Orissa High Court
Unknown vs Sepco Electric Power ... on 27 September, 2023
IN THE HIGH COURT OF ORISSA AT CUTTACK
ARBA (ICA) No.1 of 2023
(From the judgment dated 17.06.2022 passed by the Learned
Single Judge, High Court of Orissa at Cuttack in Arbitration
Petition No.1 of 2021 arising out of arbitral award dated
07.09.2020 as corrected on 17.11.2020 passed by the Tribunal
consisting of Prof. Lawrence Boo BBM, Dr. Michael Pryles PBM
and Mr. Malcolm Homes QC)
GMR Kamalanga Energy Ltd. .... Appellant
-versus-
SEPCO Electric Power Construction .... Respondent
Corporation Tower, A, Chengcheng
Mansion No.10567, Jingshi Road Jinan,
Shandong, China.
Advocates appeared in the case:
For Appellant : Mr. Ashok Kumar Parija, Senior
Advocate
Mr. S.P. Mishra, Senior Advocate
assisted by Mr.Manav Gill,
Advocate
Mr.Ciccu Mukhopadhaya, Senior
Advocate
Mr.Anupam Rath, Advocate
Mr.Hriday Kochhar, Advocate
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
i
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
Mr.Navneet Dadhichi, Advocate
Ms.Aiswarya Ray, Advocate
Ms.Manisha Mishra, Advocate
Mr.Prashant Pakhidey, Advocate
Ms. Swastika Parija, Advocate
Mr. S. Satyakam, Advocate
Mr.Amritesh Mohanty, Advocate
Ms.Adhyasa Kar, Advocate
Mr. Nikhil Pratap, Advocate
Ms.Swadha Rath, Advocate
-versus-
For Respondent : Mr.Jayant Mehta, Senior
Advocate
Mr.Gautam Misra, Senior
Advocate
Mr. Samar Singh Kachwaha,
Advocate
Ms.Ankit Khushu, Advocate
Mr.Prasenjeet Mohapatra,
Advocate
Mr.Anupam Dash, Advocate
Mr.Adhiraj Mohanty, Advocate
Ms.Bhavna Chandak, Advocate
Mr.Raghav Bhatia, Advocate
Signature Not Verified
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Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
ii
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
CORAM:
THE CHIEF JUSTICE
DR.JUSTICE S.K. PANIGRAHI
DATE OF HEARING:-02.08.2023
DATE OF JUDGMENT:-27.09.2023
INDEX
SL. ITEM PAGE NO.
NO.
I. FACTUAL MATRIX OF THE CASE 1-8
II. APPELLANT'S SUBMISSIONS 8-11
III. RESPONDENT'S SUBMISSIONS 11-15
IV. ISSUES FOR CONSIDERATION 15-16
A. WHETHER THE TRIBUNAL 16-22
INTERPRETED THE
CONTRACTUAL
PROVISIONS CORRECTLY
IN ASSESSING THAT
ISSUANCE OF
CONTRACTUAL NOTICES
IS A CONDITION
PRECEDENT? IF SO, THEN
CAN THE CONDITION OF
ISSUANCE OF NOTICE BE
WAIVED AND WHETHER A
PARTY CAN CLAIM
ESTOPPEL CONSEQUENT
THERETO?
(i). Whether the condition of 22-45
issuance of contractual notices
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Designation: Assistant Registrar-cum-Senior Secretary
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Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
can be waived?
(ii). Whether the Parties can 45-55
claim estoppel in the given
circumstances?
B. WHETHER THE TRIBUNAL 56-58
BASED ITS ANALYSIS AND
FINDINGS ON MISTAKEN
FACTS?
C. WHETHER THE 58
TRIBUNAL'S
INTERPRETATION OF THE
CONTRACTUAL
PROVISIONS SHOCKS THE
CONSCIENCE OF THE
COURT?
(i) In ascertaining that the 58-78
Respondent was entitled to
delay related damages for
prolongation and/or
disruption costs given the
express terms of the
contract.
(ii) In ascertaining that the 78-81
agreements excluded the
common law right of
termination, such as
acceptance of repudiatory
breaches.
(iii) In ascertaining that the 81-125
Respondent was liable to
receive 5% of contractual
price upon completion of
the tests?
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Designation: Assistant Registrar-cum-Senior Secretary
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Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
D. WHETHER THE LD. SINGLE 125-129
JUDGE WAS CORRECT IN
DISMISSING THE SECTION
34 PETITION AT THE STAGE
OF ADMISSION WITHOUT
CONSIDERING ALL THE
ARGUMENTS MADE BY
THE PARTIES?
(i) Whether the Ld. Single 130-133
Judge was correct in
dismissing the appellant's
contentions pertaining to
bias being showcased by
the arbitral tribunal?
E. IN LIGHT OF THE ABOVE 133-157
WHETHER THE ORDERS OF
THE LD. SINGLE JUDGE
AND THE LD. ARBITRAL
TRIBUNAL HAVE
"SHOCKED THE
CONSCIENCE OF THIS
COURT", OR "ARE
CONTRARY TO THE BASIC
NOTIONS OF JUSTICE", OR
"ARE IN EXPRESS
VIOLATION OF SECTION
28(3) OF THE A&C ACT",
WHICH NECESSITATES
INTERFERENCE BY THIS
COURT UNDER SECTION 37
OF THE A&C ACT?
V. CONCLUSION 158-159
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Designation: Assistant Registrar-cum-Senior Secretary
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Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
Dr. S.K. Panigrahi, J.
1. The present Appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 (hereinafter referred to as "A&C Act")
has been preferred against the judgment dated 17.06.2022
passed by the Ld. Single Judge, High Court of Orissa at Cuttack
in Arbitration Petition No. 1 of 2021 arising out of the arbitral
award dated 7.9.2020 (as corrected on 17.11.2020) passed by the
Arbitral Tribunal consisting of Prof. Lawrence Boo BBM, Dr.
Michael Pryles PBM, and Mr. Malcolm Homes QC (hereinafter
referred to as "the Tribunal")
I. FACTUAL MATRIX OF THE CASE:
2. GMR Kamalanga Energy Ltd. (hereinafter referred to as "GKEL
/ Owner/ Appellant") and SEPCO Electric Power Construction
Corporation (hereinafter referred to as "SEPCO / Civil
Contractor / Respondent") came together in 2008 for the
construction and subsequent operation of three 350 MW coal
fired thermal power plants at Kamalanga village, Dhenkanal in
Odisha. The Parties entered into four Agreements for the
execution of the aforementioned Project, namely:
i. Agreement for Civil Works and Engineering,
Erection, Testing and Commissioning (hereinafter
referred to as the "CWEETC Agreement") dated
28.8.2008 and further amended on 26.5.2009,
31.5.2010, 15.2.2011, 4.4.2013.
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Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
ii. Guarantee and Coordination Agreement dated
28.8.2008 and further amended on 31.5.2010.
iii. Onshore Supply Agreement dated 28.8.2008 and
further amended on 26.5.2009, 31.5.2010, 15.2.2011.
iv. Offshore Supply Agreement dated 28.8.2008 and
further amended on 18.5.2009, 26.5.2009, 31.5.2010.
3. A fourth, 350MW, unit was added to the project by mutual
consent of the parties on 31.5.2020 and the aforementioned
agreements were, thereafter, suitably amended. It is pertinent
to note, at this juncture, that work against the fourth unit was
subsequently suspended due to issues faced in the execution of
the project.
4. The present Respondent demobilized from the Project site
without completing the project around January, 2015. Disputes
had arisen between the parties in relation to the delays in
construction and various technical issues relating to the
construction and operation of the plant. Resultantly, on
30.3.2015, the Respondent served a 'notice of dispute' against
the Appellant and initiated arbitration proceedings by its
Notice of Arbitration dated 8.6.2015. An Arbitral Tribunal was
constituted to adjudicate upon the disputes between the parties
comprising of Prof. Lawrence Boo BBM, Dr. Michael Pryles
PBM, and Mr. Malcolm Homes QC. As per the agreement
between the parties, the Governing Law was English Law and
the arbitration was to be decided in accordance with the Indian
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Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
A&C Act. The "seat" of arbitration was India though the
"venue" was determined to be in Singapore. The relevant
portion of the Agreement between the parties is reproduced
hereinbelow for the sake of convenience:
"21.4 Arbitration
21.4.1 Any Dispute which has not been resolved
by negotiation and mediation pursuant to
Section 21.3 shall, following notice by
either Party be exclusively and finally
decided by arbitration in Singapore in
accordance with the provisions of the
(Indian) Arbitration and Conciliation Act,
1996 or any re-enactment or modification
thereof. Save as specified in this Section
21.4.1, no arbitration provisions contained
in any other law, shall apply to arbitration
of any Dispute.
21.4.2 Pursuant to Section 21.4.1, either Party
may notify the other party by a written
notice clearly stating all the Disputes to be
decided by the arbitral tribunal, appointing
its own arbitrator and calling upon the
other party to appoint its arbitrator within
thirty (30) days from the date of receipt of
such notice.
(i) Both the arbitrators appointed by
the Parties shall then appoint the
third arbitrator, who shall act as
chairman of the tribunal, and if the
chairman is not appointed within
thirty (30) days of the date of
appointment of the later of the two
(2) arbitrators appointed by the
Parties or if a Party does not
Signature Not Verified appoint an arbitrator within (30)
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Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
days of the date of receipt of the
notice of the other party, the
chairman and/or the arbitrator to be
appointed by a Party (such Party
having failed to appoint the
arbitrator) shall be appointed in
accordance with the provisions of
the (Indian) Arbitration and
Conciliation Act, 1996.
(ii) Each arbitrator shall be and remain
independent and impartial, and no
arbitrator shall be of the same
nationality as any Party.
21.4.3 The arbitrators shall drew up, and submit
to the Parties for signature, the terms of
reference within fifteen (15) days of the
appointment of the third arbitrator. The
terms of reference shall include a list of
issues to be determined.
21.4.4 Neither Party shall be required to give
general disclosure of documents, but may be
required to produce documents which are
relevant to the Dispute.
21.4.5 The arbitral proceedings shall be conducted
in the English language.
21.4.6 [NOT USED]
21.4.7 The arbitral award shall be final and
binding upon the Parties and enforceable by
any court having jurisdiction for this
purpose. The arbitral award may be
enforced against the Parties to the
arbitration proceeding or their assets
wherever they may be found and a
judgment upon the arbitral award may be
entered in any court having jurisdiction.
25.2 Choice of law
Signature Not Verified 25.2.1 Governing law
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Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
This Agreement shall be governed by and
construed in accordance with the laws of
England. The United Nations Convention
on Contracts for the International" Sale of
Goods shall not apply to this Agreement."
5. The Arbitral Tribunal agreed to the terms and entered into
reference on 17.10.2016. On 7.9.2020, it issued the Arbitral
Award in relation to all matters except interest and costs. Then,
on 17.11.2020, the Arbitral Tribunal issued a corrected award
under Section 33 of the A&C Act, wherein it held that the
present Appellant should pay approximately Rs.1100 crores to
the Respondent. The Arbitral Tribunal issued the final award
dated 24.6.2021 on the issues of interest and costs. The present
arbitration is an International Commercial Arbitration
governed by Part I of the A&C Act.
6. The present Appellant preferred a petition under Section 34 of
the A&C Act against the aforementioned award as well as
moved an application requesting a stay against the
aforementioned award on multiple grounds before this Court.
The same was registered as ARBP (ICA) No.1 of 2021.
7. On 1.9.2021, during the hearing of the Section 34 petition
preferred by the present Appellant, the Single Judge heard the
parties on the question of "admission" of the Section 34
petition and the stay application preferred under Section 36(2)
of the A&C Act. Without any further hearing, the Learned
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Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
Single Judge dismissed the petition vide judgment dated
17.6.2022 under Section 34 of the A&C Act and held as follows:
"27. In the result, this petition under Section 34 of
the Arbitration Act does not justify to be considered
for a detailed hearing. Accordingly, the petition
under Section 34 of the Arbitration Act is dismissed
and in the circumstances there shall be no order as to
costs.
28. As the petition under Section 34 of the
Arbitration Act is dismissed, no separate order is
required to be passed under Section 17 of the
Arbitration Act."
8. Aggrieved, the present Appellant approached the Supreme
Court in SLP(C) No. 12194 of 2022. The Supreme Court of India
vide its order dated 25.7.2022 issued notice and stayed the
operation of the Single Judge's judgment dated 17.6.2022.
Subsequently, vide order dated 15.5.2023, the Supreme Court
permitted the present Appellant to approach this Court by way
of an appeal under Section 37 of the A&C Act. The relevant
portion of order dated 15.5.2023 is reproduced hereinbelow:
"The present special leave petition is disposed of in
terms of the following directions.
1.The Chief Justice, Orissa High Court is requested
to constitute a Commercial Appellate Division
under Section 5 of the Commercial Courts Act, 2015
to hear the appeal under Section 37 against the order
dated 17.06.2022 passed by Ld. Single Judge.
2. The petitioner has undertaken to file a Section 37
Appeal, urging all contentions/grounds averred in
the SLP, against the said order of the learned Single
Judge within a period of 8 weeks (as prescribed in
Signature Not Verified Section 13(1A) of the Commercial Courts Act,
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Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
2015) from the date of constitution of the
Commercial Appellate Division.
3. It is open to the parties to urge all contention,
including objections by the petitioner and all other
contentions of the respondent, on all aspects.
It is argued on behalf of the respondent that the
financial condition of the petitioner and its
holdingcompany are precarious. A pointed reference
was made to the auditor's report of the petitioner as
well as its holding company, which were brought on
record.
Learned counsel also relied upon the general
approach of this Court in regard to entertaining
applications for interim stay or other interim relief,
during the pendency of objections under Section 34
or even appeal under Section 37 to interdict the
operation of the award and oppose the request for
continuation of the interim order. It is submitted
that by rights, the petitioner is under a duty to
deposit the entire awarded amount.
Having considered the totality of circumstances, this
Court is of the opinion that the interim order should
enure and bind the parties till 30th June, 2023 to
enable the Commercial Appellate Division to hear
arguments on this aspect. Neither the interim order
of this Court dated 25.07.2022 nor any contention
urged on behalf of the parties for its continuation or
vacation shall be considered conclusive and all
rights and contentions, in this regard, are kept open.
The special leave petition is disposed of in the above
terms. Pending applications, if any, are disposed of."
9. Here, it is relevant to point out that this Court has been tasked
by the Supreme Court to consider all contentions of the parties
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Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
with regards to the matter in hand in this appeal under Section
37 against the order of the learned Single Judge.
10.Now, the broad factual matrix leading up to the instant Appeal
have been laid down, this Court shall endeavour to summarise
the contentions of the Parties and the broad grounds that have
been urged seeking the exercise of this Court's narrow
jurisdiction available under Section 37 of the A&C Act.
II. APPELLANT'S SUBMISSIONS:
11.It is submitted by Learned Senior Counsel for the Appellant
that issuance of notice is a condition precedent for the
Respondent to make any claim for changes in the contract price
or for seeking extension of time. The Learned Tribunal
erroneously held that the Appellant is estopped from seeking
enforcement of contractual notice provisions relying primarily
upon its e-mail dated 18.3.2012 without appreciating the
context in which it was sent. Thus, it is argued that the finding
of the Tribunal that compliance with the contractual notice was
waived with effect from March, 2012 is contrary to law.
Further, in holding so, the Tribunal has prevented the
Appellant from raising the plea of lack of contractual notice by
the Respondent in various claims, such as those pertaining to,
inter alia, Grid Synchronisation (Issue No.6), Fuel oil (Issue
No.7), Coal (Issue No.8), UCT-PGT (Issue No.10);
consequentially, the Tribunal allowed the Respondent's claims
for extension of time and prolongation costs for delay which
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Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
were barred by the Respondent's admitted failure to issue
notices. In that process, the Tribunal awarded prolongation
cost of Rs.70-80 crores (approx.) which consequently led to
reduction in the amount of liquidated damages recoverable by
the Appellant from the Respondent by Rs.100 crore
approximately.
12.While dealing with the issue, the Tribunal has treated the
parties unequally by applying a different standard to each of
the parties by disallowing the Appellant's counter-claim
amounting to more than Rs.150 crores approximately at the
threshold; on the basis that the Appellant had failed to serve
notice even though such claim for default arose after March,
2012. Thus, by rejecting the claim of the Appellant in its
counter-claim and allowing the same in favour of the
Respondent, the total impact was approximately Rs.300 crores
on the Appellant.
13.It is further submitted that the Tribunal has made out a case in
favour of the Respondent, which was neither pleaded nor
argued. It was not the case of the Respondent that there were
separate agreements, which constituted estoppel, i.e., (a) that
there was an agreement of 2010, which constituted an estoppel
going forward all the way till end of the project execution; and
alternatively (b) that if there was no agreement of March, 2010,
then there was an agreement of March, 2012 which constituted
an estoppel not to give any further contractual notices. Further,
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Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
the plea of the Respondent of waiver or estoppel arising out of
events of March 2010 being rejected by the Tribunal (paragraph
226 of the award) the very basis of the Respondent's claim that
an estoppel or waiver would be operative taking into
consideration the events of March, 2012 could not have been
accepted by the Tribunal, ignoring the Respondent's own case.
Therefore, the Tribunal has made out an entirely new case in
favour of the Respondent based on the events of March, 2012 to
which the Appellant did not have any opportunity to respond
to or lead evidence controverting it. Further, even if it is
presumed that the Respondent had pleaded the case of waiver
or estoppel based upon the events of March, 2012, then the
Appellant would have produced further contractual notices
issued by the parties based on events of March, 2012 and
subsequent thereto.
14.It is also contended that the Tribunal has modified the contract
between the parties by holding that parties had mutually
waived the requirement to issue contractual notices. The
Arbitral Tribunal failed to appreciate that the claim of estoppel
would fail as it was inconsistent with and derogatory to the
express language of Section 25.5.3 of the Amended CWEETC
Agreement. It is trite law that an Arbitral Tribunal cannot act
outside the four corners of the contract or against the express
terms of the contract before it. The Tribunal has no jurisdiction
to modify the terms of a contract as has been done in the
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Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
instant case. The Tribunal has failed to take into consideration
that the E-mail dated 18th March, 2012 from Mr. Rao (the
Appellant's representative) was a simple request to the
Respondent to withdraw its letter of suspension and nothing
more. But the Tribunal by an erroneous reading of the email
came to a finding that Mr. Rao was asking the Respondent not
to issue formal notices for any matter or claims in the future
unconnected with suspension, carte blanche. Although in the
meeting dated 13th March, 2012, the Respondent agreed to
withdraw its letter of suspension by 14th March, 2012, but it
was not done. In fact, the suspension was withdrawn only
when the Appellant had established Letters of Credit (L/C) of
1266000 dollars and 11450000 dollars. Thus, it is argued that
withdrawal of the suspension letter by the Respondent was on
the basis of a positive action i.e. pending payments being made
by the Appellant and not on the basis of the E-mail of March,
2012. Thus, the Tribunal has acted in excess of its jurisdiction
by modifying/amending the notice clause in the Agreement
and unilaterally re-writing the contract.
III. RESPONDENT'S SUBMISSIONS:
15.Per contra, it is submitted by Learned Senior Counsel for the
Respondent that the scope of interference by the courts in an
arbitration proceeding under Section 37 is narrower compared
to scope of interference under Section 34 of the A&C Act. To
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Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
substantiate his submissions, Learned Senior Counsel has
relied upon the judgments rendered by the Supreme Court of
India in the case of Gemini Bay Transcription Pvt. Ltd. v.
Integrated Sales Service Ltd.1and Ssangyong Engineering &
Construction Co. Ltd. v. NHAI.2
16.Additionally, the Respondent also seeks to rely on various
judgments of this Court as well the High Court of Tripura and
the High Court of Delhi, namely, Kali Karnakar v. State of
Tripura and Ors.,3Mahanagar Telephone Nigam Limited v.
Fujhitshu India Private Limited,4 HCIL-Adhikarya-ARSS (JV)
v. RAHEE-GPT (JV),5New India Assurance Co. Ltd. v. Orissa
State Warehousing Corporation,6 and United India Insurance
Company Limited v. SuryoUdyog Limited7. It is submitted that
while entertaining appeals under Section 37 of the A&C Act,
the Court is not actually sitting as a Court of Appeal over the
award of the Arbitral Tribunal, and therefore the Court ought
not to re-assess or re-appreciate evidence. It is also stated that
the Arbitral Tribunal is the final arbiter on facts as well as law,
and even errors, factual or legal, which stop short of perversity,
do not merit interference under Section 34 or under Section 37
of the A & C Act.
(2022) 1 SCC 753
(2019) 15 SCC 131
2015 SCC OnLine Tri 923
2015 SCC Online Del 7437
2023 SCC OnLineOri 2406
Orissa HC ARBA No. 24 of 2019
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Orissa HC ARBA Nos.39 and 41 of 2018
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Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
17.It is submitted that the impugned award is anunanimous one
and has been rendered by the Arbitral Tribunal having three
members of repute in the matter of arbitration. The petition is
challenging the merit of the dispute and it is an attempt to
persuade this Court to re-appreciate the evidence which is ex
facie in the teeth of the scope of Section 34 of the Arbitration
Act. The scope and ambit of Section 34 does not permit the
Petitioner to seek factual, evidentiary or legal review of the
findings of the award.
18.Amendment to Section 34 introduced in 2015 further restricts
the scope of interference with the arbitral award on the ground
of public policy under Section 34(2)(b)(ii) of the Arbitration Act
on three heads, such as (i) fraud or corruption; (ii)
contravention of fundamental policy of Indian law; or (iii)
conflict with most basic notions of morality or justice
(Explanation-1). An important caveat stressed upon is the
clause added in Explanation-2 according to which 'no review
on merits of the award is allowed'. Interference of the arbitral
award on the ground of patent illegality is also not available in
an international commercial arbitration in view of Section 34(2)
of the Arbitration Act. Referring proviso to Section 34(2A) of the
Arbitration Act, it is submitted that even a domestic award
shall not be set aside merely on the ground of erroneous
application of law or by re-appreciation of evidence. Thus, the
merit of international commercial arbitral award is completely
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Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
beyond the scope of challenge under Section 34 of the
Arbitration Act. That the Appellant endeavored to challenge
the impugned award on the issue of bias, violation of natural
justice and perversity. It is submitted that these terms, though
on the face of it are attractive, are completely misplaced and are
nothing but fanciful expressions to camouflage its attempt to
seek a factual review of the award. In order to buttress the
argument of 'bias', the Appellant made a desperate attempt to
argue on the merit of the dispute, which is against the very
scheme of the Arbitration Act. It is nothing but an attempt to
circumvent the statutory prohibition to challenge an award on
the ground of merit.
19.It was further submitted that the Tribunal in its finding of
waiver and estoppel has limited the scope of applicability of
waiver and estoppel to notices arising out of delays and costs,
and not to all the notices required as per the terms of the
Agreement. Learned Counsel for the Respondent further
contended that the Tribunal has adhered to the principles of
equity enshrined in the Indian Contract Act and correctly held
that there was estoppel by conduct limited to notices arising
out of delays and costs. It is submitted that the present
Appellant has taken the benefit of the application of this
estoppel by claiming costs for defects that were notified in the
R173 Joint Protocol but raised an issue only when the
Respondent was allowed certain claims on the self-same
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Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
standards. It was also brought to our notice that it is the
Appellant itself who proposed adopting a "cooperative
approach" with regards to issuance of notices.
20.It was also contended by the learned counsel for the
Respondent that the Appellant contended that it was unable to
present its case and therefore, the principle of natural justice
has been violated. Inability to present its case refers to a
situation where the evidence, documents or submission are
accepted behind the back of the party and the party is deprived
of an opportunity to comment on the same. This ground would
cover facets of natural justice and fair hearing, but cannot be
used to challenge an award on merits by nit-picking the facts.
The breach of the principles of natural justice has to be made
out distinctly.
IV. ISSUES FOR CONSIDERATION:
21.Having heard the parties, we have also perused the materials
available on record, including the following documents filed by
the Parties to aid the hearing of the present lis at hand:
i. By the Appellant:
- Convenience Compilation dated 19.7.2023
- Judgment Compilation dated 19.7.2023
- Note of Arguments on behalf of the Appellant -
Part I dated 19.7.2023
- Compilation of Notices dated 20.7.2023
- Note of Arguments on behalf of the Appellant -
Part II and III dated 25.7.2023
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Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
- Additional Judgment Compilation dated
25.7.2023
- Written Submissions dated 7.8.2023
ii. By the Respondent:
- Brief Submissions on behalf of the Respondent
dated 18.7.2023
- Note on Respondent's Oral Submissions Part I
dated 27.7.2023
- Compilation of Documents on behalf of SEPCO
dated 27.7.203
- Compilation of Judgments on behalf of SEPCO
dated 27.7.2023
- Note on Respondent's Oral Submissions Part II
dated 1.8.2023
- Relevant extracts of cross examination of Mr.
