Madras High Court
The Directorate General Of Light House ... vs M/S.Vignesh Marine Technical Services ... on 9 September, 2025
Author: N. Anand Venkatesh
Bench: N. Anand Venkatesh
Arb.O.P.(Com.Div.) No.542 of 2025
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 09.09.2025
CORAM
THE HONOURABLE Mr.JUSTICE N. ANAND VENKATESH
Arb.O.P.(Com.Div.) No.542 of 2025
AND
A.No.4416 of 2025
The Directorate General of Light House and Light Ships
“Deep Bhavan”, AB Sector-24
Gautam Budh Nagar, Noida 201 301
Rep. by the Director General .. Petitioner
Vs.
M/s.Vignesh Marine Technical Services Pvt. Ltd.
Plot No.3, 2nd Street, S1, Seenas Apartments
J.P.Nagar Extension, Surapet
Chennai, Tamil Nadu 600 066
Rep. by its Director Mr.N.Arunagiri .. Respondent
Petition filed under Section 34(2)(a)(iv); 32(2)(b)(ii) & (iii) and 34(2A)
of the Arbitration and Conciliation Act, 1996, read with Rule 3(ii) of the Madras
High Court (Arbitration) Rules, 2020 and with Section 2(1)(c)(vi) and 10(2) of
the Commercial Courts Act, 2015, to set aside the arbitral award dated
02.05.2025 to the extent of directing the petitioner to pay to the respondent, a
sum of Rs.1,14,68.408/- in respect of work order No.17/1/2004-D&P dated
01.02.2010, between the petitioner and the claimant in respect of the aforesaid
work order with cost.
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For petitioner : Mr.A.R.Sakthivel
Senior Panel Counsel
ORDER
This application has been filed under Section 34 of the Arbitration and
Conciliation Act, 1996 (for brevity hereinafter referred to as “the Act”),
challenging the Arbitral Award dated 02.05.2025, passed by the sole Arbitrator
directing the petitioner to pay the respondent a sum of Rs.1,14,68,408/-.
2. Heard the learned Senior Panel Counsel appearing on behalf of the
petitioner and carefully perused the materials available on record and more
particularly, the award passed by the sole Arbitrator dated 02.05.2025.
3. The respondent, in the course of their business, approached the
petitioner regarding the usage of Fiber Glass Reinforce Plastic (FRP) for
construction/erection purposes. On enquiry of the petitioner, for construction of
a light house using FRP components, the respondent submitted a detailed
project design, together with the costing of the same. The petitioner approved
the proposal of the respondent and the petitioner issued a Letter of Intent dated
19.08.2009 to the respondent for erection and fabrication of a light house.
Thereafter, a subsequent Letter of Intent dated 11.12.2009 was issued cancelling
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the previous Letter of Intent dated 19.08.2009. A Work Order dated 01.02.2010
was issued by the petitioner to the respondent for fabrication and erection of 30
meters High FRP Composite Tower as per specification and drawing at Rava
Port, Andhra Pradesh, for a total value of Rs.59,68,126/-. The project was to be
completed by 30.04.2010. The IIT, Madras, was engaged as a Consultant and
Inspection Authority. They studied the entire plan and sketch and suggested
suitable modifications, including the use of alternative raw materials. During
this process, the validity period of the project was extended periodically.
Thereafter, the IIT, Madras consultant preferred stronger resins for the project.
The respondent was bringing in various resins to be used as raw materials.
Ultimately, the final approval was granted by the petitioner for using Vinylester
Resin on 04.02.2013. In the meantime, three years had expired from the date of
the Work Order.
4. The project work was commenced only on 22.02.2013. In the
meantime, there was price escalation of raw materials and the petitioner asked
the respondent to continue the project and ultimately, the respondent completed
the project on 30.04.2014 and the light house was thrown open to the public
from November 2014.
5. The respondent was insisting for price escalation and increase in the
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project value and submitted all the documents in this regard. The IIT, Madras,
after scrutiny of all the documents, arrived at a sum of Rs.98,53,148/- being the
final escalated value of the project as against the original project value of
Rs.59,68,126/-. This was intimated to the respondent and the respondent
accordingly raised a bill for the said amount. Even thereafter, repeated
meetings were held by the Committee and there was absolutely no progress.
