letter dated 5 May 2004, determined that Unitech was
entitled to EOT till 20 April 2005, and Unitech had also accepted EOT
date 20 April 2005, NHAI approved grant of EOT till 20 March 2005
only at a highly belated stage on 11 April 2005, nearly 2 months after
taking over certificate had been issued on 20 February 2005. Having
itself, thereby, delayed in granting EOT and hinder the progress of the
work, the Arbitral Tribunal has held Unitech entitled to be
recompensed therefor, even on principles akin to Section 73 of the
Contract Act.
19.7 As Unitech has correctly contended, the amount awarded under
Claim 7 and under Claim 3 are essentially 2 elements of 1 awarded
amount, related to the accumulated effect, on Unitech, of NHAI's
default on handing over the site in the manner envisaged by the CA,
providing land in bits and pieces, thereby hindering the progress of the
work and, even after EOT had been approved by the PE, sitting on the
approval for nearly a year before sanctioning the EOT. That this is
what the Arbitral Tribunal also intended a sapper and from the fact
that the amount awarded under Claim 7 has been deducted while
awarding Claim 3.
19.8 Viewed holistically, therefore, it cannot be said that, in
awarding Claim 7, the Arbitral Tribunal has awarded anything to
Unitech in excess than was its due.
20. Re. interest and costs
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20.1 NHAI has also, in its written submissions, questioned the
award, by the Arbitral Tribunal, of pre-reference and pendente lite
interest and costs.
20.2 At the very commencement of arguments, it was clearly stated,
by learned Counsel for NHAI, that it was restricting its challenge only
to the award in respect of Claims 3, 4 and 7.
20.3 It is not required for me, therefore, to return any findings with
respect to the challenge, in the written submissions, on the aspect of
interest and costs. Nonetheless, the award of interest, pendente lite and
pre-reference, is within the scope of authority of the Arbitral Tribunal
has conferred by Section 31(7)(a)53 of the 1996 Act, unless otherwise
agreed upon between the parties. NHAI has not drawn my attention to
any covenant in the CA or elsewhere, proscribing award of interest, to
Unitech, from the date when the amount became due to it.
20.4 Similarly, the power to grant costs vests in the Arbitral Tribunal
by Section 31(8)54 of the 1996 Act.
Conclusion
21. In the result, therefore, NHAI has not been able to make out any
case for interference with the impugned arbitral award, within the
parameters of Section 34 of the 1996 Act.
53 (7)(a) Unless otherwise agreed by the parties, where and in so far as an arbitral award is for the payment of
money, the arbitral tribunal may include in the sum for which the award is made interest, at such rate as it
deems reasonable, on the whole or any part of the money, for the whole or any part of the period between the
date on which the cause of action arose and the date on which the award is made.
54 (8)
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22. The petition is dismissed.
C. HARI SHANKAR, J.
MAY 30, 2025
dsn
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Annexure-A
Claim No. and Amount Reasoning of Arbitral Tribunal Grounds of challenge by petitioner Response by Respondent
nature of claim claimed
and awarded
Claim 3 Claimed (i) Part 1/4 of the CA at page 122 (i) Actual delay attributable to
set out the lengths of the NHAI was not determined. For
For loss suffered ₹ 172341950/- project site which were to be damages to sustain, there must
because of additional handed over by NHAI to not only be breach, but actual
mobilization made to Awarded Unitech at the commencement loss being suffered by the
overcome lapses of of the project and at 3, 6, 9 and opposite party as a result
NHAI, on site ₹ 35978180/- 12 months thence. Entire thereof. As such, for not having
handing over aspect stretch was to be handed over establish the causal relationship
by 7 June 2002. between the alleged breach of
contract by NHAI and loss
suffered by Unitech as a result,
the award was bad as violative
of public policy of India.
(ii) According to the CA, (ii) There was no evidence of the
(a) 22.845 km was to be time from which Unitech
completed by 21 months, deployed the additional
(b) 9.565 km was to be mobilization.
completed by 27 months
and
(c) 12.420 km was to be
completed by 32 months.