Prudhoe submitted on 1.8.2023
- Relevant extracts of key judgments relied upon
by the Respondent dated 2.8.2023
- Extracts from SEPCO's Post Hearing
Submissions, Vol-9 submitted on 2.8.2023
- Post Hearing Submissions by the Respondent
dated 11.8.2023
22. Accordingly, this court has identified the following issues to
be determined which have emerged contentiously during the
course of the hearing and is germane to finally decide the lis at
hand;
THE A. WHETHER
TRIBUNAL INTERPRETED THE
CONTRACTUAL PROVISIONS CORRECTLY IN
ASSESSING THAT ISSUANCE OF CONTRACTUAL
NOTICES IS A CONDITION PRECEDENT? IF SO, THEN
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CAN THE CONDITION OF ISSUANCE OF NOTICE BE
WAIVED AND WHETHER A PARTY CAN CLAIM
ESTOPPEL CONSEQUENT THERETO?
23. Before adverting to our analysis against the submissions, we
consider it apposite to refer to Section 28 of the A&C Act. The
same is reproduced herein below for ready reference:
"28. Rules applicable to substance of dispute.--(1)
Where the place of arbitration is situate in India,--
(a) in an arbitration other than an international
commercial arbitration, the arbitral tribunal shall
decide the dispute submitted to arbitration in
accordance with the substantive law for the time
being in force in India;
(b) In international commercial arbitration,--
(i) the arbitral tribunal shall decide the
dispute in accordance with the rules of law
designated by the parties as applicable to the
substance of the dispute;
(ii) any designation by the parties of the law
or legal system of a given country shall be
construed, unless otherwise expressed, as
directly referring to the substantive law of
that country and not to its conflict of laws
rules;
(iii) failing any designation of the law under
clause (a) by the parties, the arbitral tribunal
shall apply the rules of law it considers to be
appropriate given all the circumstances
surrounding the dispute.
(2) The arbitral tribunal shall decide ex aequoet bono
or as amiable compositeur only if the parties have
expressly authorised it to do so.
[(3) While deciding and making an award, the
arbitral tribunal shall, in all cases, take into account
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the terms of the contract and trade usages applicable
to the transaction.]"
(Emphasis is ours)
24.The language used in Section 28 of the A&C Act uses the words
"shall" and "in all cases" with reference to the Tribunal's
bounden duty to "take into account the terms of the contract".
Meaning thereby, that the Arbitral Tribunal while deciding the
lis before it is bound to take into account the terms of the
contract and the same shall bind it.
25.Now, adverting to the contentious clauses of the CWEETC
Agreement relevant to this issue, the same are being
reproduced herein below for the sake of convenience in their
order as per their occurrence in the Agreement itself. The same
are:
"4.2.5 Procedure for claiming change in
Contract Price
4.2.5.1 As soon as reasonably practicable after the
date of the notice given pursuant to Section
4.2.2, the Civil Contractor shall submit to the
Owner detailed particulars of its claim for an
increase in the Contract Price including
details of costs (to the extent the Civil
Contractor has complied with its obligations
under Section 4.2.6).
4.2.5.2 The Civil Contractor shall promptly submit
such further particulars as the Owner may
reasonably require to assess the validity of the
claim or any item of it but the Civil
Contractor shall, in any event. submit details
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by reason of one of the events referred to in
Section 4.2.1 within thirty (30) days of such
costs being incurred.
4.2.5.3 In any case where the Civil Contractor
considers it is entitled to an increase in the
Contract Price under this Section 4.2, it shall
keep detailed contemporary records of the costs
it incurs in relation to the matter in question
and such records shall be open to inspection
by designated representatives of the Owner at
all reasonable times.
4.2.8 Adjustments to the Agreement
Any adjustment to the Contract Price pursuant to
the procedure set out in this Section 4.2 or
extension to any Milestones Date and/or
Guaranteed Date of Completion pursuant to
the procedure set out in Section 7.3 shall be
recorded in a statement entitled "Adjustment
to the Agreement" signed by both Parties -
following agreement pursuant to Section 7.3
or Section 4.2 (as applicable) or resolution
pursuant to Section 21.5 which shall specify.
in the case of adjustments to the Contract
Price, the Contract Price immediately prior to
any such adjustment, the amount of such
adjustment pursuant to such agreement or
resolution and the revised Contract Price and
in the case of any extension, the revised
Milestone Dates and/or Guaranteed Date of
Completion pursuant to Section 7.3.
25.1.4 Communications
25.1.4.1All written communications required under
this Agreement from or on behalf of the
Owner will be sent to the Civil Contractor for
the attention of the Civil Contractor's Project
Manager or site manager for the Works. The
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Civil Contractor shall, unless the Parties
otherwise agree have no obligation to consider
any written communication which is not sent
in accordance with this Section 25.1.4.1.
25.1.4.2 Any written communication required to be
given under this Agreement to the Owner by
the Civil Contractor shall be sent by the Civil
Contractor's Project Manager or site manager
and any written Civil communication sent by
any such person shall be binding on the
Contractor. The Owner shall have no
obligation to consider any written
communication which is not sent in
accordance with this Section 25.1.4.2.
25.5 No Waiver or Variation
25.5.1No failure or neglect on the part of either
Party to exercise its rights or remedies let
under this Agreement and no single or partial
exercise thereof shall preclude any further or
other exercise of such rights and remedies.
25.5.2Any delay, waiver or omission by either Party
to exercise any right or power arising from
any breach or default by the other Party in
any of the terms or provisions of this
Agreement shall not be construed to be a
waiver of such breach or default or subsequent
breach or default of the same or other terms,
provisions or covenants.
25.5.3Without prejudice to Section 4.2 and the issue
of any Variation Order, no Variation,
amendment, supplement, modification or
waiver of this Agreement shall be effective
unless in writing and signed by or on behalf of
each Party."
(underlining is ours)
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Designation: Assistant Registrar-cum-Senior Secretary
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Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
26.Here, it is relevant to summon the latin maxim of
interpretation: 'Ex praecedentibus et consequentibus optima fit
interpretatio.' - the best interpretation is made from the context.
Every contract is to be construed with reference to its object
and the whole of its terms. The whole context must be
considered to ascertain the intention of the parties. It is an
accepted principle of construction that the sense and meaning
of the parties in any particular part of instrument may be
collected 'ex antecedentibusetconsequentibus', every part of it may
be brought into action in order to collect from the whole one
uniform and consistent sense, if that is possible.
27.The Supreme Court in Provash Chandra Dalui v. Biswanath
Banerjee8 intricately dealt with the conundrums of contractual
interpretation and in conclusion, Saikia, K.N. (J) opined that:
"10. In construing a contract the court must look at
the words used in the contract unless they are such
that one may suspect that they do not convey the
intention correctly. If the words are clear, there is
very little the court can do about it. In the
construction of a written instrument it is legitimate
in order to ascertain the true meaning of the words
used and if that be doubtful it is legitimate to have
regard to the circumstances surrounding their
creation and the subject-matter to which it was
designed and intended they should apply."
28.The above cited principle of interpretation has universal
application transcending national jurisdictions. A reference
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1989 Supp (1) SCC 487
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could be made to the pronouncement made by the Supreme
Court of Appeal of South Africa in Iveco South Africa (Pty)
Ltd v Centurion Bus Manufacturers (Pty) Ltd9 wherein it was
pronounced that:
"It is trite law that the provisions of an agreement
must be read and understood in the context within,
and having regard to the purpose for which, the
agreement was concluded. The point of departure is
the language employed by the document. But the
words must not be considered in isolation. A
restrictive examination of words, without regard to
the context or factual matrix, has to be avoided.
Evidence of prior negotiations is inadmissible, but
evidence relating to the surrounding circumstances
and the meaning to be given to special words and
phrases used by the parties, is admissible. No
distinction is drawn between context and
background circumstances. Words have to be
interpreted sensibly so as to avoid unbusinesslike
results."
29.In light of the above mentioned ratios, we now move to issues
more specific to the dispute at hand.
i. WHETHER THE CONDITION OF ISSUANCE OF
CONTRACTUAL NOTICES CAN BE WAIVED?
30.The Appellant submitted that the requirement to give notice
was a mandatory condition precedent as per the express terms
of the contract and that the said requirement was not satisfied,
thereby the Respondent could not make any claims pertaining
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(183/2019) [2020] ZASCA 58 (3 June 2020)
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to (a) change in the contract price, (b) claiming additional costs,
and/or (c) seeking extension of time.
31. In this regard, our attention was drawn to Article 4.2.5 and 7.3
of the CWEETC Agreement dated 28.8.2008 which has been
reproduced above. We are also invited to peruse passages from
the Arbitral Award, especially Paragraphs 206-215. The
Tribunal has laid down its findings with respect to this issue in
Paragraphs 208, 211 and 215 reproduced as hereunder:
"208. Although the provision did not expressly state
that it was a condition precedent in contrast to
language used elsewhere in the agreement noted
above, the Tribunal finds that the parties have made
their intention clear that they intended the clause to
operate nonetheless as a condition precedent by
expressly stating the consequences of failing to give
the required notice.
....211. The notice provision in relation to the
entitlement in Section 6.7.1 to extend the Onshore
Milestone dates is a condition precedent.
....215. (The Offshore Supply Agreement) The
Tribunal concludes that these notice provisions are
condition precedent."
32.The abovementioned finding/ conclusion was arrived at by the
Tribunal upon its own independent interpretation of the terms
of the contract that the requirement of issuance of notice was in
fact a mandatory condition precedent under the provisions of
the contracts. The Tribunal further goes on to note in Para 216
of the award the Claimant's alternate argument that:
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Designation: Assistant Registrar-cum-Senior Secretary
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Date: 03-Oct-2023 13:34:14
"216. The Claimant did not submit that it had given
notice in the required form and manner set out in
any of the Agreements. Its alternate case was based
on a claim that the Respondent had waived any
obligation to give notice or, in the circumstances, the
Respondent was estopped from insisting that the
Claimant perform the obligation to give notice."
33.The Tribunal having held that a perusal of the terms of the
contract makes it clear that issuance of notice is a condition
precedent therefore warrants no interference, the same being
sound contractually and juristically. Thus, in so far as the first
leg of the issue of whether the condition of issuance of notice is
a condition precedent is concerned; there is no cavil between
the parties to the lis and needs no further discussion.
34.This brings us to the next leg of the parties' submissions,
whether the issuance of notice being a condition precedent
could have been waived by the parties.
35.In this regard, we find it pertinent to refer to Article 25.5 which
is interestingly titled as "25.5 - No Waiver or Variation". A
bare perusal of the Article reveals that the parties, in fact, had a
firm and explicit no waiver agreement, ex facie. Moreover,
Article 25.5.3 specifically lays down that if any variation,
amendment, supplement, modification or waiver of the
Agreement is to be held to be effective, the same shall not be
effective unless in writing and signed by or on behalf of each
Party.
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Designation: Assistant Registrar-cum-Senior Secretary
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Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
36.The Respondent submitted that the parties met in March, 2010
(Bhubaneswar Meeting) and the Appellant orally requested the
Respondent to withdraw a notice dated 23.01.2010 and further
to not to issue any more contractual notices. It was the
Respondent's case that this Meeting in March, 2010 is that
when the parties allegedly decided to adopt a co-operative
approach and forgo the condition of issuance of notices.
Subsequently, the Respondent submitted that it did not act on
its notice of 23.1.2010 and the terms of this representation or
decision were not recorded and neither referred to in any
future correspondence nor established in evidence, as has also
been recorded by the Tribunal in Paragraph 225 of the Arbitral
Award.
37.The Tribunal having gone through the events that transpired in
the Meeting of March, 2010, in Paragraph 226 of the Arbitral
Award goes on to say that;
"226. Having regard to this state of evidence, the
Claimant has not established any proper basis for a
waiver or estoppel arising out of the events at the
meeting or during the break at the meeting in 2010.
There may have been discussion but the evidence is
vague and uncertain as to the contents of the
discussion."
38.The Appellant has contended that the Tribunal has rendered
contradictory findings at different instances. If the Tribunal
chose to rebuff the Respondent's case wherein the Meeting of
March, 2010 which demonstrated intention of the parties doing
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Date: 03-Oct-2023 13:34:14
away with the condition for issuance of notice; then given the
evidence on record, the Tribunal should not have taken into
consideration of the meeting in Jinan on 13.3.2012 (Jinan
Meeting) wherein the Appellant apparently asked the present
Respondent to withdraw a notice sent to them on 7.3.2012
pertaining to suspension of some works as demonstrative of
the parties intention to do away with the condition of issuance
of notices. In this regard our attention is drawn to Paragraphs
228 to 233 of the Arbitral Award which are reproduced
hereinbelow:
"228. The notices were followed by a meeting
attended by Mr Xu, Mr Rao and others in Jinan on
13 March 2012. Mr Rao asked Mr Xu to withdraw
the notice on the basis that certain outstanding
payments would be made and the Respondent would
ultimately resolve the Claimant's entitlements at a
later stage without the need for contractual notices.
Mr Xu and other members of the senior
management team acceded to his request and said
that they would do so by 14 March 2012. The
Claimant's minutes of the meeting record at Item
18: "Suspension letter issued by President Liu
Chuanming should be withdrawn to avoid parties'
verbal jousting."
229. On 18 March 2012 Mr Rao emailed Mr Xu
and said: "Warm greetings. ... You have confirmed
in the meeting and subsequently in the late evening
that SEPCO II would send a simple letter of
withdrawal of suspension letter by J4" which is yet
to be received. In case I do not receive the same
immediately I may have to refer the letter to the
Signature Not Verified departments concerned. [The Respondent] had many
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occasions to issue such letters to SEPCO II several
times but always had cooperated to ensure that your
site team perform. "(underlining added)
230. This email was effectively saying that the
parties have resolved this dispute and the Claimant
has agreed to withdraw with the formal notice issued
in this case. The Respondent had other opportunities
to give the Claimant formal notices but the
Respondent always co-operated with the Claimant to
ensure performance of the work and have not issued
formal notices. Mr Rao is effectively asking, why
doesn't the Claimant also adopt the same co-
operative approach of not issuing formal notices so
that together the parties can resolve any differences
that might arise. It is an invitation to the Claimant
by the Respondent to do what the Respondent has
been doing. The Claimant accepted the invitation.
There were no formal contractual notices
subsequently issued by the Claimant. This email
having regard to the context in which it was sent
and what was said at the previous meeting, amounts
to a written representation by the Respondent to the
Claimant that it has not, and does not intend to
strictly rely upon the formal notice provisions and
would prefer that the Claimant also adopt the same
more cooperative approach and not issue formal
notices with legal submissions in future.
231. The Claimant by email dated 29 March 2012'
acceded to the Respondent's request and said: "On
the payment problem, you introduced that $1266000
and $11450000 for the L/C has been established, and
you promised opened a L/C of $32000000 before
March 25th. In view of our friendly cooperation. We
give up to suspend supply and work according to
issuing notification suspension of certain supply
and work on March 7th ..." (underlining added).
Signature Not Verified This email in response tacitly, if not expressly,
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accepts the Respondent's invitation to adopt a co-
operative approach rather than a strict one of issuing
and relying on formal notices and serving written
submissions.
232. Third, the co-operative approach was evident
and reinforced when the Respondent granted the
Claimant an extension of time at the November 2012
Jinan Meeting. The Respondent did not raise or
suggest that the absence of contractual notices was a
barrier to any extension of time for the Milestones
for Units 1, 2 and 3.
233. Fourth, there were numerous meetings and
correspondence with the Claimant about delay and
the Claimant's claims for additional money.
Consistent with the Respondent's request, the
Respondent did not generally raise the contractual
notice provisions with the Claimant. Mr Rao gave
evidence that confirmed that during his time as
managing director (from commencement to the
Jinan meeting) it was the "mutual wish" of the
parties "that difficulties that arose should be
resolved informally by discussion and agreement."
The Claimant acted to its detriment by not putting
in formal notices as required by the contracts."
(Underlining is ours)
39.We note that the Appellant has strongly relied on Article 25.5
of the CWEETC Agreement and stated that the terms of the
contract do not envisage at any occasion for waiver given the
specific and unambiguous "No Waiver" clause. Moreover, it
was submitted that the said "No Waiver" clause could only
have been varied/amended/modified solely in accordance with
Article 25.5.3 of the CWEETC Agreement which postulates the
twin condition of the same being in writing and being signed
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by both parties. These twin conditions having not been met,
there is no question of variation of the "No Waiver" clause by
conduct or orally.
40.Our attention was further drawn to the English law principle as
laid down by the Supreme Court of the United Kingdom in the
case of Rock Advertising Ltd. v. MWB Business Exchange
Centres Ltd.10where Lord Sumption, in the majority opinion,
had established that the 'No Oral Modification Clause' in a
contract shall be interpreted strictly and parties to the contract
cannot waive the 'No Oral Modification Clause' impliedly by
making an oral modification to the terms of the contract. Any
amendment arising out of the contract, as well as where parties
seek to remove the 'No Oral Modification Clause' from the
contract, shall strictly be in writing. In effect, the majority held
that the parties can exercise their party autonomy to the extent
they have allowed themselves in the contract. However, Lord
Briggs, while concurring with Lord Sumption to some extent,
provided another school of thought. In the minority opinion,
he concurred that parties through an oral modification cannot
implicitly waive the 'No Oral Modification Clause'. However,
he opined that parties can waive the 'No Oral Modification
clause' orally by acknowledging the same in the oral
amendment. The relevant paragraphs of the judgement are
reproduced below:
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[2018] UKSC 24
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"16. The enforcement of No Oral Modification
clauses carries with it the risk that a party may act
on the contract as varied, for example by performing
it, and then find itself unable to enforce it. It will be
recalled that both the Vienna Convention and the
UNIDROIT model code qualify the principle that
effect is given to No Oral Modification clauses, by
stating that a party may be precluded by his conduct
from relying on such a provision to the extent that
the other party has relied (or reasonably relied) on
that conduct. In some legal systems this result
would follow from the concepts of contractual good
faith or abuse of rights. In England, the safeguard
against injustice lies in the various doctrines of
estoppel. This is not the place to explore the
circumstances in which a person can be estopped
from relying on a contractual provision laying down
conditions for the formal validity of a variation. The
courts below rightly held that the minimal steps
taken by Rock Advertising were not enough to
support any estoppel defences. I would merely point
out that the scope of estoppel cannot be so broad as
to destroy the whole advantage of certainty for
which the parties stipulated when they agreed upon
terms including the No Oral Modification clause. At
the very least, (i) there would have to be some words
or conduct unequivocally representing that the
variation was valid notwithstanding its informality;
and (ii) something more would be required for this
purpose than the informal promise itself: see
Actionstrength Ltd v International Glass
Engineering InGl En SpA [2003] 2 AC 541, paras 9
(Lord Bingham), 51 (Lord Walker).
23. This basic concept, that parties to a contract have
complete freedom by further agreement to "unbind"
themselves as to their future conduct, is in principle
Signature Not Verified applicable not merely to their substantive mutual
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obligations, but also to any procedural restraints
upon which they may agree, including restraints as
to how they may vary their existing contractual
relationship. It is therefore fully applicable to the
constraint upon their future conduct imposed by a
NOM clause. No-one doubts that parties to a
contract containing a NOM clause are at liberty
thereafter to remove it from their bargain,
temporarily or permanently, by a compliant written
variation, following which it will not inhibit them
from agreeing further variations purely orally.
24. The critical questions for present purposes are,
first: whether the parties can agree to remove a
NOM clause from their bargain orally and, second:
whether, if so, such an agreement will be implied
where they agree orally upon a variation of the
substance of their relationship (which the NOM
clause would require to be in writing) without
saying anything at all about the NOM clause. Must
they be taken so to have agreed by the very fact that
they have made the substantive variation orally?
Lord Sumption would answer the first question in
the negative, so that, for him, the second question
would not arise. For the reasons which follow, I
would answer the first question in the affirmative,
but not (generally at least) the second. The outcome
on the present facts is the same. In this case the
alleged oral agreement to vary the Licence said
nothing whatsoever about the NOM clause (of
which both Mr Idehen and Ms Evans were probably
entirely unaware), and I would not treat it as having
been done away with by necessary implication. The
result is that their alleged agreement as to the terms
of a variation had no immediately binding force, any
more than an agreement made subject to contract.
This will probably be the outcome on any
Signature Not Verified comparable or likely fact-set since, leaving aside
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emergencies, once the parties focus on the obstacle
presented by the NOM clause, they would almost
certainly remove it by a simple written variation, or
indeed make the whole of the substantive variation
itself in writing. "
41. Strictly looking at the express terms of the Agreement between
the parties which forbids waiver or any oral modification of the
terms or modification by conduct of the self-same terms, we are
taken aback to note the finding of the Tribunal as arrived at in
Paragraph 238 of the Arbitral Award. The same is reproduced
hereinbelow:
"238. The Tribunal finds that an equitable estoppel
arose in March 2012 because the Respondent by its
words in the email dated 18 March 2012, having
regard to the context in which it was sent, expressly
and by its conduct represented that the formal notice
provisions in the Agreements were not, and would
not be, strictly relied on by it and encouraged and
invited the Claimant to adopt the same co-operative
approach and to not issue formal notice of claims.
The Tribunal is satisfied that the Claimant has
thereafter, to the knowledge of the Respondent acted
to its detriment by relying on the representation and
Respondent's conduct, by not issuing formal notices.
An estoppel arises because there is evidence of
reliance by inference drawn from the terms of the
Claimant's reply email dated 29 March 2012
emphasised above, from the evidence of Mr.Xu in
relation to his earlier discussions with Mr.Rao and
from the reaffirmation at the November 2012 Jinan
Meeting. It would be unjust and inequitable having
regard to all the circumstances, including the
inconsistency arising out of the benefits obtained by
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the Respondent to deny a claim because the
Claimant, to the knowledge of the Respondent,
followed a co-operative approach as a result of the
Respondent's invitation to the Claimant to do so in
March 2012."
(Underlining is ours)
42.The Tribunal, therefore in conclusion, if we may attempt to
sum up, held that there was waiver "by conduct" of the
Appellant against the mandatory condition precedent and the
same attracted the principle of estoppel binding the parties.
43.Let us refer to certain Sections of Indian Contract Act, 1872 for
a clarificatory purpose. Section 62 stipulates that "If the parties
to a contract agree to substitute a new contract for it, or to rescind or
alter it, the original contract, need not be performed." On the other
hand, Section 63 of the Indian Contract Act provides that
"Every promisee may dispense with or remit, wholly or in part, the
performance of the promise made to him, or may extend the time for
such performance, or may accept instead of it any satisfaction which
he thinks fit." We'd like to emphasise on the word "agree" used
in Section 62 of the Indian Contract Act. For any alteration to
the terms of the contract, there must be an agreement - or
consensus ad idem between the parties to do the same. The
intention of the parties to alter the terms of the contract has to
be forthcoming, evident and unambiguous. It is to be noted
that in Section 63 of the Indian Contract Act, a principle of
English Law has been codified into the law which provides for
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dispensation of a promise either in part or in whole without
any consideration therefore. This proposition which finds its
origin in English Law has been frowned upon by the superior
Courts in India as will be discussed hereinafter.
44. In JagadBandhu Chatterjee v. Nilima Rani 11, the Supreme
Court held:
"5. In India the general principle with regard to
waiver of contractual obligation is to be found in
Section 63 of the Contract Act. Under that section it
is open to a promisee to dispense with or remit,
wholly or in part, the performance of the promise
made to him or he can accept instead of it any
satisfaction which he thinks fit. Under the Indian
law neither consideration nor an agreement would
be necessary to constitute waiver. This Court has
already laid down
in WamanShriniwasKini v. RatilalBhagwandas&
Co. [WamanShriniwasKini v. RatilalBhagwandas&
Co., 1959 Supp (2) SCR 217 : AIR 1959 SC 689] ,
SCR p. 226 that: (AIR p. 694, para 13)
'13. ... waiver is the abandonment of a right which
normally everybody is at liberty to waive. A waiver
is nothing unless it amounts to a release. It signifies
nothing more than an intention not to insist upon
the right.'
It is well known that in the law of pre-emption the
general principle which can be said to have been
uniformly adopted by the Indian courts is that
acquiescence in the sale by any positive act
amounting to relinquishment of a pre-emptive right
has the effect of the forfeiture of such a right. So far
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(1969) 3 SCC 445
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as the law of pre-emption is concerned the principle
of waiver is based mainly on Mohammedan
Jurisprudence. The contention that the waiver of the
appellant's right under Section 26-F of the Bengal
Tenancy Act must be founded on contract or
agreement cannot be acceded to and must be
rejected."
45.In P. Dasa Muni Reddy v. P. Appa Rao12, the Apex Court dealt
with the issue of the principle of waiver to state that every act
of waiver has to be a voluntary relinquishment of a right and
that the same has to be expressly understood in the same tone
and tenor by both the parties mutually. The relevant passage is
reproduced hereunder:
"13. ... Waiver is an intentional relinquishment of a
known right or advantage, benefit, claim or privilege
which except for such waiver the party would have
enjoyed. Waiver can also be a voluntary surrender of
a right. The doctrine of waiver has been applied in
cases where landlords claimed forfeiture of lease or
tenancy because of breach of some condition in the
contract of tenancy. The doctrine which the courts of
law will recognise is a rule of judicial policy that a
person will not be allowed to take inconsistent
position to gain advantage through the aid of courts.
Waiver sometimes partakes of the nature of an
election. Waiver is consensual in nature. It implies a
meeting of the minds. It is a matter of mutual
intention. The doctrine does not depend on
misrepresentation. Waiver actually requires two
parties, one party waiving and another receiving the
benefit of waiver. There can be waiver so intended by
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(1974) 2 SCC 725
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one party and so understood by the other. The
essential element of waiver is that there must be a
voluntary and intentional relinquishment of a right.