Aggrieved by the same, the respondent initiated legal proceedings before the
MSE Council on 19.10.2016. When a reply statement was filed by the
petitioner, the respondent came to know that the Committee had rejected the
claim for price escalation. As per the Reply Statement, the Committee Report
stated that the respondent was entitled to receive only a sum of Rs.7,33,440/-
along with 12.5% VAT amounting to Rs.91,680/- towards additional expenses
and price escalation. The respondent found this amount to be grossly
inadequate, considering the actual cost and expenses incurred duly backed by
original vouchers and bills.
6. The MSE Council, vide order dated 26.09.2018, referred the matter to
the Madras High Court Arbitration Centre, by consent given by both sides
resulting in the constitution of Arbitral Tribunal constituting of a sole Arbitrator
for adjudicating the claim made by the respondent.
7. Thereafter, a Claim Statement was made by the respondent for a sum
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of Rs.2,69,55,938/- along with interest.
8. The petitioner filed a detailed Statement of Defence completely
denying their liability towards both escalation cost as well as additional
expenditure claimed by the respondent.
9. The learned Arbitrator, on considering the Claim Statement and the
Defence taken by the petitioner, framed four issues for consideration. The first
issue is, as to whether the delay in completion of the project was attributable to
the petitioner or to the respondent (claimant). The second issue is, as to whether
the respondent (claimant) is entitled to price escalation associated with the
completion of the project. The third issue is, as to whether the IIT, Madras, had
arrived at Rs.98,53,148/- to be the final escalated value of the project as against
the original project value and the fourth issue is, as to whether the claimant had
incurred additional expenses of Rs.1,14,69,408.55 due to change in the original
project design.
10. First, second and fourth issues were decided in favour of the
respondent (claimant) and third issue was decided against the claimant.
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11. Aggrieved by the Award passed by the sole Arbitrator, the present
petition has been filed under Section 34 of the Act.
12. The main grounds that were raised by the learned Senior Panel
Counsel appearing on behalf of the petitioner is that there is patent illegality on
the face of the award and that the award was contrary to the terms of the
contract and the sole Arbitrator had not properly appreciated the evidence and
as a result, had rendered perverse findings and the award is contrary to Section
34(2)(a)(iv) and Section 34(2A) of the Act.
13. It was submitted that the work order dated 01.02.2010 was a fixed
price contract with no clause permitting escalation. Therefore, there is no
question of awarding escalation cost in favour of the respondent (claimant) and
it goes against the very terms of the contract. It was further contended that the
Work Order was for a fixed period and the delay in completion of the work was
only attributable to the respondent (claimant) and therefore, the claimant was
not entitled for any additional expenditure and the same was not even provided
under the contract and whatever was claimed by the respondent (claimant) was
completely awarded in his favour.
14. When it comes to interfering with an award under Section 34 of the
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Act, it is necessary that the Court must be satisfied that there is a patent
illegality which warrants setting aside a domestic award. The law on this issue
was succinctly captured by the Apex Court in the latest judgment in OPG
Power Generation Private Limited v. Enexio Power Cooling Solutions India
Private Limited and another [2025 (2) SCC 417]. Paragraph No.73 of the said
judgment is extracted hereunder:
“73. In a recent three-Judge Bench decision of this Court in
DMRC Ltd. v. Delhi Airport Metro Express (P) Ltd. [(2024)6 SCC 357],
the ground of patent illegality/perversity was delineated in the following
terms:
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. 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 its jurisdiction or violating a fundamental principle of
natural justice.”
15. The above judgment had taken into account of the earlier judgments
of the Apex Court and it was held that the Court exercising its jurisdiction under
Section 34 of the Act can interfere with an award only if the decision of the
Arbitrator is found to be perverse or it is so irrational that no reasonable person
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would have arrived at such a conclusion. The Court can also interfere where the
construction of contract is such that no fair or reasonable person would take the
view that the Arbitrator had taken and that is not even a possible view. An
award can also be rendered perverse, where the finding is based on no evidence
at all or the Arbitrator has ignored the vital evidence in arriving at the decision.