(iii) As per Clause 48.2 of the (iii) The additional deployment had
GCC, substantial completion not been bifurcated between
of the contract had taken place that required for claiming bonus
by 31 January 2005. and that required to complete
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the work.
(iv) The PE granted extension upto
20 April 2005 vide letter dated
5 May 2004 and NHAI
granted extension upto 20
March 2005 vide letter dated
11 April 2005.
(v) The PE, in his letter dated 5
December 2003
observed/confirmed that
(a) non-provision of land as
per the contract rendered
the contract inoperable
and redundant,
(b) working in bits and pieces
over the full length of the
contract, instead of
defined economical
sections as per the CA,
had massive time and
financial implications,
(c) land was given in 36 bits
instead of 5 bits as per
CA, and Unitech had to
work on any length/piece
of land which became
available,
(d) the bits were not in km
sequence either, thereby
making problems worse,
as many mor teams were
required at any one time to
work on all available
sections,
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(e) the longest bits of land of
4.8 km and 6.77 km were
given more than 13
months after the
commencement date, and
(f) the land bits availability
for work had to be
recorded in more than 92
separate sections, which
involved complex analysis
which would take more
time to resolve.
(vi) It was after the letters issued
by NHAI alleging lack in
performance by Unitech and
casting blame on it for delayed
completion of the contract that
EOT was given by NHAI.
The grievances must have
been considered before
granting EOT.
(vii) The issue was, therefore, to
determine who was
responsible for the delay
which necessitated EOT.
(viii) No Liquidated Damages55 had
been levied by NHAI though it
was permissible under Clause
47.1 of the GCC in the event
of delay or default by Unitech.
This also indicated that
Unitech was not liable for the
55 "LD" hereinafter
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delay.
(ix) Clause 44.1 stipulated that
Unitech would not be entitled
to EOT if delay was
attributable to it. The fact that
EOT was granted by NHAI
therefore indicated that
Unitech was not responsible
for the delay.
(x) Having granted EOT, NHAI
was estopped from contending
that Unitech was responsible
for the delay.
(xi) From the details of Plant and (iv) Annexure 1 to the CA only (i) Annexure I to the CA clearly
Machinery recorded in contained in the indicative list stated that it was the "minimum
monthly meetings with the of the plant and equipment, and plant and equipment to be
team leader for the period was not the only requirement deployed by the contractor". It
August 2001 to January 2005, that Unitech was required to clearly stated that it was "the
it was clear that, soon after the mobilize. This position had Employer's estimate of the
start, Unitech had deployed been accepted by the Arbitral minimum essential basic holding
sufficiently more machinery Tribunal in para 17(ii) of the of plant and mechanical
than the minimum specified in impugned Award. equipment which the Contractor
page 124 Annexure I of the will require in order to meet all
CA. These constituted of his performance obligations
"contemporary record" for the under the Contract".
purpose of Clause 53.4 of the (v) Failure, on Unitech's part, to (ii) It was based on this that Unitech
GCC, of the different types of issue a notice under Clause 53.1 assessed the equipment required
machinery employed at the of the GCC within 28 days of to carry out the work, which had
site. When, from this figure, arising of the claim was a fatal additional plant and machinery
the minimum machinery defect. As it commenced with a over and above that envisaged in
envisaged at Page 124 of non obstante clause, Clause Annexure I.
Annexure I of the CA was 53.1 would override Clause (iii) NHAI had not produced any
deducted, the additional 53.4, on which the Arbitral evidence to indicate that
machinery employed was Tribunal relied. Unitech's assessment was
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easily worked out. inaccurate.
(xii) Unitech's claim was therefore (vi) Clause 42.2 was wrongly
admissible under Clauses 42.2, invoked as no effort was made
53 and 69.4 of the GCC. by the Arbitral Tribunal to
verify the actual cost incurred
by Unitech. Instead, the
Arbitral Tribunal relied on
Annexure B to NHAI's written
submission which was
submitted without prejudice.
(vii) Clause 69.4 was irrelevant, as it
dealt with the right of Unitech
in the event of delay in payment
by NHAI. It entitled Unitech to
suspend of reduce the work or
progress of work and would
therefore militate against any
claim for additional
mobilization.