The voluntary choice is the essence of waiver. There
should exist an opportunity for choice between the
relinquishment and an enforcement of the right in
question. It cannot be held that there has been a
waiver of valuable rights where the circumstances
show that what was done was involuntary. There
can be no waiver of a non-existent right. Similarly,
one cannot waive that which is not one's as a right
at the time of waiver. Some mistake or
misapprehension as to some facts which constitute
the underlying assumption without which parties
would not have made the contract may be sufficient
to justify the court in saying that there was no
consent."
46.In All India Power Engineer Federation v. Sasan Power Ltd.13,
after taking into consideration the aforementioned judgements,
the Supreme Court held:
"21. Regard being had to the aforesaid decisions, it
is clear that when waiver is spoken of in the realm of
contract, Section 63 of the Contract Act, 1872
governs. But it is important to note that waiver is
an intentional relinquishment of a known right, and
that, therefore, unless there is a clear intention to
relinquish a right that is fully known to a party, a
party cannot be said to waive it. ..."
47.In Chrisomar Corpn. v. MJR Steels (P) Ltd.14, the Supreme
Court while approving the Calcutta High Court's view in
(2017) 1 SCC 487
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(2018) 16 SCC 117
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Juggilal Kamlapat v. N.V. Internationale Crediet-En-Handels
Vereeninging 'Rotterdam'15held that:
"39. We approve of the said judgment as laying
down the correct law on the expression "alter" in
Section 62 of the Contract Act. In order that a
contract that is altered in material particulars fall
under Section 62, it must be clear that the alteration
must go to the very root of the original contract and
change its essential character, so that the modified
contract must be read as doing away with the
original contract. If the modified contract has no
independent contractual force, in that it has no
meaning and content separately from and
independently of the original contract, it is clear that
there is no new contract which comes into being.
The original terms continue to be part of the
modified contract except to the extent that they are
inconsistent with the modifications made."
48.Now, the relevant question is whether the parties intended to
agree to alter the terms of the contract with regards to the
condition of issuance of notices, waiver and the no oral
modification clause.
49. However, before we proceed, it will do us good to remember in
words which have since become classic, Lord Wright in Hillas
& Co. Ltd. v. Arcos Ltd.16 prophetically foresaw the perils of a
court of law misconstruing the correspondences of business by
divorcing them from their true meaning and being susceptible
1952 SCC OnLine Cal 250
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1932 All ER Rep 494 (HL)
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to the pitfall of rewriting of a business contract. Lord Wright
has stated:
"... Businessmen often record the most important
agreements in crude and summary fashion; modes of
expression sufficient and clear to them in the course
of their business may appear to those unfamiliar
with the business far from complete or precise. It is,
accordingly, the duty of the court to construe such
documents fairly and broadly, without being too
astute or subtle in finding defects; but, on the
contrary, the court should seek to apply the old
maxim of English law, verbaitasuntintelligendaut
res magisvaleatquampereat. That maxim, however,
does not mean that the court is to make a contract
for the parties, or to go outside the words they have
used, except insofar as there are appropriate
implications of law, as, for instance, the implication
of what is just and reasonable to be ascertained by
the court as matter of machinery where the
contractual intention is clear but the contract is
silent on some detail. Thus in contracts for future
performance over a period, the parties may not be
able nor may they desire to specify many matters of
detail, but leave them to be adjusted in the working
out of the contract."
50. In this respect, it is also relevant to refer to paragraph 16 in the
case of MMTC Ltd. v. Vedanta Ltd.17, which reads thus:
"16. It is equally important to observe at this
juncture that while interpreting the terms of a
contract, the conduct of parties and correspondences
exchanged would also be relevant factors and it is
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(2019) 4 SCC 163
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within the arbitrator's jurisdiction to consider the
same. [See McDermott International Inc. v. Burn
Standard Co. Ltd. [McDermott International
Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC
181]; Pure Helium India (P) Ltd. v. ONGC [Pure
Helium India (P) Ltd. v. ONGC, (2003) 8 SCC 593]
and D.D. Sharma v. Union of India [D.D.
Sharma v. Union of India, (2004) 5 SCC 325].]"
51. In our opinion, the entire finding of the Arbitral Tribunal is
based on the premise that the Parties have made some
reference to adopting a "cooperative approach" when it comes
to issuing notices. Let us examine the correctness of this finding
while being fully aware, that neither under Section 34 nor
under Section 37 of the Arbitration Act, this Court is entitled to
re-appreciate the evidence. However, while this Court's hands
are tied in re-appreciating the evidence, the Court does have
the power to examine the evidence on record to see whether
the Tribunal has arrived at a finding based on 'no evidence'
and 'ignorance of vital evidence'.
52. Having gone through the evidence on record pertaining to the
events that transpired at the Meetings of both March, 2010 and
March, 2012, this Court is unable to find any substance, evident
or unambiguous conduct whether by words or manner, which
unequivocally indicates that the parties intended to completely
forgo the condition of issuance of notices.
53. We note, had that been the case, neither of the parties would
have issued any notices nor attempted to vary the terms of the
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Agreement in line with Article 25.5 of the CWEETC Agreement
for the remaining duration of their relationship. Tellingly,
however, the same is not true. Our attention has been drawn to
numerous documents on record before the Tribunal i.e.:
i. Notice issued by the present Respondent under
Clause 6.1.4.2(iii) dated 19.12.2013 pertaining to
payment due.
ii. Notice issued by the present Appellant under Section
6.1.5 of the amended CWEETC Agreement dated
10.6.2013 rejecting the RRT Test for Unit 1.
iii. Notice issued by the present Appellant under Section
7.5 of the amended CWEETC Agreement dated
18.12.2013 pertaining to de-scope of the balance works
in the O&M building, etc.
iv. Fourth Amendment of the CWEETC Agreement
dated 4.4.2013 which was signed by both parties. (The
Fourth Amendment of the CWEETC Agreement
dated 4.4.2013, signed by both the parties pertained to
an agreement for Transfer Tower No. 2. The
Amendment was in pursuance of Clause 4.2.8 of the
CWEETC Agreement wherein the procedure for
amendment of the contract price was laid out. The
parties specifically agreed that all the other terms and
conditions of the Agreement, together with all rights
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remain in force and shall continue to be binding on
the Parties in Clause 6.2 of the Amendment)
54.The aforementioned records reveal that the Respondent had
agreed to withdraw its letter of suspension by 14.3.2012, but
the same was not withdrawn on 14.3.2012 nor even by the
email dated 18.3.2012 of the Appellant. It was withdrawn only
on 29.3.2012 when the present Appellant had established a
Letter of Credit (L/C) of $1,266,000 and $11,450,000. It was
submitted that the withdrawal of the suspension letter by the
Respondent was on the basis of positive actions taken by the
Appellant towards making outstanding payments. Pursuant to
which the Respondent was obligated to withdraw the
suspension, and not on the basis of its reliance on any
purported representation made by the present Appellant in its
email dated 18.3.2012 to waive any notice provisions.
55.Furthermore, in light of the terms of the agreement which
explicitly bars waiver or variation variation/modification by
conduct or orally without satisfying the twin conditions
postulated therein - we are unable to accept that the Tribunal
could have arrived at its conclusion of waiver and estoppel in
the manner in which it did.
56.An Arbitral Tribunal being a creature of contract, is bound to
act in terms of the contract under which it is constituted. An
award can be said to shock the conscience of the Court where
the Arbitral Tribunal has failed to act in terms of the contract or
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has ignored the specific terms of a contract. However, a
distinction has to be drawn between failure to act in terms of a
contract and an erroneous interpretation of the terms of a
contract. An Arbitral Tribunal is entitled to interpret the terms
and conditions of a contract, while adjudicating a dispute. An
error in interpretation of a contract in a case where there is
valid and lawful submission of arbitral disputes to an Arbitral
Tribunal is an error within jurisdiction.
57.In PSA Sical Terminals (P) Ltd. v. V.O. Chidambranar Port
Trust18, the Supreme Court referred to and relied
upon Ssangyong Engg. & Construction (supra) and observed as
follows:
"85. As such, as held by this Court
in SsangyongEngg. &
Construction [SsangyongEngg.& Construction Co.
Ltd. v. NHAI, (2019) 15 SCC 131 : (2020) 2 SCC
(Civ) 213] , 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."
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(2021) 18 SCC 716
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58.In PSA Sical Terminals (supra), the Apex Court has clarified
that the role of the arbitrator was to arbitrate within the terms
of the contract. He has no power apart from what the parties
had given him under the contract. If he has travelled beyond
the contract, he would be acting without jurisdiction. The
Hon'ble Supreme Court in fact referred to and relied upon its
earlier judgment in Army Welfare Housing
Organisation v. Sumangal Services (P) Ltd.19 wherein it was
held that:
"43. An Arbitral Tribunal is not a court of law. Its
orders are not judicial orders. Its functions are not
judicial functions. It cannot exercise its power ex
debitojustitiae. The jurisdiction of the arbitrator
being confined to the four corners of the agreement,
he can only pass such an order which may be the
subject matter of reference."
59.This view was also taken by the Hon'ble Supreme Court in
Satyanarayana Construction Co. v. Union of India20, and more
recently by the Hon'ble Supreme Court in Indian Oil
Corporation Limited v. Shree Ganesh Petroleum
Rajgurunagar21.
60.The case in hand, in our opinion is not a situation where the
Tribunal has merely misinterpreted the terms of the contract in
a certain way, instead, the Tribunal has chosen to completely
(2004) 9 SCC 619
(2011) 15 SCC 101
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2022 4 SCC 463
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ignore the existing mandatory terms of the contract. In doing
so, the Tribunal has effectively rewritten the contract; altering
its very nature which it is not permitted to do for it is a creature
of the same contract. Furthermore, as the law stands today, it is
the exclusive domain of the arbitrator to interpret the
contractual provisions or construe the facts of the case in a
certain way. However, while arriving at such a decision, the
arbitrator is not permitted to travel beyond the four-corner of
the contract. An Arbitrator is akin to an umpire in the game of
cricket which is equally bound by the rules of the game as is
applicable to the players and he cannot do justice to the losing
team, signal 'out' when the batter has clearly hit the ball
beyond the boundary limit of the ground; going against the
game itself.
61.In a commercial contract, the parties do have the liberty to
unbind themselves of any obligation that the contract bestows
upon them. In the present contracts as well, while there is a 'No
Oral Modification clause' and a 'No waiver clause', there is also
a provision which prescribes the manner and method for
amendment of any of the clauses of the contract. Issuance of
notice, being a condition precedent, could not have been
waived without the parties following the manner and method
for amending the relevant clauses which envisage the issuance
of notices as being a condition precedent as per Clause 25.5.3 of
the CWEETC Agreement and Clause 4.2.8 of the CWEETC
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Agreement, both of which were followed at the time of the 4th
Amendment of the CWEETC on 4.4.2013.
ii. WHETHER THE PARTIES CAN CLAIM ESTOPPEL IN
THE GIVEN CIRCUMSTANCES?
62.The rule of estoppel is based on the maxim: "Alleganscontraria
non estaudiendus" meaning a person alleging contradictory
facts should not be heard. It is based on the principle that it
would be most inequitable and unjust that if one person, by a
representation or by conduct amounting to a representation has
induced another to act, the person who made the
representation should not be allowed to deny or repudiate the
effect of his former statements, to the loss and injury of the
person who acted on it. Waiver is either a form of estoppel or
an election.
63.The doctrine of estoppel by conduct means that 'where one by
words or conduct wilfully causes another to believe in the
existence of certain state of things and induces him to act on
that belief, or to alter his own previous position, the former is
precluded from averring against the latter a different state of
things as existing at that time.' The fundamental requirement
as to estoppel by conduct is that the estoppel must concern an
existing state of facts. The second requirement of an estoppel
by conduct is that it should be unambiguous. Finally, an
estoppel cannot be relied on if the result of giving effect to it
would be something that is prohibited by law. Estoppel is only
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a rule of evidence. One cannot claim the foundation of an
action upon estoppel. Estoppel is important as a step towards
relief on the hypothesis that the defendant is estopped from
denying the truth of something which he has said.
64.Moreover, it needs to be understood that the rule of estoppel is
a doctrine based on fairness. It postulates the exclusion of the
truth of the matter. All for the sake of fairness. The Supreme
Court in Pratima Chowdhury v. Kalpana Mukherjee,22
identified four salient preconditions before invoking the rule of
estoppel which are as follows:
(i) Firstly, one party should make a factual
representation to the other party.
(ii) Secondly, the other party should accept and rely
upon the aforesaid factual representation.
(iii) Thirdly, having relied on the aforesaid factual
representation, the second party should alter his
position.
(iv) Fourthly, the instant altering of position, should
be such, that it would be iniquitous to require
him to revert back to the original position.
Therefore, the doctrine of estoppel would apply only when,
based on a representation by the first party, the second party
alters his position in such manner that it would be unfair to
restore the initial position.
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(2014) 4 SCC 196
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65.The Supreme Court in B.L. Sreedhar v. K.M. Munireddy23, Arijit
Pasayat J. captured the notional and statutory essence of the
doctrine of estoppel:
"13. Estoppel is a rule of evidence and the general
rule is enacted in Section 115 of the Indian Evidence
Act, 1872 (in short "the Evidence Act") which lays
down that when one person has by his declaration,
act or omission caused or permitted another person
to believe a thing to be true and to act upon that
belief, neither he nor his representative shall be
allowed in any suit or proceeding between himself
and such person or his representative to deny the
truth of that thing. (See Sunderabai v. Devaji
Shankar Deshpande [(1952) 2 SCC 92 : AIR 1954
SC 82] .)
30. If a man either by words or by conduct has
intimated that he consents to an act which has been
done and that he will not offer any opposition to it,
although it could not have been lawfully done
without his consent, and he thereby induces others
to do that which they otherwise might have
abstained from, he cannot question the legality of the
act he had sanctioned to the prejudice of those who
have so given faith to his words or to the fair
inference to be drawn from his conduct."
66. In Provash Chandra Dalui v. Biswanath Banerjee (supra), the
Supreme Court dealt with the issue succinctly and has
observed as follows :
"24. The essential element of waiver is that there
must be a voluntary and intentional relinquishment
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of a known right or such conduct as warrants the
inference of the relinquishment of such right. It
means the forsaking the assertion of a right at the
proper opportunity. The first respondent filed suit at
the proper opportunity after the land was
transferred to him, and no covenant to treat the
appellants as thika tenants could be shown to have
run with the land. Waiver is distinct from estoppel
in that in waiver the essential element is actual
intent to abandon or surrender right, while in
estoppel such intent is immaterial. The necessary
condition is the detriment of the other party by the
conduct of the one estopped. An estoppel may result
though the party estopped did not intend to lose any
existing right. Thus voluntary choice is the essence
of waiver for which there must have existed an
opportunity for a choice between the relinquishment
and the conferment of the right in question. Nothing
of the kind could be proved in this case to estop the
first respondent."
67. A representation made by one party to another to waive of
contractual provisions would, therefore, be precedent to an
estoppel arising against the party making such a
representation. In the case in hand, the Tribunal has gone
beyond the four-corner of the contract and completely ignored
the contractual provisions. The contract between the parties has
a "no waiver clause" apart from having a 'No Oral
Modification Clause'. It also contains within it, a system or
procedure that can be resorted to in case any amendment to the
contract has to be carried out. As the parties had followed the
procedure laid down in Clause 25.5.3 after the November, 2012
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meeting, they cannot be said to have forgone the procedure for
amendment of contract at any point of time. The parties have,
therefore, very evidently not elected to waive of the
requirement for notices at any point of time. As it flows, if there
is no waiver, there can be no estoppel in the present case.
68.Even if we assume that there had been a "mutual" waiver of
the condition precedent to issue notices, even then, as a natural
corollary, both the parties would be equally entitled to receive
the benefit of the same principle in the adjudication of their
claims by the Tribunal. However, our attention was drawn to
the following Paragraphs of the Arbitral Award dealing with
the various issues it had framed:
"239. Furthermore, the provisions of the Agreement
do not prevent, once the Agreement has been
terminated, a party from bringing a claim for
damages for a breach of the Agreement. The right of
the Contractor under Section 7.3.1(iii) to an
extension of time where there has been delay in the
achievement of a Milestone Date, a PGT or the
Guaranteed Date of Completion of the Power
Station by reason of any breach of the Agreement by
the Owner, does not prevent the Contractor from
bringing a claim for damages for breach of contract.
...374. As the condition precedent has not been
satisfied, the Claimant is not entitled to maintain
this claim under the express terms of the Agreement.
...375. The Claimant brings an alternative claim for
damages for breaches of the implied terms of the
Agreement which are not subject to a condition
precedent requiring notice.
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...505. As this claim arose after March 2012
(the time of events giving rise to the Respondent
being estopped from insisting on compliance with
the notice provisions) the Tribunal's ruling that the
notice provisions amount to a condition precedent,
does not apply to this claim. (Grid Synchronization
(Issue no.6))
...549. As this claim arose after March 2012
(the time of events giving rise to the Respondent
being estopped from insisting on compliance with
the notice provisions) the Tribunal's ruling that the
notice provisions amount to a condition precedent,
does not apply to this claim. (Fuel Oil (Issue no.7)
...610. As this claim arose after March 2012 (the
events giving rise to the Respondent being estopped
from insisting on compliance with the notice
provisions) the Tribunal's ruling that the notice
provisions amount to a condition precedent, does not
apply to this claim. (Coal (Issue no.8))
...752. The Respondent asserted that as no
application for an extension of time, an adjustment
of the Contract Price and/or a Variation has been
made, the claim is barred for lack of notice, As noted
above, as this claim relates to events after March
2012, the Respondent is estopped from relying on an
obligation to give notice.
...1348. The Respondent also submits that even if
the requisite notice was not provided, the
Respondent, is nonetheless entitled, to damages at
Common Law for the Claimant's breach of
contractual warranties. The Respondent's R-173
claims are asserted on the basis of Section 10, or in
the alternative, as a claim for damages for breach of
Warranty by the Claimant under Common Law. The
Tribunal does not accept that the Respondent can
obtain damages at Common Law equivalent to and
Signature Not Verified as an alternative to its Defect claims under Section
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
10. The Respondent in effect submits that, had the
contract not been terminated for the Respondent's
breach, it could not claim a Defect if the requisite
notice had not been given, but as the contract has
been terminated, the Claimant has an obligation to
pay equivalent monetary compensation to the
Respondent. It is almost equivalent to saying that on
account of the Respondent's breach, the Respondent
is no longer required to prove the requisite notice in
order to be paid damages or monetary compensation
on account of the Claimant's breach of warranty,
The Respondent would be obtaining a benefit as a
result of its own breach of contract. Nevertheless, the
parties have both proceeded on the apparent common
assumption that claims could be brought on account
of rights under the contract which accrued before
termination could be enforced in these proceedings.
...1400. This alleged Defect identifies that a backup
mechanical hydraulic governing system was not
provided with the Turbine Generator.
...1401. The EPC Technical Specification (Book 1,
Part B, Vol II, Section BE, subsection 2.1, clause
1.2) states that "The turbine generator shall be
equipped with a fault tolerant microprocessor-based
digital electro-hydraulic control (DEHC) governing
system of proven design and operational capability
backed-up by mechanical hydraulic governing
system...."
Respondent's position
...1402. The failure to provide a backup mechanical
hydraulic governor for the Turbine Generator is a
Defect as seen in the EPC Technical Specifications
where the requirement was clearly outlined.
Claimant's position
...1403. This alleged Defect was not notified.
Tribunal's analysis
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
...1404. A digital electro hydraulic turbine
governing system may be very reliable, state of the
art and does not require a hydraulic back up system.
But that is what was agreed to be supplied and it is
no answer to say that it is not needed for the
operation of the Power Station.
...1405. It is an omission in the Works but there is
no liability as the Respondent did not give the
requisite notification of the alleged Defect. There is
no liability unless a Defect is shown to exist in the
requisite period and that contractual notification of
the Defect was given to the Claimant during the
relevant warranty period. These two elements are
essential regardless of the nature of the alleged
Defect.
...1406. The Schedules to the EPC Technical
Specification state that the approved manufacturers
for motorised valve actuators are Rotork, Auma and
SIPOS. In contravention of the EPCTechnical
Specification, the motorised valve actuators that the
Claimant provided are not from Rotork, Auma or
SIPOS. The Claimant installed valve actuators from
Geartork, which is not an approved vendor.I167 At
least 85 actuators have been replaced and the
Respondent claims a further 205 actuators will be
replaced.
Respondent's position
...1407. The Respondent submits that as the alleged
Defect relates to a deviation and /or omission from
the Works, no notice is required for this Defect as
the Claimant must know what it constructed.
Claimant's position
...1408. This alleged Defect was not notified. There
is no liability unless a Defect is shown to exist in the
requisite period and contractual notification was
given to the Claimant during the relevant warranty
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
period. These two elements are essential regardless of
the nature of the alleged Defect.
Tribunal's analysis
...1409. It is an omission in the Works and a Defect
but there is no liability as the Respondent did not
give the requisite notification of the alleged Defect.
There is no liability unless a Defect is shown to exist
in the requisite period and contractual notification
was given to the Claimant during the relevant
warranty period. These two elements are essential
regardless of the nature of the alleged Defect.
1410. This claim is dismissed."
(underlining is ours)
69. The Appellant's case is that the Tribunal has applied a
different standard for the Parties which has had a significant
impact on the overall financial result as most of the Appellant's
counter claims for defects have been rejected on a threshold
basis and the Appellant has failed to serve notice even though
all these claims for defects arose after March, 2012 (i.e. the
period when the Tribunal vocalised that the contractual
requirement for issuance of notices was waived by the parties).
In response, the Respondent contended that the Tribunal in the
impugned Award did not intend to mean that the parties had
meant to waive of all contractual requirements for issuances of
notices, the parties had only agreed to waive of only a "certain
kind" of notice i.e. the contractual condition precedent for
issuance of notices to the extent of the issue of delays.
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
70.We find this difference is artificial, ambiguous, ill-conceived,
and contrary to records. The Tribunal has nowhere clarified
that the waiver of requirement of issuance of notices was
limited to certain kinds of notices and not to the entire contract.
There is no resonance of the same anywhere in the impugned
Award and the Respondent has also been unable to pin point
any such intention of the Tribunal. Furthermore, it is pertinent
to mention that the Tribunal's finding on waiver of the notice
provisions is based on the Respondent's withdrawal of its
notice for suspension of works on account of the Appellant's
alleged failure to make payments in respect of invoices and did
not relate to claims pertaining to delays.
71.A bare perusal of the abovementioned facts and principles of
law, ex facie, makes it evident that issuance of notice was a
condition precedent. There was a 'No Waiver clause' in the
agreement between the parties. The said clause, as other
clauses of the agreement, could only be amended upon
following the procedure laid down in Clause 25.5.3 of the
Agreement. The said procedure having not been followed, the
conduct of the parties also does not show that there was an
intention to waive off the requirement of issuance of notice as
they had adhered to the requirement on multiple occasions
thereafter. Therefore, no reasonable man could have come to
the conclusion that the Appellant had by its conduct attempted
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
to waive of the requirement of issuance of notice and, therefore,
it was estopped from claiming otherwise. The said finding in
this regard arrived at by the Tribunal, therefore, shocks the
conscience of the Court. We are aware that if two views are
possible on an interpretation of a contractual clause, there
would not be any justification in interfering with the Award
specially when the view by the Tribunal so taken is a possible
or plausible one, however, in the present facts of the case, we
have no doubt that the view taken by the Tribunal is neither
possible nor plausible.
72.Moreover, it is but discernible that a different standard for the
two parties has, in fact, been adopted. Despite holding that
parties had given a go by to the formal notice provisions in
March 2012, most of the present Appellant's counter claims for
defects, amounting to more than Rs.150 crores (approx.) have
been rejected on preliminary basis that the present Appellant
had failed to serve notices even though all such claims for
defects arose after March 2012. This court cannot turn a blind
eye to such a glaring example of unequal treatment which
would shock the conscience of any court. Thus, it is quite clear
that the Tribunal has not adopted a consistent/equal approach
insofar as this issue of notice provisions is concerned.
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
B. WHETHER THE TRIBUNAL BASED ITS ANALYSIS AND
FINDINGS ON MISTAKEN FACTS?
73.It was the Respondent's claim that the Appellant did not
supply specific quality of Coal as agreed between the parties
and, therefore, it was in breach of the CWEETC Agreement. In
this regard, we consider it important to reproduce Paragraph
606 of the Arbitral Award.