The Arbitrator can also be said to have committed a patent illegality by deciding
a matter not within its jurisdiction or by violating the fundamental principles of
natural justice.
16. In the case in hand, the entire dispute revolves around the Award
made under two heads viz., the escalation cost and the additional expenditure
incurred by the claimant. The main ground that was raised on the side of the
petitioner is that the Work Order neither provided for payment of escalation cost
or for additional expenditure. Therefore, the award of compensation under
these two heads is beyond the terms of the contract and consequently, the award
suffers from patent illegality.
17. This Court carefully went through the finding rendered by the learned
Arbitrator for the issues No.1 and 2. Issue No.1 pertains to the delay in
completion of the project and to whom such delay was attributable. The learned
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Arbitrator has dealt with the entire claim and the defence taken and also the
evidence on record and has come to a conclusion that the entire delay had taken
place due to factors outside the control of both the parties. Having rendered
such a finding, the learned Arbitrator went into the issue of price escalation.
The learned Arbitrator, in fact, dealt with the defence taken by the petitioner and
came to a conclusion that even if the agreement does not provide for
compensation under the head of price escalation, it can be given, where the
agreement does not specifically bar the payment of compensation under this
head. Having come to such a conclusion, the learned Arbitrator rendered a
finding that the delay in the completion of the project which resulted in the
increase in terms of cost and time was not attributable to the respondent
(claimant) and in the absence of any clause in the Work Order barring a claim
under price escalation, it was held that the respondent (claimant) is entitled to
price escalation associated with completion of the project. This Court does not
find any ground to interfere with the finding of the learned Arbitrator, since it
does not suffer from any infirmity. Probably, with the same materials, an
alternative interpretation can be given, but, that is not a ground for interfering
with the finding of the learned Arbitrator on this issue.
18. Insofar as the fixation of the value for the escalation cost, the learned
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Arbitrator has rightly relied upon the value fixed by the IIT, Madras at
Rs.98,53,148/- and the claim made by the respondent (claimant) under this head
was rejected. Therefore, the escalation cost fixed by the Arbitrator does not
require any interference by this Court.
19. The last issue with regard to the additional expenses that was incurred
by the respondent (claimant), the learned Senior Panel Counsel appearing on
behalf of the petitioner submitted that the petitioner had taken a very specific
stand that the Work Order was for a fixed cost and there was no scope for any
additional cost payable to the respondent (claimant) and this stand was
completely disregarded by the learned Arbitrator.
20. On carefully going through the findings rendered by the learned
Arbitrator for issue No.4, which deals with the additional expenditure claimed
by the respondent (claimant), it is seen that the learned Arbitrator has relied
upon various exhibits in order to support the total cost incurred by the
respondent (claimant) as additional expenditure. Even though the petitioner has
independently denied the claim made by the respondent (claimant) for price
escalation and the additional expenditure, the fact remains that the defence is
more or less common. The learned Arbitrator has held that the delay is not
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attributable to the respondent (claimant) and hence, the escalation cost was
granted and it was fixed based on the report of the IIT, Madras. If that is the
reason given for awarding escalation cost, there is absolutely no reason as to
why the respondent (claimant) must be denied the claim made for additional
expenditure. The reasoning given by the learned Arbitrator which is summed
up at paragraph 56 of the Award, does not suffer from patent illegality.
21. In the light of the above discussion, this Court does not find any
ground to interfere with the Award passed by the learned sole Arbitrator, since
the facts of this case and the grounds raised on the side of the petitioner does not
fall within any of the eight pigeon holes available under Section 34 of the Act.
Accordingly, this petition stands dismissed. No costs. Connected application
stands closed.
09.09.2025
gya
Index : Yes/No
Neutral Citation : Yes/No
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Arb.O.P.(Com.Div.) No.542 of 2025
N. ANAND VENKATESH, J.
gya
Arb.O.P.(Com.Div.) No.542 of 2025
09.09.2025
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