(xiii) Unitech's claim was also
admissible under Clause 73, as
it had suffered by the breach
on the part of NHAI in
handing over the site in the
manner envisaged in the CA.
(xiv) However, NHAI's contention (viii) The claim was allowed on the (iv) The AT had relied on the
that Unitech's quantification basis of computer generated Monthly Progress Reports56
of the additional machinery sheets with made up maintained by the PE which
deployed on the basis of calculations, which could not be constituted "contemporaneous
averages was exaggerated, was regarded as evidence at all. record". The actual deployment
56 "MPRs" hereinafter
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found to be acceptable. As of plant and machinery was
such, the absolute numbers vouchsafed by these records,
contained in the last column of which were independent and
the Table provided by NHAI admitted.
in Annexure A/Column 4 of (ix) Annexure A filed with NHAI's (v) The working out by Unitech,
Annexure B of its written written synopsis demonstrated based on averages, lost
synopsis was adopted. how the actual machinery significance as the Arbitral
deployed by Unitech was less Tribunal itself rejected it and
than the average deployment allowed the claim on the basis of
claimed by it. If credit was the working provided by NHAI.
given for this, the claim would
be reduced by ₹ 132538400/-.
(x) Annexure A to the written
synopsis of NHAI was not an
admission on its part but its
submission to demonstrate how
the claim was excessive.
(xi) Applying the rate employed by (vi) The Arbitral Tribunal had
Unitech, it should have spent ₹ applied the Hire Charges
307257600/- during the provided in the Data Book of the
scheduled contract period of 32 MORTH, which was a standard
months on the minimum plant text relied upon by Arbitral
and machinery which was Tribunals and which had also
contractually required to be passed judicial muster. Even
maintained by it. If it was from this, the Arbitral Tribunal
deploying additional resources, deducted Petroleum Oil and
this figure should have been Lubricants'57 expenses and
more. However, the Chartered inherent idling expenses, over
Accountant's certificate the amounts claimed by Unitech.
57 "POL" hereinafter
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produced by Unitech make it (vii) NHAI was misconstruing the
clear that Unitech suffered no CA certificate. The CA
loss and that it had expended certificate specifically stated that
only ₹ 231107825/- between 8 it was being submitted in support
June 2001 and 8 February 2004. of Unitech's claims. The
This was pointed out in claimed amounts did not include
Annexure C to NHAI's written POL and inherent idling. As
submissions but negated by the such, the net cost of plant and
Arbitral Tribunal on the ground machinery reflected in the CA
that the CA's certificate certificate also did not include
mentioned another figure of ₹ POV and idling charges. This
83725235/- for the period was also how the Arbitral
February 2004 to January 2005, Tribunal understood the
which was not relevant. working. To arrive at the net
cost of plant and machinery,
therefore, the amount of ₹
307257600/- had to be reduced
by 73.39% as held by the
Arbitral Tribunal. The net
scheduled expenditure therefore
worked out to ₹ 81761247/-. If
this amount was deducted from
the actual expenditure of ₹
314833060/- reflected in the CA
certificate, the net additional
expenditure incurred by Unitech
worked out to ₹ 233071813/-.
Thus, NHAI's contention, based
on the CA certificate, that
Unitech did not incur any
additional expenditure, was
incorrect.
(xii) The AT did not examine how a
claim of ₹ 95550000/- presented
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to the DRB and covering the
period till April 2004 swelled
up to ₹ 172391450/- before the
Arbitral Tribunal till December
2004/
(xv) Applying (xiii) Deduction of the claim for
(a) hire charges as per the bonus from the amount awarded
rates contained in the against Claim 3 was patently
Data Book of the Ministry illegal as, for earning bonus of ₹
of Road Transport & 38701242/-, Unitech would not
Highways58, and have deployed machinery or
(b) the cost for the resources worth the same
component of Plant and amount.
Machinery for the balance
work as on the scheduled
date of completion as
communicated by the PE
to the DRB,
to the Table provided by
NHAI, the cost of additional
mobilization of plant and
equipment was worked out to
₹ 74679422/-. Deducting,
from this, the admissible claim
of bonus raised by Unitech of
₹ 38701242/-, an amount of ₹
35978180/- was awarded.