"606. In relation to the quality of coal, the
Respondent agreed that, initially, there were two
parameters relating to coal, Design Coal and Range
of Coal.338 Further that they served two distinct
purposes.339 However, the Respondent submits that
the parties agreed to amend the parameters for
Design Coal and Range of Coal, along with
introducing a third parameter "Worst Coal", which
was recorded in the Respondent's letter to the
Claimant dated 28 February 2009. In that letter, the
Respondent confirmed that "all the equipment shall
be designed / sized to handle the worst coal (GCV
3000 Kcal/Kg), without restriction on the steam and
power output of the unit." Further, the amended
parameters were summarised as follows:
Quality Design Coal Range of
characteristic(as Coal
received)
Moisture 11.9% 9 --12%
Ash content 41.6% 35 -- 45%
Gross Calorific 3,000 --
3,300
value (kCal/kg) 3,300
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
74.The table affixed at the end has been wrongly recorded. A
reference was made to the citation affixed to the Table in the
Arbitral Award which refers to "Respondent's Opening Para
113 (O/5/39) and Respondent's PHR Para 246 (R/11/65-66)"
made available to us in the Convenience Compilation. The
Range of Coal as regards the Moisture Quality is clearly
stipulated to be 9-15% but has been recorded as 9-12% by the
Tribunal in the Arbitral Award.
75.Basing its analysis and finding on an erroneous figure, despite
referring to the correct document, led to an incorrect finding as
the expert's analysis on the total moisture of the coal supplied
(At Paragraph 649 of the Arbitral Award) is between 13.7% and
14.6% and the mean value being 13.8% which is less than the
agreed upon 15% moisture. Although the Appellant's case was
always that the Range of Coal had been increased to 7-15% and
the quality of coal, therefore, supplied during the concerned
period was within that range, the Tribunal applied the
unamended specifications of 9-12% to conclude against the
Appellant. This also establishes the dangerous trend of the
Tribunal in ignoring material facts to hold the findings against
the Appellant, as otherwise there is no reason for the Tribunal
not to have considered the range of moisture content to be
7-15% and not 9-12% or to wrongly quote the submissions
despite acknowledging the amendment. While the original
Agreements provided for a range of moisture content to be 9-
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
12% as the Tribunal also held; it was subsequently modified
and amended to 7-15% as the range of coal for moisture and
16.5% as the worst coal having the least calorific value. The
Tribunal has grossly erred in concluding that the delay caused
due to mill choking and bunker chuting is attributable to the
Appellant due to higher moisture content in the range of coal
as agreed between the parties. This finding ought to be set
aside and the same would also inadvertently have an effect on
the number of days of liquidated damages that the Parties
would be entitled to recover for.
C. WHETHER THE TRIBUNAL'SINTERPRETATION OF THE
CONTRACTUAL PROVISIONS SHOCKS THE
CONSCIENCE OF THE COURT?
i. IN ASCERTAINING THAT THE RESPONDENT WAS
ENTITLED TO DELAY RELATED DAMAGES FOR
PROLONGATION AND OR DISRUPTION COSTS
GIVEN THE EXPRESS TERMS OF THE CONTRACT.
76.For the sake of convenience, the relevant Clauses of the
CWEETC Agreement necessary to be referred to for
adjudication of this issue are reproduced hereinbelow:
"16.4 Payment for termination of Works under
Section 16.1 and Section 16.3
16.4.1 If the Owner terminates the carrying out of
the Works pursuant to Section 16.1. or the
Civil Contractor terminates the Works under
Section 16.3 then subject to compliance by the
Contractor with its obligations under Section
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
16.1.2, the Owner shall within forty-five (45)
days of receipt by the Owner of the invoice
therefor, pay to the Civil Contractor, as the
Civil Contractor's sole and exclusive remedy in
respect of such termination, the aggregate of the
following amounts (without duplication),
which exceeds such amounts as have been
already paid to the Civil Contractor for the
performance of Works until the date of payment
under this Section 16.4:
(i) such part of the Contract Price as may
properly be apportioned to the Works
properly performed till the date of
termination,
(ii) any out-of-pocket expenses reasonably
incurred by the Civil Contractor directly
as a result of such termination;
(iii) reasonable and unavoidable cancellation
charges imposed by the Subcontractors as
a result of termination of their
Subcontracts following termination by the
Owner pursuant to Section 16.1;
(iv) the Costs incurred by the Civil Contractor
in protecting the Works and leaving the
Site in a safe condition;
(v) the Costs incurred by the Civil Contractor
in the removal of the Constructional Plant
from the Site and in the repatriation of
any of the personnel of the Civil
Contractor and Subcontractors; and
(vi) the actual and reasonable costs of any
Materials which have been dispatched or
have been delivered to the Site, subject to
the Civil Contractor providing the Owner
with satisfactory documentary evidence of
the same.
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
16.4.2 The Civil Contractor's right to payment of
the amounts specified in Section 16.4.1 is
subject to the condition precedent that all
Subcontractors shall have been paid in full for
all amounts owing to them through the date of
payment, and the Civil Contractor shall
execute and deliver all such papers as the
Owner reasonably requires for the purpose of
assigning to and vesting in the Owner all
rights, title and interests of the Civil
Contractor in and to all Subcontract relating to
the Works with respect to which payment has
been made free of Il hens. charges and
encumbrances of any sort.
16.4.3 Upon any termination pursuant to Section
16.1 or Section 16.3, the Performance Bond
shall be released to the Civil Contractor. Within
forty five (45) days of termination the Parties
shall estimate the payments to be made to the
Civil Contractor in accordance with the
provisions of this Agreement. If pursuant to
such estimation any amounts are owed to the
Civil Contractor then the Advance Payment
Bond shall be released to the Civil Contractor
by the Owner.
22.1 Accounting Records
The Civil Contractor shall maintain full,
complete and detailed fiscal and other records,
books and accounts pertaining to the Works in
accordance with Indian generally accepted
accounting principles and in the English
language. The Owner shall have the right to
obtain independent third parties (such third
party being mutually agreed to between the
Parties) to inspect and audit, during business
hours, all of such records, which may be
Signature Not Verified required for verification of extra claims lodged
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
by the Civil Contractor, if in dispute. Such
records, books and accounts shall be preserved
by the Civil Contractor for a period of three (3)
years after Final Acceptance of the Power
Station at no additional cost to the Owner."
(underlining is ours)
77.When the parties entered into an agreement in 2008, only three
units were envisioned. In May 2010, a fourth unit was brought
within the purview of the agreements. However, all the works
stood suspended in the said Unit 4 by the Respondent on
15.8.2011. On 27.4.2017, in its Statement of Claims at Paragraph
576, the present Respondent made a claim for CNY 248,833,587
as the cost of purchased equipment and abortive and/or
additional work caused by the suspension of Unit 4.
78.In its Statement of Defence and Counter Claims, dated 3.9.2017
at Paragraph 18.3.11, the Appellant puts the Respondent to
strict proof of the alleged costs of all the manufactured
equipment as claimed by it. In the Reply to the Statement of
Defence and Counter Claims, the Respondent vide Paragraph
515 has stated that the Respondent would provide particulars
of the loss in due course.
79.However, interestingly, no such particulars were provided and
the Appellant was constrained to move an application for
production of documents which were relevant for ascertaining
the cost of purchased equipment, storage and maintenance
costs of the equipment that were purportedly manufactured
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
but not delivered for Unit 4. Despite having undertaken to
provide these documents, the Respondent failed to honour the
promise and stated that instead of calculating its claim under
this head as per the actual cost, they would use the billing
breakup (hereinafter referred to as "BBU") whereby no
documents or material would be required to be produced. The
Appellant objected to the same stating that the BBU are
documents which are unilaterally submitted by the Respondent
and hence not verifiable. It was further contended by the
Appellant that the Respondent should provide proof that the
equipment for which it claims for prolongation costs was
"actually manufactured" and had been in storage for the last
seven years, especially considering no such claim or intimation
was made to the Appellant prior to filing of the Statement of
Claim.
80.In this regard, we consider it relevant to refer to the following
paragraphs of the Arbitral Award.
"...160. The Tribunal does not accept the
Claimant's submission that as a result of such
extension of time being granted to the Claimant, the
Claimant, "without more, ... is also entitled to
prolongation costs in the sum of ... (approximately
USD 11 million and) it can also claim what it says
are its direct costs in the sum of 1NR 67.6 Mn,
CNY 17.5 Mn and USD 480,000." The Claimant is
not entitled to its prolongation costs as of right
...161. It was a compromise agreement to
address the risk of delay liquidated damages and did
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
not identify which of the pre-existing claims for
delay had been granted, or the extent to which any
such individual claim may have been granted. If the
Claimant were to subsequently pursue claims for
prolongation costs caused by particular events prior
to the November 2012 Jinan meeting, the Claimant
bore the onus of establishing all elements justifying
a contractual entitlement to a claim for prolongation
costs.
...162. Further, insofar as those pre-existing
claims relate to delay events that occurred both
before and after the Jinan Meeting, it is necessary to
consider whether the Claimant is also entitled to
claim for events that "were known at the time of the
meeting even if the effect of the event giving rise to
the claim continued after November 2012". The only
such claim is for an extension of time of 6 days after
November 2012 for an alleged change in law.
...163. The Tribunal agrees with the
Respondent that as the alleged changes in the
applicable law occurred in 2009, some 3 years before
the November 2012 Jinan meeting, the extent of
delay arising out of any such changes were, or
should have been, taken into account. The Tribunal
agrees that therefore no such claim for delay is
possible now.
Findings
...164. In relation to the questions posed by
Issue I, the Tribunal finds that the effect of the
November 2012 Jinan Agreement regarding:
(a) the agreed Milestone Dates for completion of
the project, was that (i) SEPCO was granted an
extension of time, pursuant to the terms of the
Contracts, and (ii) the original Milestone dates
were not replaced with Replacement Milestone
dates.
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
(b) SEPCO's claims for time prior to this date
was that all such were resolved, but it had no
effect on, and did not address or resolve,
SEPCO's claims for money arising prior to this
date.
(c) It did not give rise to any automatic
entitlement to prolongation costs. If the Claimant
seeks prolongation costs in respect of matters
before and after the November 2012 Jinan
Agreement, the Claimant is required to establish
all of the contractual elements which are required
to give rise to an entitlement to prolongation
costs, including requisite procedural notices, and
the reasons for and length of, any critical delays. "
(underlining is ours)
81. Paragraph 161 of the Arbitral Award unequivocally states that
the Claimant bore the onus of establishing all elements
justifying a contractual entitlement to a claim for prolongation
costs. We may further refer to the following portions of the
Arbitral Award keeping Article 22.1 of the CWEETC
Agreement in mind. The relevant paras from the arbitral award
are as follows;
"806. Part II: Assessment. The Respondent submits
that the Claimant has failed to establish what its
prolongation costs are. In those circumstances the
Respondent submits that Tribunal should not
speculate as to the costs but must simply dismiss the
claim. However Mr Ellison and Mr Jain "agree with
the overall approach followed by"Mr Prudhoe in
assessing prolongation. Their disagreement rests on
access to all of the documents used by Mr Prudhoe.
They have also identified double counting in relation
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
to the travelling costs and salary for Guondian
Shandong staff.
...807. The Claimant relies on Mr Prudhoe's
analysis, and contends it should be preferred as his
Mandarin fluent assistants audited the Claimant's
ledgers and were satisfied that the records contain
the costs for the project that are claimed.
...808. Mr Prudhoe explained that the audited
financial statements cover many projects and the
total costs are confidential. He said that it was not
practical to reconcile the costs in the project cost
ledgers which were provided with the audited
financial statements. Mr Prudhoe was satisfied from
the audit that the ledgers as adjusted contain the
costs incurred in the project. The Claimant
maintains two separate costs accounts for the
project, one in respect of the Amended CWEETC
Agreement and Onshore Supply Agreement and one
in respect of the Offshore Supply Agreement. He
revised his assessment to remove the double
counting. Mr Prudhoe produced extracts from the
Claimant's project cost ledgers of categories of costs
which he attached to his first report. Mr Prudhoe
has assumed some delays are the responsibility of the
Claimant and has excluded those costs. He has
prepared daily rates to apply in the windows of time
on the basis that the delays may not be agreed.
...809. Mr Prudhoe's Mandarin fluent
assistants audited the Claimant's ledgers and are
satisfied that the records contains the costs for the
project. Mr Ellison did not undertake any such
audit and accordingly assessed such items at nil
value.
...810. The Tribunal considers that the
evidence is sufficient to establish the prolongation
costs incurred by the Claimant.
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
...831. The Respondent has not engaged with this
claim at all. The Respondent submits that the
Claimant has not established what its prolongation
costs are. The claim for prolongation costs fails for
lack of evidence and "must simply be dismissed."
...919. There is no dispute that the Claimant is
entitled to be paid for the cost of Unit 4 equipment
that was delivered or installed. The Respondent
accepts that the Claimant is entitled to the "cost of
all works completed prior to the date of suspension
of the Unit 4 works which it is accepted is August
2011 "and reasonable and unavoidable cancellation
charges imposed by sub-contractors as a result of the
termination of their subcontracts.
...923. The Claim for damages is made on a
costs incurred basis, and in the alternative, on the
basis that the Claimant has lost the amount that
would have been paid by the Respondent to the
Claimant had the work been performed.
...925. This claim was quantified at CNY
248,833,587 and related to 30 items which had been
delivered to site but which had not been installed
and 30 items that had not been delivered at all.
Subsequently, the claim was changed to delete the
claim in respect of the 30 items delivered to site. The
number of undelivered items of equipment increased
from 30 to 41.
926. The Claimant in the course of these
proceedings made its claim on the alternative and
different basis namely for damages for breach of
contract. The Claimant in its PI-IS claimed "the
value of the amount for Unit 4 equipment and
materials manufactured but not delivered to Site,
plusprofit on these elements."739 It was made on
the basis that the Claimant should be put back in the
position it would have been but for the Respondent's
Signature Not Verified breach of contract. Had the contract been performed,
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
the Claimant would have received the equipment,
supplied it to the Respondent and "would have been
paid for the value of the Unit 4 equipment in
accordance with the terms of the Offshore Supply
Agreement, and have made a profit, assessed at 5%
(including overheads)."740 This alternative analysis
is only applicable where but for the breach, the
equipment would have been supplied and delivered
to the Respondent and the Respondent would have
paid the Claimant the value of the equipment.
927. The alternative claim is available in a typical
case to allow a claimant to recover the benefits that
it would have received had the contract been
performed. However, in the present situation the
parties have agreed in Section 9.3 that neither party
shall be liable to the other for any indirect,
incidental or consequential damages or anticipated
profits whether as a consequence of the negligence of
a party or otherwise.
928. The Respondent accepts that any costs
incurred by the Claimant are recoverable but
submits that the other claim put forward was a false
claim and asks that the Tribunal dismiss the claim
in its entirety.
929. The Claimant primarily relies on settlement
agreements made with each of the suppliers of
undelivered Unit 4 equipment in support of both
bases upon which it claims damages. The settlement
agreements are put forward as a compromise
agreement pursuant to the principle in Biggin& Co
Ltd v Permanite. [1951] 2 KB 314. In that case,,
unlike the present, the party entered into a
settlement agreement which compromised its claims.
930. Here the claimant has obtained settlement
agreements that are more in the nature of a witness
statement in standard form by the Claimant and the
Signature Not Verified supplier. A typical example of thedocument'
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
records; (i) the original subcontract; (H) the
subcontract was performed until it was suspended
in August 2011; (iii) thereafter the materials and
equipment were stored; (iv) the supplier suffered
loss and the parties wish to settle the related
matters. The parties agree
(i) they have inspected the equipment and "confirm"
the equipment was prepared and manufactured as
set out in appendix 1, (ii) the equipment cannot
normally be used and the supplier should dispose of
the equipment to mitigate the loss and the disposal
income is purportedly stated, (iii) the parties agree
to settle by the Claimant paying the settled amount
to the supplier less the disposal income, after the
conclusion of the arbitration; and (iv) the Claimant
agrees to pay for the storage charges.
931. As noted by the Respondent, the terms of the
settlement agreements do not state or record the
actual amount due and owing to the supplier" or
payable under the settlement agreement." The
Claimant contends that the completion ratio, if
endorsed by a decision of the Tribunal, would be the
basis on which the suppliers would be paid. The
suppliers would be paid no matter what. The
settlement agreements were obtained in or around
July 2018.
932. Shortly afterwards, when the factual witness
statements exchanged, the amount claimed was not
claimed as the "amount of account payable" but
became "BBU value." This caused the amount
claimed to increase from CNY 248,833,587 (page 57
of Mr Prudhoe's First Report {E/15/64}) to CNY
317,072,901 (page 65 of Mr Prudhoe's First
Report{E/15/72}). Mr Prudhoe explains in his
report the change or development of the assessment
of the claim from one of cost incurred by the
Signature Not Verified Claimant including any storage charges,
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
administration costs and Credit for salvage value, to
one of the value of the equipment on the BBU basis
cost to the Respondent. The reason for the change
was made apparent when he freely admitted in cross
examination; "My assessment, in my view, is the
proper way, even though it is different to the
claim.""
933. The Tribunal rejects the suggestion that a
false claim was constructed or put forward. The
assessment was undertaken diligently and in an
open and transparent manner. The multitude of
variations in, and the inconclusiveness of, the
settlement agreements however is such that they do
not establish a basis on which to assess the claim of
the costs incurred by the Claimant including any
storage charges and any salvage value in the
equipment.
934. The Claimant did prepare an itemised Status
List of the undelivered equipment as at 24 October
2011.746 There is no suggestion that this critical
document was not accurate. This evidence and the
evidence from some of the suppliers when
approaches made to those suppliers at the time of the
hearing, does establish that the Claimant
nonetheless has a liability to third party suppliers
for undelivered equipment in respect of which it is
entitled to compensation.
...937. The Tribunal finds that the Claimant is
entitled to damages on account of costs claimed by
third parties for undelivered equipment as a result of
the cancellation of Unit 4 calculated as follows:
Equipment manufactured but not delivered; CNY
256,830,000 -- 2,100,000 = 254,730,000
Storage charges on equipment; CNY 254,730,000 x
50% = 127,365,000
Plus storage charges g 5%; CNY 127,365,000 x 5%
Signature Not Verified = 6,368,250
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
Less credit for salvage value; CNY 254,730,000 x
33.3% = 84,825,090
Costs claimed by Third Parties; CNY 254,730,000 +
6,368,250 -- 84,825,090 = CNY 176,273,160"
82.Before we advert to our discussion, at the time of oral
submissions, the Respondent sought to clarify that the details
of the costs along with excerpts of the ledgers were provided to
the Appellant and the Tribunal in the form of a Report
authored by Mr. Jonathan Prudhoe. In response, the Appellant
drew our attention to the following portion of the Quantum
Report of Mr. Jonathan Prudhoe dated 20thDecember, 2018,
reproduced hereinbelow:
"16.2.13 On 27 and 28 September 2018, my
assistant carried out an audit in Singapore with
SEPCO's personnel, Mr. Manoj, on SEPCO's
onshore cost accounting system.
...16.2.29 On 15 to 16 November 2018, my
assistant carried out an audit at SEPCO's office in
Jinan on SEPCO's offshore cost accounting
system."
(underlining is ours)
83.Our attention was further drawn to the Respondent's Post-
hearing Submissions, especially Paragraph 501, reproduced
hereinbelow:
"501. The prolongation costs fall into a number of
separate categories, as set out below. The differences
between the quantum experts are relatively small,
and are set out in the Quantum Joint Statement. In
Signature Not Verified essence Mr Ellison is of the view that he does not
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
disagree with Mr Prudhoe's approach, but assesses
the sums at nil on the basis of (1) Mr McIntyre's
views; and (2) an alleged lack of evidence. In relation
to point (2), Mr Prudhoe's Mandarin fluent
assistants had audited SEPCO's ledgers and are
satisfied that the records contain the costs for the
projects. Mr Ellison has not undertaken any such
audit, and accordingly assessed many items at nil
value. SEPCO contends that Mr Prudhoe's
assessment is to be preferred."
84.Therefore, the Appellant contends that the only evidence in
respect of the Respondent's claims for prolongation costs was
the report of Mr. Prudhoe, who had not provided any
background documents to the Tribunal or GEL's experts in
support of his assessment. He had only perused extracts from
the Respondent's project cost ledgers indicating only the
categories of costs. The ledgers were not produced in its
entirety. Moreover, access to the ledgers was refused on the
ground of confidentiality of total costs. It was then contended
that Mr. Prudhoe had not even conducted the audit himself,
but had relied on an audit conducted by his assistant who was
not even called upon to depose in the arbitration proceedings.
85.It is quite perplexing to note that no evidence of prolongation
cost has been led or dealt with and the accounts have not been
provided by the party who is claiming the cost apart from
some ostensible 'Settlement Agreements' entered into with the
alleged subcontractors in a standard format; in or around July,
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
2018. These settlement agreements do not indicate any
payment actually having been made or due to the
subcontractors except for a promise that should the
Respondent recover any money, some payment would be
released to the subcontractors. The basis of the these claims is
said to have been conducted by Mr. Prudhoe's assistant; who
in turn claims to have seen the accounts relevant to making
such a claim for prolongation cost. All such assertions fall
within the often frowned upon and dangerous realm of
"hearsay evidence" which is inadmissible.
86.It is disquieting to note that neither Mr. Prudhoe nor the
Tribunal have seen these accounts despite multiple requests by
the Appellant to place such documents on record. When Mr.
Prudhoe and the Tribunal have both not seen the relevant
accounts directly, reliance on the version of some assistant who
has not deposed to prove the veracity of the contents of the
records turning out to be unreliable. It is settled law that proof
of "actual payment" must be pleaded, proved and established
unambiguously as has been consistently laid down by the
judgments of the Supreme Court24.
87.Even as per the contractual scheme of Section 16.4, the
Respondent would have been entitled to make a claim for Unit-
4 equipment and also other prolongation costs insofar as third-
SeeONGC v. Saw Pipes (2003) 5 SCC 705; Mecamidi S.A. v. FlovelMG Holdings Private Limited,
Signature Not Verified
2019 SCC OnLine Del 9414.
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
party payments were concerned and to receive payment.
Therefore, under Section 16.4.1 only if it had satisfied the
condition precedent requiring that all sub-contractors shall be
paid in full for all amounts owed to them. The erroneous
finding by the Tribunal has enabled the Respondent to receive
an award for damages for the Unit 4 equipment (Issue no.12)
for a sum of more than Rs.200 Crores (approx.), even though
the Respondent has, in fact, admittedly made no payments to
the sub-contractors. In effect, the Tribunal has proceeded to
award a claim for which "no proof of payment" was produced,
the same is a vexing position taken by the Tribunal which
cannot be sustained. The Tribunal has ignored the specific
terms of the contract which amounts to a jurisdictional error.
88. It is trite to consider the observation made by the Supreme
Court in Associated Engineering Co. v. Govt. of A.P.25 which is
reproduced as follows:
"21. These four claims are not payable under the
contract. The contract does not postulate -- in fact
it prohibits -- payment of any escalation under
claim No. III for napa slabs or claim No. VI for extra
lead of water or claim No. IX for flattening of canal
slopes or claim No. II for escalation in labour
charges otherwise than in terms of the formula
prescribed by the contract. This conclusion is
reached not by construction of the contract but by
merely looking at the contract. The umpire travelled
totally outside the permissible territory and thus
Signature Not Verified
(1991) 4 SCC 93
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
exceeded his jurisdiction in making the award under
those claims. This is an error going to the root of his
jurisdiction : See JivarajbhaiUjamshiSheth v.
ChintamanraoBalaji [(1964) 5 SCR 480 : AIR 1965
SC 214] . We are in complete agreement with Mr
Madhava Reddy's submissions on the point.
24. The arbitrator cannot act arbitrarily,
irrationally, capriciously or independently of the
contract. His sole function is to arbitrate in terms of
the contract. He has no power apart from what the
parties have given him under the contract. If he has
travelled outside the bounds of the contract, he has
acted without jurisdiction. But if he has remained
inside the parameters of the contract and has
construed the provisions of the contract, his award
cannot be interfered with unless he has given
reasons for the award disclosing an error apparent
on the face of it.
25. An arbitrator who acts in manifest disregard of
the contract acts without jurisdiction. His authority
is derived from the contract and is governed by the
Arbitration Act which embodies principles derived
from a specialised branch of the law of agency (see
Mustill and Boyd's Commercial Arbitration, 2nd
edn., p. 641). He commits misconduct if by his
award he decides matters excluded by the agreement
(see Halsbury's Laws of England, Volume II, 4th
edn.,para 622). A deliberate departure from contract
amounts to not only manifest disregard of his
authority or a misconduct on his part, but it may
tantamount to a mala fide action. A conscious
disregard of the law or the provisions of the contract
from which he has derived his authority vitiates the
award.
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
28. In the instant case, the umpire decided matters
strikingly outside his jurisdiction. He outstepped the
confines of the contract. He wandered far outside the
designated area. He digressed far away from the
allotted task. His error arose not by misreading or
misconstruing or misunderstanding the contract,
but by acting in excess of what was agreed. It was an
error going to the root of his jurisdiction because he
asked himself the wrong question, disregarded the
contract and awarded in excess of his authority. In
many respects, the award flew in the face of
provisions of the contract to the contrary. [See the
principles stated in Anisminic Ltd. v. Foreign
Compensation Commission [(1969) 2 AC 147 :
(1969) 1 All ER 208] ; Pearlman v. Keepers and
Governors of Harrow School [(1979) 1 QB 56 :
(1979) 1 All ER 365] ; Lee v. Showmen's Guild of
Great Britain [(1952) 2 QB 239 : (1952) 1 All ER
1175] ; M.L. Sethi v. R.P. Kapur [(1972) 2 SCC 427
: (1973) 1 SCR 697 : AIR 1972 SC 2379]
; Managing Director, J.& K. Handicrafts v. Good
Luck Carpets [(1990) 4 SCC 740 : AIR 1990 SC
864] ; State of A.P. v. R.V. Rayanim [(1990) 1 SCC
433 : AIR 1990 SC 626] . See also Mustill and
Boyd's Commercial Arbitration, 2nd
edn., Halsbury's Laws of England, Vol. II, 4th edn.].
29. The umpire, in our view, acted unreasonably,
irrationally and capriciously in ignoring the limits
and the clear provisions of the contract. In awarding
claims which are totally opposed to the provisions of
the contract to which he made specific reference in
allowing them, he has misdirected and misconducted
himself by manifestly disregarding the limits of his
jurisdiction and the bounds of the contract from
which he derived his authority thereby acting ultra
finescompromissi."
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
89. The Tribunal, in the present case, also has transgressed its
limits by completely ignoring the contractual agreement
between the parties. This is squarely in conflict with the sweep
of the expression "fundamental policy of India" as judicially
carved out by the Supreme Court in State of Rajasthan and
Anr. v. Ferro Concrete Construction Pvt. Ltd.26, where an
award which used the Statement of Claims amount and
nothing more, was held to be illegal and beyond the
jurisdiction of the Tribunal. The Supreme Court has also echoes
similar sentiments in Ferro Concrete Construction (supra)
which is extracted hereinbelow:
"55. While the quantum of evidence required to
accept a claim may be a matter within the exclusive
jurisdiction of the arbitrator to decide, if there was
no evidence at all and if the arbitrator makes an
award of the amount claimed in the claim statement,
merely on the basis of the claim statement without
anything more, it has to be held that the award on
that account would be invalid. Suffice it to say that
the entire award under this head is wholly illegal
and beyond the jurisdiction of the arbitrator, and
wholly unsustainable."
90.Further reliance can be placed on the High Court of Delhi's
judgment in ZemanTechnogroup v. Union of India27where
RavindraBhat J. had opined that:
(2009) 12 SCC 1
Signature Not Verified
2018 SCC OnLine Del 10371
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
"7. As far as Zeman's appeal is concerned, we notice
that the Tribunal in all relevant parts of its findings,
held that no proof of injury or the extent of it, to
indicate the yardstick which could form the basis of
compensation had been led by the claimant. The
Single Judge in our opinion quite correctly
concluded that the figure of 20% was merely an
assumption. It goes without saying that one
who claims any relief is under a primary
obligation to support it with appropriate
evidence. The reliance on A.T. Brij Paul Singh
(supra) or any other decision, in our opinion, is not
apt because those were rendered in the context of
breach of construction contracts. The Court rulings
largely were based upon the settled principles of
construction of such contracts and the nature of the
profit, indicated by a long line of authorities and
even by experts. In this case, however, there is no
such evidence. Those principles cannot be imported
uncritically. Moreover, it was within the claimant's
claim to support its submission with regard to the
extent of injury suffered by placing on record its
consistent pattern of profits in similar contracts or
the industry practice as it were. Its failure to do so,
therefore, cannot result in an arbitrary figure
transmitting into a margin of profit. We also notice
that the recent judgment in KinnariMullick v.
GhanshyamDassDamani, (2018) 11 SCC 328, set
outs extremely limited circumstances whereby the
Court can require re-adjudication and the conditions
applicable. Those conditions too do not apply in this
case." (The emphasis is ours)
91. It is thus clear that the basis on which the Tribunal has
awarded the said claim in question is impermissible in Indian
Law given the unequivocal position of law as discussed
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
hereinabove. An award in conflict with or in derogation of law
declared by a superior court will be violative of the
fundamental policy of Indian law.
ii. IN ASCERTAINING THAT THE AGREEMENTS
EXCLUDED THE COMMON LAW RIGHT OF
TERMINATION, SUCH AS ACCEPTANCE OF
REPUDIATORY BREACHES.
92.For the sake of convenience, the relevant Clauses of the
CWEETC Agreement necessary to be referred to for
adjudication of this issue are reproduced herein below:
"4.16 Exclusivity
The Owner and the Civil Contractor agree
that the provisions relating to the Contract
Price and termination rights set out in this
Agreement are comprehensive and exclusive
and take into account all relevant risks
relating to the Works, whether foreseeable or
not."
(underlining is ours)
93.On this point a reference may be made to the following
relevant paragraphs of the Arbitral Award:
"961. Although the Agreements contain a
termination mechanism, the mechanism is not a
comprehensive or exclusive regime. In the present
case, where the Contractor terminates because the
Owner repudiates the Agreement, the Agreement
does not provide a termination mechanism even
though the parties did, in contrast, provide a
termination mechanism to the Owner if "the Civil
Contractor repudiates or abandons this Agreement."
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
963. Furthermore, Section 16.3.1 of the Amended
CWEETC Agreement expressly provides that the
Claimant's contractual right to terminate for default
"is without prejudice to any other right or remedy
the Civil Contractor may have under the Agreement
or applicable Law or in equity..." Consequently, the
Tribunal finds that the Claimant's common law
remedies were not excluded."
(Underlining is ours)
94.The Tribunal has held that although the Agreements contain a
termination mechanism, the mechanism is not a comprehensive
or exclusive regime. It has held that the common law right of
termination was not excluded by the provisions of the
Agreement. The same, in fact, is directly contrary to the express
provisions of Section 4.16 of the Amended CWEETC
Agreement as well as the Amended Onshore Supply
Agreement all of which specifically state that the "termination
rights set out in this Agreement are comprehensive and exclusive and
take into account all relevant risks relating to the Works, whether
foreseeable or not.".
95.Therefore, by holding that the Respondent had the right to
terminate the agreements on account of the alleged repudiatory
breaches of the Appellant, and disregarding the otherwise
express provisions of the contract; the Tribunal has re-written
the Agreements by exceeding its jurisdiction, especially when,
it is no longer res integra that an Arbitral Tribunal is bound by
the terms of the contract by virtue of it being a creature of the
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
contract as well as the statutory mandate of Section 28 (3) of the
A&C Act. If the Arbitrator gives an award by ignoring the
terms and conditions of the contract and by travelling beyond
the terms and conditions of the contract, the award is liable to
be set aside.
96.It is also apposite to note that at this juncture the Tribunal came
to a finding that the Respondent by its correspondence in late
2014 and the demobilisation of its commissioning team from
the work site on or around 24 January 2015, accepted the
repudiatory breaches by the Appellant and brought the
Agreements to an end. The relevant passage reads as follows;
"965. The Tribunal finds that the Claimant by its
correspondence in late 2014 and its demobilisation
of its commissioning team from the Site on or
around 24 January 2015, accepted the repudiatory
breaches by the Respondent and brought the
Agreement to an end. The Respondent had by its
repudiatory conduct evinced a clear intention not to
comply with the Agreement. At the time the
Tribunal finds that Respondent, by its conduct,
acted in clear breach of the Agreement and such
conduct both individually and collectively amounted
to a repudiatory breach of the Agreement and a clear
indication by the Respondent that it no longer
intended to be bound by the Agreement.
967. The Tribunal finds that the EPC Agreements
were terminated by SEPCO accepting
repudiatorybreaches of the Amended EPC
Agreements by GKEL in January 2015."
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
97.With such finding, the Tribunal has awarded to the
Respondent a prayer which in fact had been abandoned in the
first place. The Respondent in its post-hearing submissions had
invited the Tribunal to find that the Agreements were brought
to an end by its letter dated 31stMarch, 2016 and not January,
2015. By holding that the Respondent had the right to terminate
the agreement under common law, the Tribunal has re-written
the Agreements to overcome the express terms of Section 16,
holding that they would not be applicable and the
Respondent's entitlement to payments on account of
termination would not be limited by the provisions of Section
16.4.1 of the Agreement. Such an act of the Tribunal does not
pass muster and shocks the conscience of the court.
iii. IN ASCERTAINING THAT THE RESPONDENT WAS
LIABLE TO RECEIVE 5% OF CONTRACTUAL PRICE
UPON COMPLETION OF THE TESTS?
98.For the sake of convenience, the relevant Clauses of the
CWEETC Agreement necessary to be referred to for
adjudication of this issue are reproduced herein below:
"6.1 Testing
6.1.1 Startup and Acceptance Tests
6.1.1.1 The commissioning, start in and
testing and acceptance of Unit 1, Unit 2 and
Unit 3 along with the Power Station shall be
as per the provisions of this Article 6 and the
Technical Specifications; provided that the
commissioning, start-up, testing and
acceptance of the entire Power Station shall
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
occur upon the commissioning, start-up,
testing and acceptance of Unit 3 or the last
Unit to be commissioned and accepted, as the
case may be. The tests and operations to be
conducted by the Civil Contractor for this
purpose shall be as under:
(i) Mechanical Completion of works,
systems, each Unit and the Power
Station;
(ii) Initial Operation; and
(iii) Acceptance Tests, which shall include
the Unit Characteristic Test,
Reliability Run and Performance
Guarantee Test.
6.1.1.2During all testing, each Unit or the Power
Station will be operated within normal
operational design limits of the equipment, in
accordance with the manufacturers'
recommendations (as indicated in the
respective operation and maintenance
manuals) and in a manner consistent with the
practices of a Reasonable and Prudent
Contractor and Reasonable and Prudent
Operator for long-term operation. During the
tests and for all times when the Power Station
or Unit operation is interconnected with the
Grid. the instructions of the SLDC or the
RLDC, as the case may be. will, be binding
and the Power Station or Unit will be
operated according to the applicable Grid
Code, provided however, that the grid
conditions will not require the Civil
Contractor to cause operation of the Power
Station or any Unit thereof beyond the
technical limits.
6.1.1.3 The Civil Contractor shall conduct all tests as
Signature Not Verified a Reasonable and Prudent Contractor and
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
Reasonable and Prudent Operator. Further all
such tests shall be conducted in accordance
with this Agreement (including the Technical
Specifications). Design Documentation,
O&M Manuals, and all warranties of
vendors, manufacturers and insurance
policies.
6.1.2.5 Acceptance of Mechanical Completion
Report.
If the Owner is not satisfied that the
respective Unit or the Power Station is
Mechanically Complete it may endorse the
Mechanical Completion Report accordingly,
stating in what way such Unit or the Power
Station is not Mechanically Complete in
accordance with this Agreement. The Civil
Contractor shall then remedy the deficiencies
as necessary and shall repeat the procedures
described hereinabove.
6.1.4 Acceptance Tests
6.1.4.1 Test Conditions
The test conditions are particularly described
in the Technical Specifications. During the
Acceptance Tests, the respective Unit or the
Power Station, as the case may be, will be
operated from the Power Station control room
with systems normally operated in the modes
as provided in the Technical Specifications.
All systems must be ready for normal and
continuous operation. The use of temporary
equipment will not be allowed unless
approved by the Owner. During testing, the
respective. Unit or the Power Station, as the
case may be, will be operated with requisite
staffing where the operating functions will be
conducted by the Owner's operating staff who
Signature Not Verified will report to and be under the responsibility,
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
control and supervision of the Civil
Contractor (who shall remain responsible for
meeting the requirements of and achieving the
tests) till Take Over of the respective Unit or
the Power Station, as the case may be. The
respective Unit or the Power Station, as the
case may be, will run in a normal manner
with no equipment shutdown to reduce
auxiliary load. Where redundant capacity is
provided.only equipment required for normal
operation shall be in operation
6.1.4.2 Notice for Acceptance Tests and Owner's
right to reschedule
(i) The Civil Contractor shall give at least
thirty (30) days (but not more than
sixty (60) days) prior notice to the
Owner of the anticipated schedule prior
to the beginning of such Acceptance
Tests, together with a time schedule for
each of the tests comprising the
Acceptance Tests ("Performance Test
Notice"). Such schedule shall be subject
to the approval of the Owner. If the
Acceptance Tests are not expected to
begin by the date specified in the
Performance Test Notice, the Civil
Contractor shall be required to notify
the Owner as under:
(a) In case the Acceptance Tests are
delayed by not more than seven
(7) days, Civil Contractor shall
notify the Owner of the revised
date at least two (2) days in
advance: and
(b) in case the Acceptance Tests are
delayed by more than seven (7)
Signature Not Verified days. Civil Contractor shall
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
notify the Owner of the revised
date at least seven (7) days in
advance.
In any such event (under paragraph (a)
and (b) above), there will be no
adjustment to any of the Milestones
and Guaranteed Date of Completion
and any additional costs suffered by the
Civil Contractor shall be to the Civil
Contractor's account.
(ii) Notwithstanding the above, the Owner
shall have the right to suggest
alternative dates for the conduct of
Acceptance Test (including for reasons
related to any electrical output
demands of the Power Procurers) and
the Civil Contractor shall accommodate
any such request by the Owner. In the
event of such rescheduling effected at
the request of the Owner, the Owner
shall provide the Civil Contractor with
an equitable adjustment to the Detailed
Programme and/or Project Schedule for
any delay caused by such rescheduling
pursuant to this Agreement and
reimburse any Costs incurred by the
Civil Contractor.
(iii) In the event each of the Units is capable
of successfully conducting the
Reliability Run or Performance
Guarantee Test. but the Civil
Contractor is unable to perform the test
due to reasons not attributable to the
Civil Contractor or any Subcontractor.
the portion of the Contract Price due
Signature Not Verified upon Reliability Run or Performance
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
Guarantee Test of such Unit shall be
paid to the Civil Contractor not later
than three (3) months after the date
upon which it was otherwise available
for a Reliability Run or a Performance
Guarantee Test: provided that the Civil
Contractor shall not be relieved from its
obligation to perform the Reliability
Run or Performance Guarantee Test in
accordance with this Agreement. For
such period of suspension.the Civil
Contractor shall be entitled to obtain
from the Owner a Variation Order
covering reasonable costs due to
suspension and appropriate adjustment
to the Project Schedule, the relevant
Milestone Dates and the Guaranteed
Date of Completion in accordance with
this Agreement.
(iv) If the Civil Contractor is unable to
conduct the Reliability Run or
Performance Guarantee Test for the
last Unit due to reasons not
attributable to the Civil Contractor or
any Subcontractor for more. than six
(6) months after the date upon which it
was otherwise available for a Reliability
Run or a Performance Guarantee Test.
the Civil Contractor shall be entitled to
demobilize from the Site.
6.1.4.3The Civil Contractor shall not perform or
undertake any Acceptance Test. if. all
conditions and requirements that must be
fulfilled under this Agreement have not been
duly fulfilled, including those related to
Works necessary for the safe performance of
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
any Acceptance Tests or Works that are
incomplete or defective.
6.1.4.4 No materials equipment system incorporated
into the Power Station shall. be operated
during any Acceptance Tests in excess of the
limits allowed by its manufacturer to
maintain the warranties such materials
equipment system.
6.1.4.5 The Civil Contractor shall cooperate with the
Owner to allow the Owner's Representative.
Owner's engineer, the Independent Engineer
or any third party expert appointed by the
Owner.the Power Procurers or the Lenders to
attend, monitor and witness any and all of the
Acceptance Tests.
6.1.4.6 Test Reports
(i) The Civil Contractor shall submit to
the Owner (with copies to the
Independent Engineer) a written
report for each of the Acceptance Tests,
stating:
(a) in the case of the Reliability Run,
observations and recordings of
various parameters measured in
respect of the Reliability Run, the
dates of start and finish of the
Reliability Run, recordings of all
details of interruptions that
occurred, adjustments made and
any repairs done during the
period of Reliability Run,
(b) in the case of Unit Characteristic
Tests, sufficient test data to
establish the level of performance
achieved with respect to the
Signature Not Verified required levels of performance
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
and status regarding meeting of
other required functional
parameters as per the Technical
Specifications.
(c) in the case of Performance
Guarantee Tests. details of actual
measurements of guaranteed
parameters- accompanied by
sufficient test data, adjustment
to the test results for change in
test conditions with respect to
the agreed parameters and by
reference to the agreed correction
curves, all in accordance with the
Technical Specifications (and
subject to such limitations as
may be provided under this
Agreement) to demonstrate the
level of performance attained
with respect to each of the tested
parameters.
(ii) The detailed format for the test reports
will be prepared by the Civil Contractor
and approved by the Owner during the
detailed engineering stage. The reports
would contain at the minimum the
details shown in the Technical
Specifications.
(iii)If the results of the Acceptance Tests
do not meet the requirements of this
Agreement (including - applicable
Laws), including the Technical
Specifications, the Civil Contractor
shall at its own risk and cost take all
remedial and rectification measures and
continue to re-perform and retest till all
Signature Not Verified requirements for successful completion
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
of the tests as per the provisions of this
Agreement are satisfied.
(iv) The Civil Contractor shall, within
seventy-two (72) hours after the
completion of each of the Reliability
Run and Unit Characteristic Tests,
provide a written report to the Owner
for its approval either by facsimile of
otherwise by same day delivery. The
reports would be in the form as
described above and would certify that
the tests have been conducted in
accordance with this Agreement.
The Owner shall respond to such
reports within two (2) Business Days,
either agreeing to the conclusions of the
test reports or in case of its
disagreement with the matters
contained in such reports providing in
reasonable detail the reasons for such
disagreement.
In case the Owner disagrees with the
matters contained in such reports. the
Owner will notify the reasons therefor
in accordance with the provisions of
this Agreement, including the
Technical Specifications, to the Civil
Contractor and the Civil Contractor
shall re-perform and re-test, as
applicable and as advised by the Other
Contractors in order to respond
properly to the objections raised by the
Owner and may thereafter again
deliver the relevant written report for
the approval.
The Reliability Run and the Unit
Signature Not Verified Characteristics Test shall be deemed to
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
have been successfully completed only
after the Owner has agreed in writing
to such test report or the test is deemed
to have been successfully completed in
accordance with this Article 6 and the
Technical Specifications. In case the
Owner does not respond to such test
reports submitted by the Civil
Contactor within two (2) Business
Days from the date of receipt the
reports from the Civil Contractor, the
Civil Contractor shall be entitled to an
extension of the Project Schedule and
shall be reimbursed at actuals any
additional Costs incurred by the Civil
Contractor on account of such delay by
the Owner in responding to the test
reports; provided that in case the
Owner provides no response to such
test reports on or before twenty-one
(21) days from the date of receipt of the
tests reports from the Civil Contractor
then such tests shall be deemed to have
been passed.
6.1.5 Reliability Run
6.1.5.1Reliability Run is to be conducted only after
successful completion of the Initial Operation
and have to be successfully completed prior to
the commencement of the Unit Characteristics
Tests.
All necessary adjustments shall be made to the
respective Unit While operating over the full
range enabling the respective Unit to be made
ready for the Reliability Run. The Reliability
Run shall only be carried out provided the
respective Unit is fully available for full toad
Signature Not Verified operation. The duration of the Reliability Run
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
shall be as specified in the Technical
Specifications.
6.1.5.2The Reliability Run shall be considered
successful provided that the requirements set
forth in the Technical Specifications have been
satisfied.
6.1.5.3 For the determination of the period of the
Reliability Run the time of actual operation
shall be measured. In case the duration of
actual continuous operation during the test
period as per the Technical Specifications is
discontinued for cause's attributable to the
Owner, the Civil Contractor would have been
deemed to have operated the Unit(s) or the
Power Station at the required load during
such period of discontinuation. "However, in
such cases the Owner can, at its option,
require the period of the test to be extended
appropriately in which case the Civil
Contractor would be eligible for an extension
of the relevant Milestone "Date or Guaranteed
Date of Completion by an equivalent period
and any additional costs reasonably incurred
by the Civil Contractor for such extension
shall be reimbursed.
However, should any test that is part of the
Reliability Run (as set forth in the Technical
Specification) be discontinued due to any
default of the Civil Contractor, or any
Subcontractor, such test shall be conducted
again. Should any failure (other than that of
an entirely minor nature) due to or arising
out of faulty design, materials, or
workmanship or omissions.incorrect erection
or improper operating instructions occur in
any part or all of the respective Unit or the
Signature Not Verified Power Station, as the case may be, in a
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
manner that prevents safe commercial use of
the respective. Unit or the Power Station, as
the case may be, a Reliability Run period of
fourteen (14) days shall be conducted after the
defect has been remedied. The onus of proving
that any failure is not due to faulty design,
materials and workmanship shall lie solely
with the Civil Contractor.
6.1.5.4Reliability Run would be deemed to have been
successfully completed only after the Owner
has agreed in writing to such test report or the
test is deemed to have been successfully
completed in accordance with this Section
6.1.
6.1.6 Unit Characteristic Tests
6.1.6.1The Unit Characteristic Tests are to be
carried out to demonstrate compliance of the
respective Unit or the Power Station, as the
case may be, with the required functional
capabilities as per the agreed parameters and
will be conducted in accordance with and as
particularly described in the Technical
Specifications.
6.1.6.2Unit Characteristic Tests would be deemed to
have been successfully completed only after
the Owner has agreed in writing to a
satisfactory test report or the test is deemed to
have been successfully completed in
accordance with Section 6.1.4.6(iv) and the
Technical Specifications.
6.1.7 Performance Guarantee Test
6.1.7.1 General conditions for Performance
Guarantee Test
The Performance Guarantee Test would
be conducted to determine the level of
Signature Not Verified achievement of the Performance Guarantees
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
for the purpose of Take Over of the respective
Units or the Power Station, as the case may
be. The Performance Guarantee Test for the
Power Station shall be successfully completed
alongwith the Performance Guarantee Test for
the last Unit. The Performance Guarantee
Test would be conducted over a continuous
period of seventy-two (72) hours without any
interruption. The Performance Guarantee
Tests for each Unit and the Power Station
shall be successfully completed within a period
of two hundred and twenty (220) days from
the respective dates of successful completion of
the Reliability Run. The Performance
Guarantee Tests may be carried out for a
maximum number of three (3) tests only.
Further, provided that the cumulative
aggregate shut-down period for preparing to
conduct the three (3) tests shall not exceed a
period of nineteen (19) days.
The Power Station or any Unit thereof will
not be deemed ready for the Performance
Guarantee Test if any of the following
conditions exists:
(a) the Reliability Run and the Unit
Characteristic Tests have not been
successfully completed as per the
provisions of this Section 6.1;
(b) the Owner has given notice, to the
Civil Contractor, specifying the
reasons therefor in accordance with
this Agreement. that the Works
necessary for the safe performance of
such tests have not been performed
or are incomplete or defective.
6.1.7.2Performance Guarantee Test procedure
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
The procedure including the definitions,
calculation method to he used, method of
correction of test results for change in
guaranteed reference conditions, the
instrumentation to be installed, the
instrument accuracy class, and the items,
which specifically require preparation and
agreement. are particularly provided for in the
Technical Specifications. The Civil Contractor
will prepare a detailed test procedure based on
such Specification and submit the same for
review and approval by the Owner during the
detailed engineering phase.
6.1.7.3 Codes and Standards to be used
The Performance Guarantee Test shall be
carried out, at no additional cost. or expense
to the Owner, as per the performance test
codes set forth in the Technical Specifications.
6.1.7.4 Instrumentation
All test instrumentation (other than Power
Station instrumentation) required for the
Performance Guarantee Test pursuant to the
Technical Specifications shall be arranged by
the Civil Contractor at its own cost.
6.1.7.5 Guaranteed Parameters
The determination of the level of achievement
of the Performance Guarantees would be done
only when the respective Unit or the Power
Station, as the case may be, is operating under
steady state operations.
The Performance Guarantee parameters which
will be tested measured during the
Performance Guarantee Test would be as set
forth in the Technical Specifications as
detailed in Sub section-VIII of Volume-II.
Section-2A of Part-B (for BTG) and Part C
Signature Not Verified (for BOP).
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
6.1.7.6 Corrections to Test results
The Performance Guarantee parameters, as
measured during the Performance Guarantee
Test, will be adjusted only for such reference
conditions and fuel specifications as
specifically provided in the Technical
Specifications for such correction and using
correction curves as provided therein.
6.1.7.7 Performance Guarantee Test Report
(i) The Civil Contractor shall after the
completion of Performance Guarantee
Test submit (by facsimile or otherwise
by same day delivery) a report
("Performance Test Report") to the
Owner for its review and approval.
The reports shall be in a format as
specified in this Agreement and shall
also include a certification from the
Civil Contractor that the Performance
Guarantee Test was conducted in
accordance with this Agreement.
(ii) The Owner shall respond to the
Performance Test Report submitted by
the Civil Contractor within seven (7)
days of receipt of such Performance
Test Report ("Owner Response
Period").
(iii) If the Owner disagrees with matters
contained in the Performance Test
Report, the Owner's response shall set
forth in reasonable detail the reasons
for such disagreement and the Civil
Contractor shall perform such
corrective measures as in its judgment
may be required, including any
necessary re-testing. if applicable, to
Signature Not Verified respond properly to the objections
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
raised by the Owner and may
thereafter again deliver such
Performance Test Report.
(iv) The Performance Guarantee Test shall
be deemed to have been successfully
completed only after the Owner has
agreed in writing to the Performance
Test Report or the test is deemed to
have been successfully completed in
accordance with this Section 6.1 and
the Technical Specifications. In case
the Owner does not respond to such
test reports submitted by the Civil
Contactor within the Owner Response
Period, the Civil Contractor shall be
entitled to an extension of the Project
Schedule and shall be reimbursed at
actuals any additional Costs incurred
by the Civil Contractor on account of
such delay by the Owner in
responding to the test reports.