Claim 4 Claim 4(a)
Re. Claim 4(a)
Compensation for Claimed
58 "MORTH" hereinafter
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losses incurred as a (i) The MPRs for the period (i) The claim was allowed without (i) The claim was for mobilization
consequence of ₹ 127336568/- August 2001 to January 2005 evidence. The claim was for of machinery, labour, materials,
breach of contract on have already been held to be "deemed idling", not for actual infrastructural facilities,
NHAI's part and Awarded contemporary record within idling. overheads and site
consequent the meaning of Claus 53.4 of establishment, etc., during the
prolongation of the ₹ 32995870/- the GCC, of the number of prolongation period. This was
contract period, on machinery actually deployed. merely termed "deemed idling".
mobilization of Claim 4(b) (ii) Unitech claimed that as the (ii) The two reasons for
machinery, labour, completion of the work was prolongation were accepted, viz.
materials, Claimed delayed by 12 months owing handing over of the land in bits
infrastructural to NHAI's lapse, for which and pieces and not providing the
facilities, overheads, ₹ 5072089/- purpose EOT was also project area in the manner as
site establishment, granted, the minimum scheduled in the CA.
etc. Awarded essential machinery lay idle (iii) On account of the breach by
for a period 8 June 2001 to 7 NHAI, the plant and machinery
Claim 4(a) Nil February 2004. mobilized by Unitech remained
idle and could not be utilized to
Idling of machinery Claim 4(c) optimum capacity.
and work force (ii) The claim was contrary to the (iv) There was no conflict between
Claimed Claim 3 for additional Claim 3 and Claim 4(a) as the
Claim 4(b) deployment of resources. It former was for additional plant
₹ 24793302/- could not be that the existing and machinery and the latter
Idling of materials deployed resources remained was for mobilization of
Awarded idle and Unitech nonetheless scheduled plant and machinery
Claim 4(c) had to deploy additional beyond the scheduled contract
₹ 17098829/- resources during the same period. This claim was also
Idle overheads period. supported by letter dated 5
December 2003 of the PE.
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(iii) Clauses 42, 63 and 69.4 of the
GCC and Section 7359 of the
Contract Act were not
applicable for the reasons
already stated in respect of
Claim 3.
(iii) The value of the contract was
₹ 1469667435/-, for a total
contract period of 32 months,
which worked out, pro rata, to
₹ 45927107/- per month.
Total value of work executed
by Unitech was ₹
1562244345/-. @ ₹
45927107/- per month, it
would take 34 months to
execute work valued at ₹
1562244345/-. This would
imply an additional period of
10 months at site. Unitech's
claim could only be, therefore,
for 10 months, not 12 months.
(iv) Applying the Hire Charges
from the Data Book of the
MORTH to each item (the
award tabulates this), the total
idling cost of equipment for 10
months worked out to ₹
59 73. Compensation for loss or damage caused by breach of contract. - When a contract has been broken, the party who suffers by such breach is entitled to receive, from the
party who has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach, or which the parties
knew, when they made the contract, to be likely to result from the breach of it.
Such compensation is not to be given for any remote and indirect loss or damage sustained by reason of the breach.
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32995870/-. This amount was,
therefore, awarded.
Re. Claim 4(c)
(i) Unitech claimed ₹ 24793302/-
for idle overheads and
establishment. The claim was
based on expenditure incurred
on overheads and
establishment during the
extended period from 6
February 2004 to 20 April
2005.
(ii) Clauses 42.2 and 69.4 of the
GCC provided for
determination by the PE of the
EOT under Clause 44 and
additional costs incurred, in
consultation with NHAI and
Unitech.
(iii) The entitlement of Unitech to (i) Mc Dermott was wrongly (i) The claim was not without
additional costs towards applied. Claim was without evidence, as Unitech had placed
overheads and decreased profit evidence. before the Arbitral Tribunal its
for the extended period could General Ledger and records as
not be denied, especially in evidence of expenses towards
view of the judgement of the overheads, establishment, salaries
Supreme Court in Mc Dermott and allowances, and a CA
International v Burn certificate certifying these
Standard Co. Ltd. In that expenses. Mc Dermott was
case, the Supreme Court also correctly applied.