(v) Without prejudice to the provisions of
Articles 7 and 8, the Civil Contractor
shall have the right to re-run the
Performance Guarantee Test, but only
after giving thirty-six (36) hours prior
written notice to the Owner.
6.1.7.8 Results of Performance Guarantee Test
(i) If, after the Owner's review of the
Performance Test Report. the Owner
agrees with the resubs of such report
and is satisfied that the Civil
Contractor has achieved at least the
Minimum Performance Standards, it
will issue, within the Owner Response
Period. a certificate to that effect
Signature Not Verified ("Minimum Performance Standards
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
Certificate"), and, if the Civil
Contractor, has in addition to
achievement of the Performance
Guarantees also satisfied the
conditions specified in Section 6.1.7.8
(ii), a certificate confirming that the
Performance Guarantees have been
met ("Performance Guarantee
Certificate"). In each such case, the
date of the relevant certificate shall be
the date of the corresponding
Performance Test Report submitted by
the Civil Contractor.
In case the Minimum Performance
Standards are not achieved, the Civil
Contractor shall, subject to Section
6.1.7.1, take all remedial measures
necessary and continue to test and re-
test until such Minimum Performance
Standards are achieved subject to time
limitations as provided under this
Agreement.
(ii) When the Civil Contractor has in
relation to any Unit, or the Power
Station, completed the following, the
Civil Contractor may apply for the
Performance Guarantee Certificate of
such Unit or the Power Station:
(a) the respective Unit or the Power
Station, as the case may he, has
been completed in accordance
with this Agreement. except. in
the reasonable opinion of the
Owner, in minor respects that
will not affect the safe, efficient
and full use thereof for the
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
purpose contemplated by this
Agreement.
(b) all Delay Liquidated Damages
due under Section 7.4 have been
paid to the Owner:
(c) [NOT USED
(d) the Performance Bond is fully
valid and in effect until the
period prescribed in terms
hereof:
(e) all parts in respect of the
respective Unit or the Power
Station, as the case may be,
which are supplied by the Other
Contractors. have been properly
and securely stored at the Site in
accordance with the
requirements of this Agreement
or the Civil Contractor has
provided the Owner with a copy
of the documentation relating to
the replacement at the cost
replacement. at the cost and
expense of the Civil Contractor.
in accordance with this
Agreement (including re-order
documentation), of any such
parts consumed pursuant to the
commissioning and testing
obligations and obligations
during the Warranty Period or
the Extended Warranty Period,
as the case may be, but which
have not been delivered prior to
the satisfaction of the
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
requirements " of Sections
6.1.7.8(a) to (d) (inclusive):
(f) the Owner is satisfied acting
reasonably that the respective
Unit of the Power Station, as
the case may be, can be safely
and reliably placed in operation,
with a normal complement of
spares and personnel, for their
intended purposes of the
generation of electricity in
accordance with all applicable
Laws, this Agreement
(including the Technical
Specifications) and the O&M
Manuals;
(g) the respective Unit or the Power
Station, as the case may be, is
fully and properly
interconnected and
synchronised with Grid, and all
features and equipment of the
respective Unit or the Power
Station, as the case may be, have
been demonstrated to be capable
of delivering electric power and
capacity into the Power
Procurers' system in accordance
with this Agreement (including
the Technical Specifications);
(h) the Civil Contractor shall have
completed the training of the
Owner's nominated personnel
in the operation and
maintenance of the respective
Unit or the Power Station, as
Signature Not Verified the case may be. in accordance
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
with the terms and conditions of
this Agreement;
(i) all Civil Contractor's Permits
required to be obtained by the
Civil Contractor have been
obtained and handed over to the
Owner (wherever necessary);
(j) the Owner has received from the
Civil Contractor all manuals
required to be provided by the
Civil Contractor under this
Agreement for the Owner to
start-up. operate and maintain
the respective Unit or the Power
Station, as the case may be, in a
safe, efficient and effective
manner;
(k) the Civil Contractor has
provided to the Owner, the
instrument lists, all tools in
respect of the Power Station
required to be provided under
this Agreement, to be received
with the supply of any
equipments, and all left- over
start-up and commissioning
spares and consumables.
provided that the Owner will
make available ai no extra cost
such commissioning spares to
the Civil Contractor in case the
same is required by the Civil
Contractor for the performance
of its warranty obligations
hereunder:
(l) [NOT USED]
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
(m) all waste materials and rubbish
have been removed from the Site
or the relevant part thereof
(n) the Owner shall have received
any relevant assignments with
respect to surviving warranties
provided by Subcontractors, if
applicable:
(o) the Civil Contractor has
provided to the Owner a
certificate confirming that no
Subcontractor Sub-contractor
has any liens. encumbrance or
security interest on, or claims
with respect to title to, the
properties and assets of the
Power Station or the Owner;
and
(p) all damages determined as
payable in accordance with the
provisions of this Agreement
have been paid to the Owner.
(iii) In case the Minimum Performance
Standards have not been achieved the
Civil Contractor shall continue to
perform its obligations hereunder,
including any remediation,
replacement and retesting to achieve
the Minimum Performance Standards
in accordance with the provisions of
this Agreement. In the event the
Minimum Performance Standards have
been achieved but the Performance
Guarantees have not been achieved,
then the Civil Contractor shall have the
right, in accordance with and subject to
Signature Not Verified the provisions of this Section 6.1.10
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
elect to correct the shortfall in the
Performance Guarantees or to pay the
Performance Guarantee Liquidated
Damages in accordance with the
provisions of this Agreement.
Subject to Section 6.1.7.1. if the
Minimum Performance Standards or
the Performance Guarantees have not
been achieved at the first Performance
Guarantee Test conducted after the
successful completion of the Reliability
Run to determine the achievement of
the Performance Guarantees, the Civil
Contractor shall undertake remedial
action (the period of shutdown for such
remediation not to exceed nineteen (19)
days less the period of shutdown for the
first Performance Guarantee Test)
within a period not exceeding two
hundred and twenty (220) days from
the successful completion of the
Reliability Run. The Civil Contractor
shall give the Owner not less than
fifteen (15) days notice in writing of the
period during which the Civil
Contractor would undertake remedial
action to achieve the Minimum
Performance Standards or the
Performance Guarantees, and such
notice shall be given together with a
revised Detailed Programme setting
forth the actions, proposed to be taken
by the Civil Contractor, the times
schedule for such remedial action and
the analysis of the impact that such
remedial action would have on the
Signature Not Verified operation and maintenance of the
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
respective Unit or the Power Station
(by way of reduced availability etc.). as
the case may be ("Corrective Action
Plan").
If the Minimum Performance
Standards have been achieved but the
Performance Guarantees have not been
achieved within fifteen (15) days after
the receipt of the Minimum
Performance, Standards Certificate, the
Civil Contractor may at its options:
provide to the Owner a written notice
that the Civil Contractor shall not take
action to correct the shortfall in the
Performance Guarantees in which
event, the Civil Contractor would be
obliged to pay Performance Liquidated
Damages as per Article 8: provided
that, in case the Owner so requires,
prior to payment of any Performance
Liquidated Damages, the Civil
Contractor shall as a Reasonable and
Prudent Contractor undertake atleast
one (1) remediation rectification
measure for achieving the Performance
Guarantees in accordance with a
Corrective Action Plan agreed between
the Parties.
The Civil Contractor shall be deemed to
have elected not to take. any such
corrective action to achieve the
Performance Guarantees if it fails to
provide any notice to the Owner within
fifteen (15) days after the Performance
Guarantee Test at which the Minimum
Performance Standards were achieved.
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
The Civil Contractor shall consult and
co-operate with the Owner in putting
into effect any such corrective action in
a manner that will cause the least
disruption to the operation and
maintenance of the respective Unit or
the Power Station, as the case may be.
All measures taken under any
Corrective Action Plan, or otherwise to
make good any performance shortfall
shall be at the sole cost and risk of the
Civil Contractor.
(iv) The Owner may, acting reasonably,
notify within five (5) days, of its
disagreement (setting out its reasons),
with the actions, time period and/or
scheduling specified in the Corrective
Action Plan and the Civil Contractor
shall resubmit a revised Corrective
Action Plan within seven (7) Business
Days, failing which the Civil
Contractor shall be deemed to have
elected not to take any corrective action
in, respect of shortfall in the
Performance Guarantees. In
circumstances where the Owner has
continued to operate the respective
Unit or the Power Station, as the case
may be, and has not provided Unit
Power Station outage to the Civil
Contractor or for any time period
and/or schedule specified and agreed to
between the Owner and the Civil
Contractor for any Corrective Action
Plan then the time period specified in
such Corrective Action Plan shall be
Signature Not Verified extended till such time the Owner has
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
provided outage of the Unit Power
Station to the Civil Contractor for the
number of hours as per the agreed
Corrective Action Plan. The Civil
Contractor shall, at all times keep
the Owner informed of the progress of
any Corrective Action Plan.
(v) In the event the Civil Contractor has
taken any corrective and remedial
action with respect to the respective
Unit or the Power Station, as the case
may be, then, prior to the expiry of the
period of two hundred and twenty
(220) days from the date of successful
Completion of the Reliability Run, the
Civil Contractor shall conduct the
Performance Guarantee Test in
accordance with the provisions of this
Article 6. If the results of the
Performance Guaranteed Test fail to
achieve Performance Guarantees, the
results of the most recent test
conducted to establish the Performance
Guarantees preceding the end of the
aforesaid period of two hundred and
twenty (220) days from the successful
completion of the Reliability Run shall
be deemed för the purposes of this
Agreement as the final results for the
test in question.
(i) [NOT USED]
(ii) [NOT USED]
(iii) The obligation of the Civil Contractor
under this Section 6.1.7 is in addition
to and not in substitution of its actual
liability, if any, to pay any Performance
Signature Not Verified Liquidated Damages.
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
7.1 Operation and Completion
7.1.1 The Civil Contractor guarantees that it shall
achieve each Milestone by the Milestone
Date specified therefor and shall achieve
successful completion of the Performance
Guarantee Test for each Unit and the Power
Station by the Guaranteed Date of
Completion.
7.1.2 [NOT USED]
7.1.3 No Milestone Date or Guaranteed Date of
Completion shall be extended for any reason
except as provided in Section 7.3.
7.3 Delay and Extension of Time
7.3.1 If the achievement of any Milestone will be,
or has been, delayed beyond the Milestone
Date specified therefor or the successful
completion of the Performance Guarantee
Test for any Unit or the Power Station will
be, or has been delayed, beyond the
Guaranteed Date of Completion by reason
of:
(i) Change of Law
(ii) suspension of the Works under Sections
15.1 or 15.3;
(iii)in respect of the Works or this
Agreement, any breach by the Owner
and any failure to prevent a breach of
this Agreement by the Owner or any
person engaged by the Owner
(including any contractor engaged by
the Owner on the Site in connection
with the Transmission Lines and or coal
transportation system from the mine
but excluding the Civil Contractor. any
Subcontractor and the Other
Contractors), unless such breach of this
Signature Not Verified Agreement or failure results from any
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
act. omission or breach of this
Agreement by the Civil Contractor or
any Subcontractor:
(iv) an Event of Force Majeure to the extent
the provisions of Article 11 permit a
delay.
(i) a Variation Order issued by the
Owner (except where such
variation is caused by a breach of
this Agreement by the Civil
Contractor or any Subcontractor)
in circumstances where any
modification to any Milestone
Date or Guaranteed Date of
Completion has not been agreed
pursuant to Article 12 and
including any delay associated
with dismantling or rectification
where the Civil Contractor has
proceeded with a Variation upon
the Owner's notification pursuant
to Section 12,7.2(fi)(b) and the
determination of the relevant
Dispute under Section 12.7.2(i)(a)
is in favour of the Civil Contractor
and such determination requires
dismantling or rectification
works:
(ii) additional testing or uncovering,
making openings, reinstating and
making good are ordered by the
Owner pursuant to Sections 2.8.3
and 2.8.6 respectively except in
circumstances where the results of
such additional test or uncovering
or making openings shows that the
Signature Not Verified workmanship or materials tested or
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
the previously executed Works are
not in accordance with this
Agreement;
(iii) compliance by the Civil Contractor
with any (a) decision, instruction
or order of the Owner, in
accordance with Section 2.6, to the
extent such decision, instruction
or order is subsequently
determined pursuant to Article 21
not to be in accordance with this
Agreement, applicable Law or the
Governmental Permits or required
the Civil Contractor to perform its
obligations otherwise than as a
Reasonable and Prudent
Contractor: and (b) determination
pursuant to Article 21 which
requires the Civil Contractor to
undertake any dismantling or
remediation works;
(iv) compliance by the Civil Contractor
with any requirements resulting
from (a) the disapproval of any
Design Documentation or
comments on any Design
Documentation pursuant to
Section 18.3 by the Owner in
respect of which there was a
Dispute and the determination in
respect of such Dispute was in
favour of the Civil Contractor: and
(b) such determination which
necessitate amendments or
variations having to be made to
such Design Documentation and
Signature Not Verified or Variations having to be made to
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
any part of the Works which were
carried out pursuant to such
Design Documentation (prior to
such amendments or variations to
such Design Documentation being
made pursuant to such
determination):
(v) delay in release of the Advance
Payment by the Owner, beyond a
period of seven (7) days from the
date of issue of the Notice to
Proceed, provided that the
Advance Payment Bond has been
submitted by the Civil Contractor
in accordance with the provisions
of this Agreement on or before the
date of issuance of the Notice to
Proceed;
(vi) any stoppage in the Works for a
period greater than seven (7)
consecutive days or a cumulative
period of thirty (30) days caused
by any disturbance from villagers
occurring outside the boundary of
the Power Station; and
(vii) any other reasons expressly
provided in this Agreement for
which the Civil Contractor is
entitled for an extension of time;
then subject to the satisfaction of
the conditions set out in Section
7.3.2. the Civil Contractor shall be
entitled to such extension to the
relevant Milestone Date and/or
Guaranteed Date of Completion as
shall be fair and reasonable taking
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
into account all the circumstances
of such delay.
7.3.2 Unless otherwise specified in this Agreement,
within seventy-two (72) hours (or such other
period as may be agreed by the Owner) of
learning of any cause of delay or disruption to
the progress of the Works, the Civil
Contractor shall submit a notice providing
full details relevant to such cause, except to
the extent the Civil Contractor cannot submit
all relevant details within such period because
the cause of delay or disruption continued for
a period exceeding seven (7) days, the Civil
Contractor shall submit interim details of
intervals of not more than seven (7) days
(from the first day of such delay or
disruption) and full and final supporting
details together with full supporting
documentation in support of its application
within fourteen (14) days of the date of
cessation of such delay or disruption.
Further in all cases where events described in
Section 7.3.1 have occurred, the Civil
Contractor shall advise the Owner of:
(a) the extent of the actual and
contemplated delay and its anticipated
effect upon the relevant Milestone
Date and or Guaranteed Date of
Completion;
(b) the Civil Contractor's plans to take
steps to overcome or minimise the
actual or anticipated delay and the
increased costs, if any, associated
therewith: and
(c) the Civil Contractor's plans to adopt
any methods suggested by the Owner
Signature Not Verified to overcome or minimise the delay and
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
the increased costs, if any, associated
therewith, and the Civil Contractor
shall use all reasonable endeavours to
take such steps and or adopt such
methods.
7.3.3 The Civil Contractor shall not be entitled to
any extension of time:
(i) unless the Civil Contractor shall have
used and continues to use reasonable
endeavours to prevent, avoid,
overcome and minimise any such delay
and to proceed with the Works, and
(ii) in respect of any delay to the extent
that such delay is attributable to any
act, omission, negligence, default or
breach of the Civil Contractor or its
Subcontractors or any tier of
subcontractor of such Subcontractor or
la any matters or events which are
within the control of the Civil
Contractor or any Subcontractor or
any tier of subcontractor of such
Subcontractor:
7.3.4 Where the Parties have agreed pursuant to
Article 12 the length of the extension of time
to be granted in respect of a Variation or other
event treated as Variation under this
Agreement, such agreement shall be final and
binding.
7.3.5 The Owner shall proceed to agree or
determine either prospectively or
retrospectively such extension of the time for
completion as may be due and shall notify the
Civil Contractor accordingly. When
determining each extension of time, the
Owner shall be entitled to take into account
Signature Not Verified all the circumstances known to the Owner at
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
that time, including the effect and impact of
any prior extensions. the effect of any
reduction in the quantity of any item of the
Works and the Civil Contractor's compliance
with the requirements of this Section 7.3. If
the Parties fail to agree upon the period of
extension to the relevant Milestone Date
and/or Guaranteed Date of Completion, as
applicable, the matter shall be determined in
accordance with Section 21.5,"
7.3.6 Any addition to the Contract Price granted by
the Owner under Section 4.2 small not of
itself entitle the Civil Contractor to an
extension of time pursuant to this Section 7.3.
7.3.7 Without prejudice to the other provisions of
this Section 7.3, the Owner shall. within
thirty (30) days of receipt of the supporting
documents, respond to the Civil Contractor's
request for extension of time, and the Parties
shall mutually agree to whether the Civil
Contractor is entitled to any extension to the
relevant Milestone Date and/or Guaranteed
Date of Completion.
7.4 Delay Liquidated Damages
7.4.1 Liquidated Damages
7.4.1.1 In case the Reliability Run of any Unit(s) is
not successfully completed on or before the
Milestone Date(s) specified therefor. subject to
such extensions of time as may be allowed in
this Agreement, the Civil Contractor shall pay
to the Owner by way of Delay Liquidated
Damages and not by way of penalty, zero
decimal point one seven percent (0.17%) of
the Contract Price per week of delay or part
thereof for each Unit. provided that the total
Delay Liquidated Damages payable by the
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
Civil Contractor shall not exceed ten percent
(10%) of the Contract Price.
7.4.1.2 All sums payable by the Civil Contractor to
the Owner pursuant to this Section 7.4 shall
be paid as liquidated damages and not as a
penalty The terms, conditions and amounts
fixed pursuant to this Section 7.4.1 for
liquidated damages are reasonable,
considering the reduction in value of the
Power Station to the Owner and the actual
costs thar the Owner will incur in the event of
the Civil Contractor's failure to scheme each
Milestone by the Milestone Date specified
therefor. The amount of these liquidated
damages are agreed upon and fixed hereunder
by the Parties because of the difficulty of
ascertaining on the date hereof the exact
amount of such reduction in value or costs
that will be actually incurred by the Owner in
such event, and the Parties hereby agree that
the liquidated damages amounts specified
herein are a genuine pre estimate as of the date
hereof of damages likely to be incurred and
shall be applicable regardless of the amount of
such reduction in value or costs actually
incurred by the Owner and, subject to the
provisions of Article 9 and the Owner's right
to terminate this Agreement under Section
16.2 shall be in lieu of all remedies and
damages for such late completion or Take
Over.
7.4.2 If the Civil Contractor is entitled pursuant to
Section 7.3 to an extension to any Milestone
Date for any Milestones in respect of any
delay which will be or has been suffered by the
Civil Contractor during any Period of Civil
Signature Not Verified Contractor's Delay by reason of any one or
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
more of the matters set out in Section 7.3.1,
and/or the Owner issues a Variation Order
pursuant to Article 12 for the performance of
work by the Civil Contractor during any
Period of Civil Contractor's Delay pursuant
to which any such Milestone Date is extended,
the Owner shall be entitled to liquidated
damages in accordance with Section 7.4.1 in
respect of any delay:
(i) prior to extension as aforesaid and the
Delay Commencement Date: and
(ii) after the Milestone Date, as extended
as aforesaid.
7.4.3 [NOT USED]
7.4.4 Liquidated damages arising under this Section
7.4 shall, subject to Section 4.8, be paid by the
Civil Contractor fortnightly in arrears by wire
transfer or deposit of immediately available
funds to such account as the Owner may
direct, with the first such payment to be made
no later than fourteen (14) days from the date
of raising invoice(s) in respect of the same by
the Owner and the last such payment to occur
on the earlier of successful completion of the
Performance Guarantee Test of the Power
Station or termination of this Agreement by
the Owner.
7.4.5 The damages recoverable pursuant to this
Section 7.4 shall, subject to Sections 16.2 and
6.6, be the Owner's sole remedy în relation to
such delay.
7.4.6 The aggregate maximum liability of the Civil
Contractor for Delay Liquidated Damages
shall be equal to ten percent (10%) of the
Contract Price.
10.7 Further Tests
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
10.7.1If the making good under this Article 10 when
complete, might affect the performance of any
part of the Power Station, the Owner may
reasonably require that any of the tests which
are to be performed under this Agreement be
repeated; provided that if the Civil Contractor
provides evidence satisfactory to the Owner
that any such remedying of defects shall not
affect the previous test results, the owner may
direct that such tests would not require to be
repeated.
10.7.2The request shall be made by notice within
thirty (30) days after completion of such
making good and the relevant tests shall be
repeated in accordance with Article 6.
10.7.3In the event of any failure to pass such tests,
the provisions of Sections 6.1.10, 6.1.12, 6.6
and Articles 8 and 16 shall apply."
(underlining is ours)
99. The Respondent was contractually required to conduct three
tests on each Unit in the following order; (i) RRT; (ii) UCT; and
(iii) PGT. Milestone payments under the Agreements were
linked to the "successful completion" of the RRT and PGT. 5%
of the contract price was payable on the successful completion
of the RRT and another 5% was payable on the successful
completion of the PGT. The successful completion of the PGT
was based on the achievement of certain parameters as
provided for in the Agreements and Technical Specifications.
Despite the Tribunal having rendered a categorical finding that
the UCT for Unit -I was not successfully completed, had gone
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
on to hold that the PGT for Unit -1 was successfully completed
and thus the Respondent was entitled to the milestone
payment payable towards PGT of Unit -1 in derogation of the
contractual provisions which stipulate the manner in which the
testing has to be done.
100. On the contrary, the Tribunal has held that the Appellant had
acted in breach of the contractual obligations by refusing to
recognise that the RRT had been successfully passed for Units I
and 2 and by refusing to permit the UCT and PGT to be
conducted, it held that the Respondent was entitled to damages
for breach of the contract as it was prevented by the Appellant
from performing these Tests and earning 5% of the Contract
Price for the PGT of Units 2 and 3. These findings are again in
the teeth of the contractual provisions that the tests must be
carried out in a certain order and manner failing which the
question of moving on to the subsequent test would not arise.
The relevant passages dealing with the same are as hereunder;
"764. In relation to the UCT, the Tribunal notes the
approach adopted by Mr Margolis which is said to
take into account the evidence and agreements
between the parties. There were three key parameters
which were not met and which are the subject of the
counterclaim and R-173 defects. These were (I) the
attemperation flow rate was exceeded; (2) the ID
fans did not have sufficient capacity; and (3) the
noise levels were too high. In these circumstances
the Tribunal rejects the Claimant's submission that
Mr Margolis' approach "better reflects the basis on
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
which UCT was to be conducted, how it was to be
conducted and the interpretation of those results. '
765. However the Respondent had by the time the
results of the UCT and PGT test on Unit 1 were
known, adopted a blanket approach which would
have prevented the Claimant from repeating the
UCT and PGT. This approach stems from Mr
Sheshan's email dated 10 September 2014. This
approach is not consistent with the contractual
obligations between the parties. The Respondent
acted in breach of the contractual obligations by
refusing to recognise RRT had been successfully
passed on Units 1 and 2 and by refusing to permit
the UCT and PGT to be conducted until all work
within the Claimant's scope of works had been
completed in all respects.
Findings
766. The Tribunal finds that the Claimant is
entitled to 5% of the Contract Price payable on
completion of PGT in relation to Unit 1 and that the
Claimant is entitled to damages for breach of
contract because the Claimant was prevented by
GKEL's wrongful act of hindrance and prevention
from performing the tests and earning the 5% of the
Contract Price that would have been payable for the
UCT in relation to Units 1, 2 and 3, and the PGT
for Units 2 and 3 on satisfying these milestones."
101. In holding so, the Tribunal has awarded to the present
Respondent sums to the tune of Rs. 255 Crores (approx.). It is
opportune at this stage to take note of Section 6.1.5.1 of
Amended CWEETC Agreement, which mandates that the RRT
is required to be successfully completed before the
commencement of the UCT. Further, as per Section 6.1.7.1(a),
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
both RRT and UCT are required to be successfully completed
before the conduct of the PGT. Thus, it is evident that
successful completion of both RRT and UCT is a precondition
to the successful completion of the PGT. A failure to
successfully complete the RRT and UCT would mean that the
preconditions to perform the PGT had, in fact, not been
achieved and thus the question of conducting the same would
not arise.
102. It was the Appellant's case that UCT for Unit 1 had failed, for
the reason amongst others, that the attemperator flow rate had
exceeded the design value i.e. there being a defect in the design
of the Boiler. This system and the Boiler design was common to
all the Units. In fact, the Appellant had made a counter claim
for the cost of rectification of this defect in all 3 units, (which
was considered in Issue no. 16 of the Arbitral Award) which
would have required a substantial change in the design of the
boiler.
103. The relevant paragraphs from the Arbitral Award dealing with
the issue state;
"1084. The Claimant submitted Mr Aspinall's
investigations were limited and not probative of the
existence of any defect in the design as he had only
looked at Unit 2 boiler operation. His reports did not
detail any of his observations of Unit 2 and he had
not looked at Unit 3 at all. However, this
submission overlooks the same evidence elsewhere.
There is a comment in the opening paragraph of the
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
first Harbin report headed a "Description of
Problem" (i.e., the high desuperheating water flow
during the UCT of Unit 1) which also states; "the
same problem also got involved in the operation of
the No 2 and No 3 boilers.
1093. The Tribunal has carefully considered this
evidence in light of all the evidence put forward by
the parties. The Tribunal finds that with the
exception of the "over-fire air" and other low cost
rectification works which have been recommended by
Mr Aspinall and which the Tribunal finds are
necessary, whether any other remedial works are
necessary has not been established. The over-fire
works and other low cost measures will probably
mitigate the problem.
1094. The Tribunal finds that the Claimant's design
was in breach of the EPC Technical Specifications as
a result of the failure to achieve the stable
operationattemperation flow rate of below 25 TPH at
100% BMCR."
104. The Tribunal, curiously, has returned a finding that there was
defect in the design of the boiler and it was in breach of the
EPC Technical Specifications. The Tribunal also held that the
manufacturers of the boiler itself had stated that the same
defect was prevalent in boilers of all the 3 units.
105. The Tribunal has also rendered a finding that the attemperator
was defective and that it was the Respondent's responsibility
under, inter alia, Sections 6.1.4.3, 6.1.4.6 (iii) and 6.1.10.1 of the
Amended CWEETC Agreement to repair and rectify it, at its
own risk and cost, and further, under Section 6.1.4.1, to have all
systems functioning before undertaking or re-taking the tests.
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
106. The Respondent was, thus, contractually constrained to
demand a re-test unless it first rectified the defect of the
attemperation flow rate and completed all systems which were
required for the smooth operation of the plant as required
under Section 6.1.4.1. Therefore, the question of the Appellant
preventing the Respondent from carrying out the re-test of the
UCT, by not allowing a UCT unless a rectification was done
and all systems were operational as required by the Contract
for performing the Acceptance Tests, did not arise. Unless, the
UCT was successful, the question of preventing the PGT does
not arise.
107. In view of the above, having held that the UCT for Unit -- 1
was unsuccessful the Tribunal could not have proceeded to
hold the PGT to be successful as held in the following
paragraphs:
"764.In relation to the UCT, the Tribunal notes the
approach adopted by Mr Margolis which is said to
take into account the evidence and agreements
between the parties. There were three key parameters
which were not met and which are the subject of the
counterclaim and R-173 defects. These were (I) the
attemperation flow rate was exceeded; (2) the ID
fans did not have sufficient capacity; and (3) the
noise levels were too high. In these circumstances
the Tribunal rejects the Claimant's submission that
Mr Margolis' approach "better reflects the basis on
which UCT was to be conducted, how it was to be
conducted and the interpretation of those results.
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
766.The Tribunal finds that the Claimant is entitled
to 5% of the Contract Price payable on completion of
PGT in relation to Unit 1 and that the Claimant is
entitled to damages for breach of contract because
the Claimant was prevented by GKEL's wrongful
act of hindrance and prevention from performing the
tests and earning the 5% of the Contract Price that
would have been payable for the UCT in relation to
Units 1, 2 and 3, and the PGT for Units 2 and 3 on
satisfying these milestones."
108. Similarly, with respect to the Units -- 2 and 3 also the problem
of, inter alia, the attemperator flow rate was also existing and
thus there could be no question of prevention of the test, as
they were bound to fail. Further, the Appellant had
categorically informed the Respondent vide its letter dated
28.11.2014, in consonance with inter alia, the provisions of
Section 6.1.4.1 of the amended CWEETC Agreement, that there
were several systems such as the fire fighting system, the
condenser tube cleaning system, CEMS, the ash disposal
system, coal waste water treatment, all of which were still
required to be made operational so as to be eligible to
undertake the Acceptance Tests.
109. In view of the above, the Tribunal's repeated findings, that
requiring all works in all Units and-the BOP to be completed
before UCT and POT is in stark contrast to the provisions of the
Amended CWEETC Agreement and in contradiction to the
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
express terms of the Agreements. The relevant paragraphs of
the arbitral award are reproduced herein:
"757. The contractual requirements for undertaking
UCT are successful completion of the RRT,
submission of the test procedure for approval and 30
days' notice. A Unit is ready for PGT when the
RRT and UCT tests have been successfully
completed. Contrary to the requirements in Section
6 of the Amended CWEETC Agreement, Mr
Sheshan's view was that he saw no problem with
requiring everything to be completed before allowing
UCT and PGT to take place. Mr Karanam's
evidence was equally clear, he required "all the
things to be completed. "Requiring all works in all
Units and the BOP to be completed before UCT and
PGT is contrary to the provisions of the Amended
CWEETC Agreement and furthermore was
inconsistent with the Respondent's own position in
August 2013 and in July 2014."
110. The Tribunal by holding so has modified the express terms of
the Agreements and overshot its jurisdiction. The Tribunal has,
in fact, ignored its own finding:
"1061. The attemperation flaw rate is one of the
Guaranteed Performance Parameters jar the PGT
the EPC Technical Specifications in terms referring
to 100% MICR ..."
111. Thus, once it was held that the UCT was not successful, as a
corollary thereto, it could never be said that the PGT was
successful. The Tribunal in holding in favour of the
Respondent failed to consider that the Milestone payment of
5% is payable on not merely conducting the PGT but on the
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
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'successful completion' of the same. Consequentially, once the
Tribunal had rendered a finding that the Respondent had
failed to achieve the parameter for the attemperation flow rate,
any number of attempts at the UCT / PGT would naturally
have been unsuccessful.
112. A bare perusal of the RRT Test Report (provided to us at Annex-
94, Pg.7328) and the Post RRT Joint Protocol (provided to us at
Ann-95, Pg.7428) shows that there were a number of critical
defects observed during the reliability runs of both Unit 1 and
Unit 2. One of them being the fact that the Ash Handling
System was not functioning properly as the ash conveying
system was being run with 5 air compressors (for Unit 1) and 4
air compressors (for Unit 2) instead of the design requirement
of 3 compressors( Issue No. 19). Moreover, when the Tribunal
held that the ash handling system was fundamentally under
designed and could not cope with the amount of ash being
produced, even if the coal was within the range of coal and still
proceeded to award a sum of Rs.40 Crores (approx.) as
damages for the same. The relevant paragraphs of the Arbitral
Award are reproduced hereinbelow:
"16.2 Was the Demonstration Parameter for
attemperation flow being below 25TPH at BMCR
achieved during the UCT attempt of Unit 1?
.....1071. No, the rate was exceeded. As noted above,
during the UCT for Unit 1 on 26 August 2014, the
total flow rate was recorded as "Total flow = 46.12 +
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46.12.+ 1.9 = 94.14 TPH" and it was observed that
"SH attemperation flow is more than design value."
Findings
....1093. The Tribunal has carefully considered this
evidence in light of all the evidence put forward by
the parties. The Tribunal finds that with the
exception of the "over-fire air" and other low cost
rectification works which have been recommended by
Mr Aspinall and which the Tribunal finds are
necessary, whether any other remedial works are
necessary has not been established. The over-fire
works and other low cost measures will probably
mitigate the problem.
1094. The Tribunal finds that the Claimant's design
was in breach of the EPC Technical Specifications as
a result of the failure to achieve the stable operation
attemperation flow rate of below 25 TPH at 100%
BMCR.
1281. The Tribunal assesses the rectification costs
limited to INR 395,300,000 on the basis that the
vacuum system is not to be included as it would
otherwise be a claim for betterment of the contracted
system.
(44) Defect 44 - Failure of Turbine Driven Boiler
Feed Pump (TDBFP) rotor cartridge (Part 1, Tab 3,
Item 46)
1725. In or around July 2016, the rotor cartridge of
the Turbine Driven Boiler Feed Pump 3tiA seized.
As a result the feed water flow could not be
established and the rotor cartridge was unable to
achieve the necessary process parameters for the
feedwater flow.
Respondent's position
1726. This is a Latent Defect that arose before the
expiry of the Latent Defects Period on 1 June 2016."
(underlining is ours)
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113. The Tribunal having awarded damages for the defective ash
handling system (Issue no.19), HFO system (Issue no.18), as
well as the High Pressure Feed Water Heaters (Issue No. 17).,
which were also, mentioned as defects in the post RRT
protocol, the Tribunal could not have possibly found that the
Appellant had agreed that the RRT was successfully
completed. The same is counter intuitive, contrary to the
records and grossly arbitrary. It is thus clear that Issue
Nos.9,10, 7,16,17,18 and 19 are intrinsically tied up with and
directly related to the inherent flaws in the testing processes i.e.
UCT, RRT and PGT.
D. WHETHER THE LD. SINGLE JUDGE WAS CORRECT IN
DISMISSING THE SECTION 34 PETITION AT THE STAGE
OF ADMISSION WITHOUT CONSIDERING ALL THE
ARGUMENTS MADE BY THE PARTIES?
114. The Learned Senior Counsel for the Respondent very zealously
put forward his submissions pertaining to this issue. The
Appellant claims that the Learned Single Judge ought not to
have dismissed the petition under Section 34 at the stage of
admissions without considering all the arguments made by
them.
115. Per contra, the Respondent's contended that under Section 34 of
the A & C Act, a Court exercises limited jurisdiction and any
challenge to an award must meet the minimal thresholds set
out in the said Section for it to be admitted. The hearing, on
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admission and stay, before the Learned Single Judge has
apparently gone on for 9 days followed by the parties
submitting post hearing submissions as well. Therefore, it is the
Respondent's earnest contention that the Single Judge did not
err in dismissing the petition under Section 34 at the stage of
admission and has done so after applying his mind to the
merits of the Appellant's submissions.
116. It is pertinent to mention herein that the Learned Single Judge
had considered only three broad issues at the stage of
admission and hearing of the interim stay application before
passing his final judgment (impugned herein). Firstly, whether
the Tribunal has made out a case for the Respondent which
was not pleaded by it; secondly, if the Tribunal has modified
the contract between the parties by holding that the parties had
waived the requirement to issue contractual notices and
thirdly, whether this waiver was applied equally to both
parties.
117. However, the Learned Single Judge was of the final opinion in
the following words:
"24.1 As discussed earlier, in the instant case, the
Tribunal has not re-written the contract. When an
issue with regard to waiver/estoppel of issuance of
notices in violation of the amended CWEETC
Agreement was raised by the Petitioner, the
Tribunal was obliged to answer the same on the
basis of the materials available on record.
Accordingly, on discussion of the materials on
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record, the Tribunal came to a conclusion that the
parties have agreed to waive issuance of notices as
per contractual provision. The Tribunal, while
answering the issue, has rejected the plea of waiver
of contractual notices by the SEPCO relying upon
the events of March, 2010 only. Basing upon the
materials on record, the Tribunal came to a
conclusion that by their conduct in March, 2012 the
parties have consciously and diligently decided to
waive issuance of contractual notices. Although the
material available may not be sufficient to come to
the impugned conclusion, as alleged by the
Petitioner, but that cannot be a ground of
interference in view of the case law discussed earlier.
Further, the finding of the Tribunal does not shock
the conscience of the Court, which would warrant
interference with the impugned award under Section
34 of the Arbitration Act, on the plea of breach of
fundamental principles of justice. Thus, it cannot be
said that finding of the Tribunal is contrary to the
public policy of India."
118. The Learned Single Judge while discussing the main issue of
Notice - Waiver/Estoppel has held as follows:
"19. In the instant case, the arbitral Tribunal
relying upon the email of Mr.Rao (GKEL's
representative) came to hold that through such email
Mr.Rao was asking SEPCO not to issue formal
notice to it in any matter in future. Thus, it cannot
be denied that finding with regard to waiver of
notice is perverse and based on no evidence. As held
in Associate Builders (supra), an award based on
little evidence or on evidence which does not
measure up in quality to a trained legal mind would
not be held to be invalid on this score. This Court on
re-appreciation of evidence cannot comment upon
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the quantity and quality of evidence relied upon by
the Tribunal to come to a definite finding, unless it
shocks the conscience of the Court. On perusal of the
relevant paragraphs of the impugned award referred
to by learned counsel for the parties, it is manifest
that the Tribunal has dealt with the rival
contentions of the parties while recording finding of
waiver of notices. It would not be out of place to
mention here that the claim of SEPCO with regard
to waiver of notices in certain aspects have also been
rejected by the Tribunal holding that waiver of
notices in such matters is not permissible in law."
(underlining is ours)
119. We are unable to accept that, despite noting that the finding
regarding waiver of notice is based on no evidence and
incorrect, the Single Judge has been reluctant to interfere with
the Arbitral Award while being conscious and aware of the fact
that this one issue was by itself a bedrock for a major portion of
the parties claims and disputes and, therefore, went to the root
of the matter. Moreover, the Learned Single Judge did not even
delve into the issue of prolongation costs caused by the
suspension and cancellation of Unit 4 despite the same being
brought to its notice.
120. The statutory right to appeal against an arbitral award as
provided for in Section 34 of the A&C Act is a statutory appeal.
There are usually only three outcomes that come out of these
appeals, which are:
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i. Dismissed after consideration of the matter on
merits. (Award is upheld)
ii. Allowed after consideration of the matter on merits.
(Award is set aside)
iii. Dismissed on the ground of delay or error in
jurisdiction, etc. at a preliminary stage without
consideration on merits.
121. The first and second outcomes being simple, we are faced here
with a curious mixture of the first and third outcome. When a
petition under Section 34 is dismissed at a preliminary stage,
i.e. at the stage of admission, the grounds are usually limited to
delay or jurisdiction. In the present case, the Single Judge has
partially considered the case on merits but dismissed the
matter at a preliminary stage. The same is an unusual
departure from the practice and norm of hearing a petition
under Section 34. In any case, whether or not the Learned
Single Judge erred in his approach, is not germane to the issues
at hand as the parties vide order dated 15.5.2023 of the Supreme
Court of India in SLP(C) No.12194 of 2023 have been urged to
place all their contentions before this Court in the present
appeal Section 37 of the A&C Act and therefore, this Court is
presently in any case, making an earnest endeavour to discuss
and deliberate upon all such contentions.
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i. WHETHER THE LD. SINGLE JUDGE WAS
CORRECT IN DISMISSING THE APPELLANT'S
CONTENTIONS PERTAINING TO BIAS BEING
SHOWCASED BY THE ARBITRAL TRIBUNAL.
122. While the Learned Single Judge has curiously not considered
all the contentions of the Appellant, it has rendered a finding
on whether the Appellant could raise the issue of bias being
showcased by the Arbitral Tribunal. The Appellant has
premised this contention as an extension of the equality of
treatment specified under Section 18 of the A&C Act. The
Appellant has pointed out a number of instances to show how
the parties have been treated unequally during the course of
arbitral proceedings. It has also taken us painstakingly through
various portions of the award to show how certain principles of
law have been applied unequally with respect to the parties
therein. Although, such a contention at first glance seems to be
attractive but a closer scrutiny would, in fact, points in another
direction. The concept of "bias" and "unequality" as postulated
under Section 18 of the A&C Act are separate and distinct
concepts juristically.
123. The Arbitration Act is a complete code in itself and provides
for a challenge being made on the ground of bias. Section 12(3)
of the A&C Act which provides that:
"12 (3) An arbitrator may be challenged only if--
(a) circumstances exist that give rise to justifiable
doubts as to his independence or impartiality, or
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(b) he does not possess the qualifications agreed to by
the parties."
And Section 13 of the A&C Act further provides that:
"13.Challenge procedure.--(1) Subject to sub-
section (4), the parties are free to agree on a
procedure for challenging an arbitrator.
(2) Failing any agreement referred to in sub-section
(1), a party who intends to challenge an arbitrator
shall, within fifteen days after becoming aware of the
constitution of the arbitral tribunal or after
becoming aware of any circumstances referred to in
sub-section(3) of section 12, send a written
statement of the reasons for the challenge to the
arbitral tribunal.
(3) Unless the arbitrator challenged under sub-
section (2) withdraws from his office or the other
party agrees to the challenge, the arbitral tribunal
shall decide on the challenge.
(4) If a challenge under any procedure agreed upon
by the parties or under the procedure under sub-
section (2) is not successful, the arbitral tribunal
shall continue the arbitral proceedings and make an
arbitral award.
(5) Where an arbitral award is made under sub-
section (4), the party challenging the arbitrator may
make an application for setting aside such an
arbitral award in accordance with section 34.
(6) Where an arbitral award is set aside on an
application made under sub-section (5), the Court
may decide as to whether the arbitrator who is
challenged is entitled to any fees."
124. Section 13 of the A&C Act requires that in the first instance, the
challenge pertaining to the Arbitral Tribunal's independence or
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impartiality is to be made to the Arbitral Tribunal itself. If the
said challenge is not successful, it can be made a ground for
setting aside of the award under Section 34 of the A&C Act
(Section 13(5) of the A&C Act provides for the same). In fact,
the said challenge can be raised at any stage of the arbitral
proceeding when such a circumstance occurs subject to the
limitation of 15 days provided under Section 13(2) of the A&C
Act.
125. In the present case, the challenge is based solely on the
conclusions and findings of the Tribunal in its Award. The
Award is dated 7.9.2020. It was corrected on 17.11.2020. It was
followed by a further Award on Interest and Costs dated
24.6.2021, followed by corrections and a final award dated
1.9.2021. The Appellant thus knew the grounds of its challenge
on 7.9.2020 and was legally obliged to make its challenge on
the grounds of bias within 15 days thereof. Instead, the
Appellant participated in the corrections of Award exercise and
participated in the further Award on Interests and Costs
without any objection/protest. It made its bias challenge on
15.2.2021 when it filed its petition under Section 34 of the A &
C Act. The Appellant has not explained the delay or reasons for
non-adherence to the procedure and time window prescribed
under Section 13(2) of the A&C Act.
126. The Respondent has further brought to our notice the test for
apparent bias laid down by the House of Lords in Porter v.
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Magill28 which was endorsed by the Supreme Court in N.K.
Bajpai v. Union of India29.
127. Nonetheless, we are but in agreement with the Learned Single
Judge that the allegation of 'bias' is a serious allegation against
the Tribunal and the same has to be viewed with
circumspection. The Appellant cannot raise the issue of 'bias' at
a belated stage before this Court in a petition under Section 34,
in gross contravention of the mechanism provided in the A&C
Act. No objection with regards to 'bias' was raised by the
Appellant under Section 12(3) and Section 13 of the A&C Act
and thus, the same cannot be entertained now.
E. IN LIGHT OF THE ABOVE WHETHER THE ORDERS OF
THE LD. SINGLE JUDGE AND THE LD. ARBITRAL
TRIBUNAL HAVE "SHOCKED THE CONSCIENCE OF
THIS COURT", OR "ARE CONTRARY TO THE BASIC
NOTIONS OF JUSTICE", OR "ARE IN EXPRESS
VIOLATION OF SECTION 28(3) OF THE A&C ACT,
WHICH NECESSITATES INTERFERENCE BY THIS COURT
UNDER SECTION 37 OF THE A&C ACT?
128. At the outset, it is relevant to observe that the law as to the
scope of interference under Sections 34 and 37 of the A&C Act
is now well settled. It is no longer res integra that the scope of
interference by the Courts in arbitration proceedings and
arbitral awards is narrow, more so, in an International
(2002) 1 All ER 465
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Commercial Arbitration seated within or outside India,
especially after the amendment to the A&C Act in 2015. The
Courts should be slow and circumspect in interfering with any
award which is passed by an arbitral tribunal which has been
appointed pursuant to an agreement between the parties to the
dispute. Section 34 of the A&C Act outlines within it, only
certain finite instances when the Courts can interfere with an
award passed by arbitral tribunals and set it aside. An arbitral
award can be set aside under Section 34 of the A&C Act only
on the grounds as set out under Section 34(2) or 34(2A) of the
A&C Act. Further, interference under Section 37 of the A&C
Act cannot travel beyond the prescriptions as set out under
Section 34 of the A&C Act.
129. Section 34 of the A&C Act is quoted hereinbelow for easy
reference:
"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
1[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
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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 not in accordance
with the agreement of the parties, unless such
agreement was 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
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(iv) 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.]
...."
(Emphasis is ours)
130. In MMTC Ltd. v. Vedanta Ltd. (supra), the Supreme Court has
observed that as far as interference with an order made under
Section 34 is concerned, it cannot be disputed that such
interference under Section 37 cannot travel beyond the
restrictions laid down under Section 34. In other words, the
court cannot undertake an independent assessment of the
merits of the award, and must only ascertain that the exercise
of power by the court under Section 34 has not exceeded the
scope of the said provision. As far as Section 34 is concerned,
the position is well-settled that the Court does not sit in appeal
over the arbitral award and can interfere on merits only under
limited grounds. It thus, needs no reiteration that interference
under Section 37 of said Act does not entail a review of the
merits of the dispute, and is limited to situations where the
findings of the Arbitrator are arbitrary, capricious or perverse,
or when the conscience of the Court is shocked, or when the
illegality is not trivial but goes to the root of the matter. An
arbitral award may not be tinkered with lightly, if the view
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taken by the Arbitrator is a possible view based on facts. The
relevant paragraphs of MMTC Ltd. v. Vedanta Ltd. (supra) are
reproduced hereinbelow for the sake of convenience:
"10. Before proceeding further, we find it necessary
to briefly revisit the existing position of law with
respect to the scope of interference with an arbitral
award in India, though we do not wish to burden
this judgment by discussing the principles regarding
the same in detail. Such interference may be
undertaken in terms of Section 34 or Section 37 of
the Arbitration and Conciliation Act, 1996 (for
short "the 1996 Act"). While the former deals with
challenges to an arbitral award itself, the latter, inter
alia, deals with appeals against an order made under
Section 34 setting aside or refusing to set aside an
arbitral award.
11. As far as Section 34 is concerned, the position is
well-settled by now that the Court does not sit in
appeal over the arbitral award and may interfere on
merits on the limited ground provided under Section
34(2)(b)(ii) i.e. if the award is against the public
policy of India. As per the legal position clarified
through decisions of this Court prior to the
amendments to the 1996 Act in 2015, a violation of
Indian public policy, in turn, includes a violation of
the fundamental policy of Indian law, a violation of
the interest of India, conflict with justice or
morality, and the existence of patent illegality in the
arbitral award. Additionally, the concept of the
"fundamental policy of Indian law" would cover
compliance with statutes and judicial precedents,
adopting a judicial approach, compliance with the
principles of natural justice,
and Wednesbury [Associated Provincial Picture
Houses v. WednesburyCorpn., (1948) 1 KB 223
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(CA)] reasonableness. Furthermore, "patent
illegality" itself has been held to mean contravention
of the substantive law of India, contravention of the
1996 Act, and contravention of the terms of the
contract.
12. It is only if one of these conditions is met that the
Court may interfere with an arbitral award in terms
of Section 34(2)(b)(ii), but such interference does not
entail a review of the merits of the dispute, and is
limited to situations where the findings of the
arbitrator are arbitrary, capricious or perverse, or
when the conscience of the Court is shocked, or when
the illegality is not trivial but goes to the root of the
matter. An arbitral award may not be interfered
with if the view taken by the arbitrator is a possible
view based on facts. (See Associate
Builders v. DDA [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204] . Also
see ONGC Ltd. v. Saw Pipes Ltd. [ONGC
Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705]
; Hindustan Zinc Ltd. v. Friends Coal
Carbonisation [Hindustan Zinc Ltd. v. Friends Coal
Carbonisation, (2006) 4 SCC 445] ; and McDermott
International Inc. v. Burn Standard Co.
Ltd. [McDermott International Inc. v. Burn
Standard Co. Ltd., (2006) 11 SCC 181] )
14. As far as interference with an order made under
Section 34, as per Section 37, is concerned, it cannot
be disputed that such interference under Section 37
cannot travel beyond the restrictions laid down
under Section 34. In other words, the court cannot
undertake an independent assessment of the merits
of the award, and must only ascertain that the
exercise of power by the court under Section 34 has
not exceeded the scope of the provision. Thus, it is
evident that in case an arbitral award has been
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confirmed by the court under Section 34 and by the
court in an appeal under Section 37, this Court
must be extremely cautious and slow to disturb such
concurrent findings."
Reference may also be made to Hindustan Zinc Ltd. v. Friends
Coal Carbonisation30; National Highway Authority of India v.
Progressive-MVR (JV)31; and McDermott International Inc. v.
Burn Standard Co. Ltd.32in this regard.
131. Furthermore, in the oft quoted and relied upon case of
Ssangyong Engg. & Construction Co. Ltd. v. NHAI (supra) the
Supreme Court has held that:
"34. What is clear, therefore, is that the expression
"public policy of India", whether contained in
Section 34 or in Section 48, would now mean the
"fundamental policy of Indian law" as explained in
paras 18 and 27 of Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] i.e. the fundamental policy of Indian law
would be relegated to "Renusagar" understanding
of this expression. This would necessarily mean that
Western Geco [ONGC v. Western Geco
International Ltd., (2014) 9 SCC 263 : (2014) 5
SCC (Civ) 12] expansion has been done away with.