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held that the manner of
computation of delay damages
was within the province of the
Arbitrator.
(iv) However, the additional period
would only be 10 months, and
not 12 months as claimed, as
already held supra.
(v) On proportionate basis, the
expenditure on overheads for
10 months worked out to ₹
17098829/-.
Claim 7 Claimed (i) The case set up by Unitech
was that
Extension of contract ₹ 88180046/- (a) the PE had granted EOT
and entitlement to under Clause 44.3 of the
bonus Awarded GCC upto 20 April 2005,
vide letter dated 5 May
₹ 38701242/- 2004, which had been
accepted by Unitech vide
letter dated 18 May 2004,
(b) Clause 44.3 proscribed
decrease of EOT
determined by the PE at
the stage of final review,
(c) Clause 2.1(b) of the GCC
deemed any such
authority exercised by the
PE to be with the approval
of the NHAI,
(d) however, NHAI was
granting only provisional
piece meal extensions,
with the last extension
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granted till 20 March
2005, which breached
Clause 44.3,
(e) Clause 47.3 of the GCC
provided for payment of
bonus for early
completion of the project,
(f) this Clause was unfair as
it denied bonus to the
contractor even when the
delay was attributable to
NHAI,
(g) substantial work had been
completed by Unitech by
October 2004, more than
6 months in advance of 20
April 2005, and
(h) Unitech was, therefore,
entitled to EOT till 20
April 2005 and for the
maximum bonus of 6%
for the period from
October 2004 to 20 April
2005.
(ii) Unitech's claim, on principle, (i) The award was contrary to (i) The claim was always for
was acceptable, because Clause 2.1(d) and Clause 47.3 of damages for the inability of
(a) the stipulated period for the Conditions of Particular Unitech to claim bonus due to the
completion of the contract Application. Clause 2.1(d) act of breach of contract by
was till 7 February 2004, required the PE to obtain the NHAI. Reference was invited to
(b) the PE had, vide letter specific approval of NHAI paras 9 to 16 of the Statement of
dated 5 May 2004, before granting EOT. NHAI's Claim.
determined EOT till 20 decision, therefore, prevailed. In
April 2005, holding that Unitech was entitled
(c) NHAI also consented to EOT till 20 April 2005,
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thereto, vide letter dated therefore, the Arbitral Tribunal
18 May 2004, transgressed the CA.
(d) it was only a year
thereafter, on 11 April
2005, after the taking over
certificate had been issued
(ii) The award was contradictory in (ii) It is for this reason that the
on 20 February 2005, that
terms, as, earlier, the Arbitral Arbitral Tribunal has deducted
NHAI granted EOT only
Tribunal held that Unitech had the amount awarded towards
till 20 March 2005,
been granted EOT till 20 March Claim 7 from the amount
(e) the delay in approval of
2005. awarded towards Claim 3.
EOT by NHAI was bound
NHAI's objection is based on the
to have affected the
erroneous premise that Claims 3
progress of the work and
and 7 have both been awarded.
cash flow, etc.,
(iii) The award was contrary to the
(f) in any case, there was no
specific prohibition in the CA to
justification for delaying
grant of bonus in the case of
grant of EOT after the
EOT.
taking over certificate had
been issued, and (iv) The Arbitral Tribunal exceeded
(g) Unitech was, therefore, its jurisdiction in holding Clause
entitled to EOT till 20 47.3 to be in conflict with
April 2005 as claimed, as Section 73 of the Contract Act.
per the determination by The decision in Sathyapalan was
the PE, distinguishable.
(h) EOT was given by the PE (v) The Arbitral Tribunal did not
without any levy of LD deal with the objection of the
under Clause 47.1, claim not having been presented
(i) in view of the judgement before the DRB.
of the Supreme Court in
K.N. Sathyapalan v State
of Kerala60, Clause 47.3,
to the extent it denied
60 (2007) 13 SCC 43
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bonus to Unitech even
where the EOT was owing
to defaults of NHAI, was
in conflict with Section 73
of the Contract Act, and
(j) Unitech's claim for bonus
was, therefore, justified.
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