In short, Western Geco [ONGC v. Western Geco
International Ltd., (2014) 9 SCC 263 : (2014) 5
SCC (Civ) 12], as explained in paras 28 and 29 of
Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], would
no longer obtain, as under the guise of interfering
(2006) 4 SCC 445
(2018) 14 SCC 688
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with an award on the ground that the arbitrator has
not adopted a judicial approach, the Court's
intervention would be on the merits of the award,
which cannot be permitted post amendment.
However, insofar as principles of natural justice are
concerned, as contained in Sections 18 and
34(2)(a)(iii) of the 1996 Act, these continue to be
grounds of challenge of an award, as is contained in
para 30 of Associate Builders [Associate Builders v.
DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204].
35. It is important to notice that the ground for
interference insofar as it concerns "interest of India"
has since been deleted, and therefore, no longer
obtains. Equally, the ground for interference on the
basis that the award is in conflict with justice or
morality is now to be understood as a conflict with
the "most basic notions of morality or justice". This
again would be in line with paras 36 to 39 of
Associate Builders [Associate Builders v. DDA,
(2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204], as it is
only such arbitral awards that shock the conscience
of the court that can be set aside on this ground."
132. Therefore, keeping in mind the position of law as it stands
today, the grounds available to a party to challenge an arbitral
award are broadly:
i. Contravention of the fundamental policy of Indian Law
as laid down in Paras 18 and 27 of Associate
Builders[Associate Builders v. DDA33]: A quick reference
may be made to the relevant paragraphs as reproduced
hereinbelow:
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"18. In Renusagar Power Co. Ltd. v. General
Electric Co. [Renusagar Power Co. Ltd. v. General
Electric Co., 1994 Supp (1) SCC 644] , the Supreme
Court construed Section 7(1)(b)(ii) of the Foreign
Awards (Recognition and Enforcement) Act, 1961:
"7. Conditions for enforcement of foreign
awards.--(1) A foreign award may not be
enforced under this Act--
***
(b) if the Court dealing with the case is
satisfied that--
***
(ii) the enforcement of the award will be
contrary to the public policy."
In construing the expression "public policy" in
the context of a foreign award, the Court held that
an award contrary to
(i) The fundamental policy of Indian law,
(ii) The interest of India,
(iii) Justice or morality,
would be set aside on the ground that it would be
contrary to the public policy of India. It went on
further to hold that a contravention of the provisions
of the Foreign Exchange Regulation Act would be
contrary to the public policy of India in that the
statute is enacted for the national economic interest
to ensure that the nation does not lose foreign
exchange which is essential for the economic
survival of the nation (see SCC p. 685, para 75).
Equally, disregarding orders passed by the superior
courts in India could also be a contravention of the
fundamental policy of Indian law, but the recovery
of compound interest on interest, being contrary to
statute only, would not contravene any fundamental
policy of Indian law (see SCC pp. 689 & 693, paras
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....27. Coming to each of the heads contained in Saw
Pipes [(2003) 5 SCC 705 : AIR 2003 SC 2629]
judgment, we will first deal with the head
"fundamental policy of Indian law". It has already
been seen from Renusagar [Renusagar Power Co.
Ltd. v. General Electric Co., 1994 Supp (1) SCC
644] judgment that violation of the Foreign
Exchange Act and disregarding orders of superior
courts in India would be regarded as being contrary
to the fundamental policy of Indian law. To this it
could be added that the binding effect of the
judgment of a superior court being disregarded
would be equally violative of the fundamental policy
of Indian law.
ii. Contravention of the principles of natural justice (as
laid down in Para 30 of Associate Builders): A quick
reference may be made to the relevant paragraphs as
reproduced hereinbelow:
"....30. The audialterampartem principle which
undoubtedly is a fundamental juristic principle in
Indian law is also contained in Sections 18 and
34(2)(a)(iii) of the Arbitration and Conciliation Act.
These sections read as follows:
"18.Equal treatment of parties.--The parties shall
be treated with equality and each party shall be
given a full opportunity to present his case.
***
34.Application for setting aside arbitral award.--
(1)***
(2) An arbitral award may be set aside by the
court only if--
(a) the party making the application
furnishes proof that--
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***
(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;"
iii. Contravention of the most basic notions of justice
and morality (as laid down in Paras 36 to 39 of
Associate Builders): A quick reference may be made
to the relevant paragraphs as reproduced
hereinbelow:
"36. The third ground of public policy is, if an
award is against justice or morality. These are two
different concepts in law. An award can be said to be
against justice only when it shocks the conscience of
the court. An illustration of this can be given. A
claimant is content with restricting his claim, let us
say to Rs 30 lakhs in a statement of claim before the
arbitrator and at no point does he seek to claim
anything more. The arbitral award ultimately
awards him Rs 45 lakhs without any acceptable
reason or justification. Obviously, this would shock
the conscience of the court and the arbitral award
would be liable to be set aside on the ground that it
is contrary to "justice".
37. The other ground is of "morality". Just as the
expression "public policy" also occurs in Section 23
of the Contract Act, 1872 so does the expression
"morality". Two illustrations to the said section are
interesting for they explain to us the scope of the
expression "morality":
"(j) A, who is B's Mukhtar, promises to exercise
his influence, as such, with B in favour of C,
and C promises to pay 1000 rupees to A. The
agreement is void, because it is immoral.
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(k) A agrees to let her daughter to hire to B for
concubinage. The agreement is void, because it is
immoral, though the letting may not be
punishable under the Penal Code, 1860."
38. In GherulalParakh v. MahadeodasMaiya [1959
Supp (2) SCR 406 : AIR 1959 SC 781] , this Court
explained the concept of "morality" thus: (SCR pp.
445-46 : AIR pp. 797-98)
"Re. Point 3 -- Immorality: The argument
under this head is rather broadly stated by the
learned counsel for the appellant. The learned
counsel attempts to draw an analogy from the
Hindu law relating to the doctrine of pious
obligation of sons to discharge their father's
debts and contends that what the Hindu law
considers to be immoral in that context may
appropriately be applied to a case under
Section 23 of the Contract Act. Neither any
authority is cited nor any legal basis is
suggested for importing the doctrine of Hindu
law into the domain of contracts. Section 23 of
the Contract Act is inspired by the common
law of England and it would be more useful to
refer to the English law than to the Hindu law
texts dealing with a different matter. Anson in
his Law of Contracts states at p. 222 thus:
'The only aspect of immorality with
which courts of law have dealt is sexual
immorality....'
Halsbury in his Laws of England, 3rd
Edn., Vol. 8, makes a similar statement, at p.
138:
'A contract which is made upon an
immoral consideration or for an immoral
purpose is unenforceable, and there is no
distinction in this respect between immoral
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and illegal contracts. The immorality here
alluded to is sexual immorality.'
In the Law of Contract by Cheshire and Fifoot,
3rd Edn., it is stated at p. 279:
'Although Lord Mansfield laid it down
that a contract contra bonos mores is illegal,
the law in this connection gives no extended
meaning to morality, but concerns itself only
with what is sexually reprehensible.'
In the book on the Indian Contract Act by
Pollock and Mulla it is stated at p. 157:
'The epithet "immoral" points, in legal
usage, to conduct or purposes which the State,
though disapproving them, is unable, or not
advised, to visit with direct punishment.'
The learned authors confined its operation to
acts which are considered to be immoral
according to the standards of immorality
approved by courts. The case law both in
England and India confines the operation of
the doctrine to sexual immorality. To cite only
some instances: settlements in consideration
of concubinage, contracts of sale or hire of
things to be used in a brothel or by a
prostitute for purposes incidental to her
profession, agreements to pay money for
future illicit cohabitation, promises in regard
to marriage for consideration, or contracts
facilitating divorce are all held to be void on
the ground that the object is immoral.
The word 'immoral' is a very
comprehensive word. Ordinarily it takes in
every aspect of personal conduct deviating
from the standard norms of life. It may also be
said that what is repugnant to good
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conscience is immoral. Its varying content
depends upon time, place and the stage of
civilisation of a particular society. In short, no
universal standard can be laid down and any
law based on such fluid concept defeats its
own purpose. The provisions of Section 23 of
the Contract Act indicate the legislative
intention to give it a restricted meaning. Its
juxtaposition with an equally illusive concept,
public policy, indicates that it is used in a
restricted sense; otherwise there would be
overlapping of the two concepts. In its wide
sense what is immoral may be against public
policy, for public policy covers political, social
and economic ground of objection. Decided
cases and authoritative textbook writers,
therefore, confined it, with every justification,
only to sexual immorality. The other
limitation imposed on the word by the statute,
namely, 'the court regards it as immoral',
brings out the idea that it is also a branch of
the common law like the doctrine of public
policy, and, therefore, should be confined to
the principles recognised and settled by
courts. Precedents confine the said concept
only to sexual immorality and no case has
been brought to our notice where it has been
applied to any head other than sexual
immorality. In the circumstances, we cannot
evolve a new head so as to bring in wagers
within its fold."
39. This Court has confined morality to sexual
morality so far as Section 23 of the Contract
Act, 1872 is concerned, which in the context
of an arbitral award would mean the
enforcement of an award say for specific
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performance of a contract involving
prostitution. "Morality" would, if it is to go
beyond sexual morality necessarily cover such
agreements as are not illegal but would not be
enforced given the prevailing mores of the day.
However, interference on this ground would
also be only if something shocks the court's
conscience."
133. Again in Madhya Pradesh Power Generation Company Ltd. v.
Ansaldo EnergiaSpA,34 it is held as under:
"25. The limit of exercise of power by courts under
Section 34 of the Act has been comprehensively dealt
with by R.F. Nariman, J. in Associate Builders v.
DDA [Associate Builders v. DDA, (2015) 3 SCC 49
: (2015) 2 SCC (Civ) 204]. Lack of judicial approach,
violation of principles of natural justice, perversity
and patent illegality have been identified as grounds
for interference with an award of the arbitrator. The
restrictions placed on the exercise of power of a court
under Section 34 of the Act have been analysed and
enumerated in Associate Builders [Associate
Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC
(Civ) 204] which are as follows:
(a) The court under Section 34(2) of the Act, does
not act as a court of appeal while applying the
ground of "public policy" to an arbitral award
and consequently errors of fact cannot be
corrected.
(b) A possible view by the arbitrator on facts has
necessarily to pass muster as the arbitrator is the
sole judge of the quantity and quality of the
evidence.
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(c) Insufficiency of evidence cannot be a ground
for interference by the court. Re-examination of
the facts to find out whether a different decision
can be arrived at is impermissible under Section
34(2) of the Act.
(d) An award can be set aside only if it shocks the
conscience of the court.
(e) Illegality must go to the root of the matter and
cannot be of a trivial nature for interference by a
court. A reasonable construction of the terms of
the contract by the arbitrator cannot be interfered
with by the court. Error of construction is within
the jurisdiction of the arbitrator. Hence, no
interference is warranted.
(f) If there are two possible interpretations of the
terms of the contract, the arbitrator's
interpretation has to be accepted and the court
under Section 34 cannot substitute its opinion
over the arbitrator's view."
134. If we may, for a moment, focus on the term used in
Explanation 2 of Section 34 (2)(b) then Merriam Webster
Dictionary defines "review" simply as "to look at a thing
again". It is trite in law that the Court under Section 34 or
Section 37 of the A&C Act does not sit in appeal over the merits
of the case. The Supreme Court in P.R. Shah Shares & Stock
Broker (P) Ltd. v. B.H.H. Securities (P) Ltd.35 has held that a
Court does not sit in appeal over the award of an Arbitrator by
re-assessing or re-appreciating the evidence. An award can be
challenged only on the grounds mentioned in Section 34(2) of
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the Act and in absence of any such ground, it is not possible to
re-examine the facts to find out whether a different decision
can be arrived at. This view was reiterated by the Apex Court
in Swan Gold Mining Ltd. v. Hindustan Copper Ltd.36.
Therefore, the standard of "review" of an Arbitral Award
under Section 34 and Section 37 of the A&C Act is quite
different as compared to the onerous task of adjudicating the
dispute afresh. In the latter, the Arbitrator is tasked with a
complete and exhaustive perusal of the evidence produced on
record. However, at the stage of adjudicating a challenge to the
award, this Court cannot look at the merits of the dispute
"again". Having been said, the Court while endeavouring to
test if an award does not pass the muster of being "in conflict
with the fundamental policy of Indian law" or being "in conflict
with the most basic notions of justice" will necessarily have to
undertake an assessment of the manner of the decision making
of the award. Although the end-result or the interpretation of a
contractual provision or a fact finding by the Arbitrator cannot
be tinkered with the reasoning behind it must necessarily pass
muster. The limitations placed on this Court's powers under
Section 34 or 37 of the A&C Act cannot be countenanced to
mean that a court seized with an application under Section 34
or Section 37 of the A&C Act is denuded from reviewing the
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"reasonableness/unreasonableness" of decision making of
either the Tribunal or the Court below, as the case may be.
135. In conducting this exercise, the Court must ensure that their
actions are within the contours of the provisions, no matter
howsoever constricted, they might have become over the years
by way of judicial pronouncements or legislative interventions.
Today, the test is that, to warrant interference with arbitral
award the same must "shock the conscience of the court",
interestingly a phrase which doesn't find mention in the A&C
Act itself but it is an innovation made by the courts themselves.
136. It is true that the jurisdiction of this Court while considering
the validity of an award is limited, as has also been stated by
this Court in Ispat Engg. & Foundry Works37. However, the
Supreme Court in Bharat Coking Coal Ltd. v. Annapurna
Construction38, where the Arbitrator has not taken into
consideration and ignored the relevant clauses of the contract,
goes on to hold that:
"40. However, as noticed hereinbefore, this case
stands on a different footing, namely, that the
arbitrator while passing the award in relation to
some items failed and/or neglected to take into
consideration the relevant clauses of the contract,
nor did he take into consideration the relevant
materials for the purpose of arriving at a correct fact.
(2001) 6 SCC 347
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Such an order would amount to misdirection in
law."
137. We are also mindful of the fact that the present legal position,
as it stands today, states that this Court does not have the
power to modify an award. In this regard, reference may be
made to the judgment of the Supreme Court in NHAI v. M.
Hakeem39, wherein the Apex Court has held:
"41. As has been pointed out by us
hereinabove, McDermott [McDermott International
Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181]
has been followed by this Court
in KinnariMullick [KinnariMullick v. Ghanshyam
Das Damani, (2018) 11 SCC 328 : (2018) 5 SCC
(Civ) 106] . Also, in Dakshin Haryana BijliVitran
Nigam Ltd. v. Navigant Technologies (P)
Ltd. [Dakshin Haryana BijliVitran Nigam
Ltd. v. Navigant Technologies (P) Ltd., (2021) 7
SCC 657] , a recent judgment of this Court also
followed McDermott [McDermott International
Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181]
stating that there is no power to modify an arbitral
award under Section 34 as follows : (Dakshin
Haryana BijliVitran Nigam case [Dakshin Haryana
BijliVitran Nigam Ltd. v. Navigant Technologies
(P) Ltd., (2021) 7 SCC 657] , SCC p. 676, para 44)
"44. In law, where the court sets aside the
award passed by the majority members of the
Tribunal, the underlying disputes would
require to be decided afresh in an appropriate
proceeding. Under Section 34 of the
Arbitration Act, the court may either dismiss
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the objections filed, and uphold the award, or
set aside the award if the grounds contained in
sub-sections (2) and (2-A) are made out. There
is no power to modify an arbitral award."
...42. It can therefore be said that this question has
now been settled finally by at least 3 decisions
[McDermott International Inc. v. Burn Standard
Co. Ltd., (2006) 11 SCC 181] , [KinnariMullick v.
Ghanshyam Das Damani, (2018) 11 SCC 328 :
(2018) 5 SCC (Civ) 106] , [Dakshin Haryana
BijliVitran Nigam Ltd. v. Navigant Technologies
(P) Ltd., (2021) 7 SCC 657] of this Court. Even
otherwise, to state that the judicial trend appears to
favour an interpretation that would read into
Section 34 a power to modify, revise or vary the
award would be to ignore the previous law contained
in the 1940 Act; as also to ignore the fact that the
1996 Act was enacted based on the Uncitral Model
Law on International Commercial Arbitration, 1985
which, as has been pointed out in Redfern and
Hunter on International Arbitration, makes it clear
that, given the limited judicial interference on
extremely limited grounds not dealing with the
merits of an award, the "limited remedy" under
Section 34 is coterminous with the "limited right",
namely, either to set aside an award or remand the
matter under the circumstances mentioned in
Section 34 of the Arbitration Act, 1996.
...48. Quite obviously if one were to include the
power to modify an award in Section 34, one would
be crossing the LakshmanRekha and doing what,
according to the justice of a case, ought to be done.
In interpreting a statutory provision, a Judge must
put himself in the shoes of Parliament and then ask
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whether Parliament intended this result. Parliament
very clearly intended that no power of modification
of an award exists in Section 34 of the Arbitration
Act, 1996. It is only for Parliament to amend the
aforesaid provision in the light of the experience of
the courts in the working of the Arbitration Act,
1996, and bring it in line with other legislations
world over."
138. The issue of Notice - Waiver / Estoppel goes to the root of the
matter and is all pervasive and non-severable. It affects various
claims such as those pertaining to Grid Synchronization (Issue
no.6) (Para 505 of the Award), Fuel Oil (Issue no.7) Para 549 of
the Award), Coal (Issue no.8) Para 610 of the Award), UCT-
PGT (Issue no. 10) (Para 752 of the Award) and R-173 Defects
(Issue No. 20). The findings in these issues has a consequential
impact on the amount of prolongation costs awarded to the
Respondent under Issue no. 11 and the issue of delay in
liquidated damages recoverable by the Appellant from the
Respondent, which has been considered by the Tribunal in
Issue no. 15 of the Award. Thus, in view of the law settled by
the Supreme Court in the case of NHAI v. M. Hakeem (supra),
if the findings on this issue or any of the aforementioned issues
are set aside, then the entire Award will have to be set aside.
139. In PSA Sical Terminals (supra), Army Welfare Housing
Organisation v. Sumangal Services (P) Ltd. (supra),
Satyanarayana Construction Co. v. Union of India (supra) and
Indian Oil Corporation Limited v. Shree Ganesh Petroleum
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Rajgurunagar (supra), the common thread that emerges from
the aforesaid decisions of the Supreme Court is that it has
broadly identified two categories of cases which can be
challenged under the mechanism provided under the A&C Act.
They can be said to be cases where the Arbitrator exercises his
power within jurisdiction or in excess thereof. An Arbitrator is
perfectly entitled to "interpret" the terms of the contract and
the same would be exclusively within its domain and he would
be acting "within" his jurisdiction. However, when the
Arbitrator based on whatever materials proceeds to "rewrite
the terms of the contract", the same would be acting in excess
of jurisdiction. In all the above cases, the Supreme Court has
consistently held that rewriting of contract would come under
the latter category, albeit an extremely narrow one, i.e. one
which "shocks the conscience of the Court". The Apex Court
has also consistently upheld the setting aside of all such
instances which were brought before it especially where the
arbitrator has acted in excess of jurisdiction and rewritten the
terms of the contract.
140. In the present case, the Tribunal's interpretation of the
contractual provisions vis-a-vis Respondent's entitlement of
delay related damages for prolongation and disruption costs in
contravention of the express terms of the contract, and its
ascertaining that the agreements excluded the common law
right of termination, are in gross violation of the terms of the
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contract entered into by the parties themselves. The Arbitral
Tribunal has not only ignored the express terms of the contract
to arrive at its findings; but it has also rewritten certain clauses
thereby grossly exceeding the scope of its jurisdiction. The
same does shock the conscience of this Court.
141. The ground of contravention of the fundamental policy of
Indian Law(Ground 'i' hereinabove) entails that any arbitral
award which flies in the face of what is fundamental to Indian
law or any principle arising thereof, would be a valid ground
for setting aside the arbitral award. As discussed hereinabove,
it has been categorically laid down that disregarding orders
passed by the superior courts in India would also be a
contravention of the fundamental policy of Indian law. That
being the case, as has been dealt with hereinabove, principles
laid down in a catena of judgments of the Apex Court have
been disregarded by the Tribunal while dealing with various
issues as were framed by it. Therefore, this Court is constrained
by the imprimatur of the Supreme Court to intervene, given the
factual and legal backdrop.
142. Similarly, the ground of contravention of the principles of
natural justice (Ground 'ii' hereinabove) postulates the
principle that all parties must be treated equally and as a
corollary thereof, any principle applied to one party must be
extended equally to the other party as well. If there is no
equality in the treatment of the parties, the arbitral award
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becomes liable to be set aside. The Tribunal having come to a
conclusion that the parties had mutually decided to "waive"
the requirement of issuance of contractual notices could not
have disallowed the counterclaims of the Appellant on the
ground that no such notices had been given. This is nothing but
violative of the equality principle enshrined under Section 18 of
the A&C Act.
143. Lastly, the ground of contravention of the most basic notions of
justice (Ground 'iii' hereinabove) implies that an award can be
said to be against justice, when it shocks the conscience of the
court and any such award which shocks the conscience of the
court is liable to be set aside. Although, what will "shock the
conscience of the court" will depend on the facts and
circumstances of each case. What seems to be the common
thread as discussed hereinabove is that it is impermissible for
the Tribunal to rewrite the terms of the contract. In the present
case, the Tribunal would have been perfectly justified and
within jurisdiction to interpret the terms of the contract and
could not have been faulted with. However, the Tribunal
disregarding the fact that the parties were not ad idem on the
issue of waiver of contractual notices and has proceeded to
come to a conclusion that there, in fact, has been "waiver" of
the same. In doing so, the Tribunal has acted in derogation of
the express terms of the two clauses in particular, i.e. the "no
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oral modification clause" and the "no waiver clause". In this
manner, the Tribunal has committed a grave error of stepping
into the shoes of the parties of the contract and it has rewritten
the terms which strike at the root of the matter and it alters the
very nature of the contract and the manner in which it was
envisioned to be performed. We are, thus, of the considered
opinion, albeit very cautiously, that the present case "shocks
the conscience" of this Court and necessitates interference.
144. Therefore, keeping in mind the discussion above, the findings
of the Tribunal pertaining to the issue of Notice-
Waiver/Estoppel completely "shocks the conscience of this
court" as also the Tribunal's findings pertaining to delay
related damages for prolongation or disruption costs and the
grant of 5% of contractual price upon completion of tests, and
the same is therefore liable to be set aside. As explained above,
the issue of Notice-Waiver/Estoppel is intertwined with
various others and therefore, in light of the Supreme Court's
judgment in NHAI v. M. Hakeem (supra) and more recently
reiterated in Larsen Air Conditioning &Refrigration Company
v. Union of India and Ors.40, the only recourse available to this
Court is to set aside the entire Arbitral Award in the interest of
justice.
Signature Not Verified
2023 SCC OnLine SC 982
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
V. CONCLUSION:
145. The Arbitrator is a Judge chosen by the parties and his decision
is final as long as it is founded in fairness and justice.
"Quialiquidstatueritparteinauditaaltera, aequum licet dixerit, baud
aequumfecerit" that is, "justice should not only be done but
should manifestly be seen to be done". A decision must be fair,
reasonable and objective. On the obverse side, anything
arbitrary and whimsical would obviously not be a
determination which would either be fair, reasonable or
objective. The award cannot be passed on the ipse dixit of the
arbitrator.
146. When it comes to the fundamental public policy of India,
argument based upon "most basic notions of justice", it is clear
that this ground as laid down by the Supreme Court in
SsangyongEngg. & Construction (supra); Associate Builders v.
DDA (supra) and Madhya Pradesh Power Generation
Company Ltd. v. AnsaldoEnergiaSpA (supra) can be attracted
only in very exceptional circumstances when the conscience of
the Court is shocked by infractions of the arbitrator or arbitral
tribunal. This being the case, it is clear that in the present case,
the arbitral tribunal has created a new contract for the parties
by not only re-writing large portions of the same but also
disregarding certain explicit embargos therein, which goes
against the basic notions of justice and shocks the conscience of
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
this Court. Clearly, such a course of conduct would be contrary
to fundamental principles of justice as followed in this country.
However, we repeat that this ground is available only in very
exceptional circumstances, such as the facts and circumstances
of the present case.
147. In light of the discussion above, keeping the settled principles
of law in mind and for the reasons given above, this Court is of
the considered view that the present Arbitration Appeal is
allowed. Consequently, the judgment dated 17.06.2022 passed
by the learned Single Judge of this Court is set aside.
Accordingly, the arbitral award dated 07.09.2020 as corrected
thereafter, passed by the Tribunal consisting Prof. Lawrence
Boo BBM, Dr. Michael Pryles PBM, and Mr. Malcolm Homes
QC is, accordingly, set aside in light of the discussion
hereinabove.
148. ARBA (ICA) No.1 of 2023 is disposed of on the
abovementioned terms. No order as to costs. Ordered
accordingly.
(S. Talapatra) (Dr. S.K. Panigrahi)
Chief Justice Judge
Orissa High Court, Cuttack,
Dated the 27th September, 2023/
Signature Not Verified
Digitally Signed
Signed by: BHABAGRAHI JHANKAR
Designation: Assistant Registrar-cum-Senior Secretary
Reason: Authentication
Location: HIGH COURT OF ORISSA, CUTTACK
Date: 03-Oct-2023 13:34:14
