THDC INDIA LTD v. M/S PCL-INTERTECH LENHYDRO CONSORTIUM JV

6.35 5.95 Counter Claim-3 Claim for Rs. 10.45 Cr. Towards Deferred recovery of Equipment Advance.

10.45 - Counter Claim-4 Claim for Rs. 11.73 Cr. Towards Departmentally issued steel at the request of the Claimant on Deferred cost recovery

11.53 0.20 Counter Claim-5 Interest for the amount claimed against the claim 1 to 4 Counter claim-6 Cost of arbitration

12. In the above context, the arbitral award dated 17.12.2010, rendered by 2 out of the 3 arbitrators (hereinafter referred to as the impugned award) pronounces upon the aforesaid claims, also dealing with the preliminary objections raised by respective parties and renders elaborate factual findings. Findings regarding delays:-

13. The impugned arbitral award analyses each and every delay alleged by the respondent/claimant and renders a factual finding with regard thereto. As regards, the delay in giving possession of work sites and borrow area sites, the impugned award concludes as under:- ―61. Taking an overall view of above situation we find that the borrow areas B[1] & B[2] for extraction of aggregates were not available until the evacuation was made, thereby the land for the borrow areas and the quarries for extraction of aggregates was not handed over to the Claimant unhindered for execution of the work and that the land in the working area of the site was also not handed over unhindered till April- 2005 when the Village Pendaras was admittedly fully evacuated. The delay claimed on account of the non handing over of land and the borrow areas by the Claimant is from September-2002 to May-2005 accounting for 32 months for handing over of Pendaras village and from September-2002 to November-2006 for giving possession of the lands for the borrow areas B[1] & B[2]. The effective delay is from September-2002 to November-2006 i.e., for a period 50 months as the 32 months delay in handing over of the Pendaras village is a concurrent and over lapping delay with the handing over of borrow areas B[1] & B[2] and this delay of 50 months according to us is not attributable to the Contractor for the reason of not handing over the land on the right bank around Pendaras Village and not giving possession of land in the borrow areas of B[1] & B[2].‖

14. As regards delay/s due to geological reasons, slope failures on right bank and left bank and their stabilization, the impugned award holds as under:- ―64.We have examined the various documents relied on by the parties and after hearing the rival contentions of the parties we find that the actual conditions at site leading to the failure of the slopes and the slope stabilization methods adopted to the excavated slopes involving flattening of slopes resulting in increased quantity of excavation, additional item of installation of geo-grid and geotextiles, providing dry stone and boulder pitching that were executed based on the design drawings issued would lead us to a conclusion that there were delays not attributable to the Claimant due to the changed conditions at site due to the geological features. The total delay is claimed from Nov-2005 to Dec-2007 accounting for 24 months. As the delay from Sep-2002 to Nov-2006 is an over lapping delay which period is already covered in the delay in handing over of possession of land and borrow areas and the right bank, the net delay on account of the delay due to geological reasons is from Nov-2006 till Dec- 2007 which accounts for a net delay of 13 months.‖

15. The impugned award proceeds to discuss the other circumstances which caused delay, and proceeds to hold as under:- ―65. From the above we find that a net delay of 63 months from September-2002 to December-2007 on the grounds of delays in handing over of land on right bank around Pendaras village, delay in giving possession of borrow areas B[1] & B[2] and delay due to adverse geological reasons is not attributable to the Claimant. The Claimant has put forth additional grounds of delay as per page-349 of C-1-2 and C-1: (a) Delay in giving decision for concrete placement methodology from Nov-2004 to March-2006 accounting to 17 months. (b) Delay due to treatment of cracks in the foundation blocks of the Dam from Oct-2006 to Mar-2007 accounting to 6 months.

(c) Change in specification of cement & FM of sand from Oct-2006 to

(d) Stoppage of work by local public - the delay continued through out the execution of works however these are claimed as overlapping delays. (e) Delay in release of construction drawings - the delay continued through out the execution of works however these are claimed as overlapping delays.

66. The Claimant submits regarding delay in giving decision and changes in concrete placement methodology that under the contract volume-1 pages 95 to 155 the construction methodology proposed for the placement of concrete in dam, power house and associated works at page-122 was through a twin cable way of 20 ton capacity and a span of ±360m across the river keeping in view the limits of excavation as per the tender drawing for the length of the dam which was 253m at the top level of elevation 618.5m. The Claimant further submits that letter dated 11.03.2002 at page-159 of Volume-1 of the contract addressed to the Respondent informed alternate methodologies for concrete placement viz; (i) concrete placement by cable way & (ii) concrete placement by erecting trestle bridges over which moving cranes would carry the concrete. Further as per the enclosure to the said letter based on the discussions held with the Respondent the Claimant submits that it was decided that both alternatives (i) & (ii) would be kept open and a final decision to use either of these alternatives shall be taken after the award of work and consultations with Respondent of THDC and that as desired by THDC at the pre-award stage, the Claimant had submitted the methodology of concreting with both the alternatives which was also reiterated by him in their letter dated 20.07.2002 under para-3 at page 169 of volume-1 of the contract stating that the methodology will be finalized jointly with project authorities on award of work. The Claimant's contention is that owing to the site conditions and the adverse geological conditions met with at site concreting by cable way was not possible as the excavations were to be made much beyond the original limits and heights as contemplated in the tender. There is a separate claim by the Claimant on this account under CLAIM-7 for having purchased the cable way equipment but not capable of being utilized at the site. The Respondent refutes the contentions of the Claimant that there was any delay by the Respondent as it was the Claimant who was responsible for the delay in not mobilizing the required equipment and not obtaining the approval from the Respondent, not making the presence of the Joint venture partners to obtain their technical advise and expertise on which basis the Claimant JV was qualified. At this juncture for determining the delay we find that it suffices to say that the delay on account of this decision even if agreed to is an overlapping delay as the delay claimed is from Nov- 2005 to Mar-2006 and therefore it does not affect the net cumulative delay of 63 months not attributable to the Claimant.

67. Similarly regarding the delay due to treatment of cracks in the foundation blocks of the dam, the delay from Oct-2006 to Mar-2007 and the delay in the change in specification of cement and FM of sand from Oct-2006 to Oct-2007 stated by the Claimant as not attributable to him but is refuted by the Respondent, both parties relying on various documents. The fact is that this is an overlapping delay which is covered with in the 63 months of net delay. Hence, we find that insofar as these delays are concerned the net delay comprising all the delays and ignoring the over lapping delays is 63 months which is not attributable to the Claimant. The Claimant had sought for extension of the contract up to September-2009 i.e., for a period of 40 months in his letter for seeking the second extension while the Respondent has granted an extension E0T[2] up to June-2009 i.e., for a period of 37 months from the original period of the contract ending on 31.05.2006. It is submitted by the Claimant that for the present, in this Arbitration before this Tribunal the subject of delays placed is to the tune of 40 months as per the claim statement. Hence, we are limiting our jurisdiction only up to September-2009 while we were informed by both the parties that the work is in progress and is in the final stage of completion at the end of the proceedings in 2010.

68. In the light of the above observations and findings relying on the pleadings, arguments put forth by the parties and the facts and circumstances of the case our answer to Question-2 is the affirmative. We hold that the Respondent is responsible for delay and committed breach of the obligations under the contract as established by the Claimant.‖

16. Thus, the responsibility for the delays that had been occasioned was laid squarely at the doorstep of the Petitioner herein, based on an appreciation of the material/ evidence on record. Breaches alleged by the petitioner:-

17. The impugned award also proceeds to consider the breaches and delays alleged by the petitioner as highlighted in the statement of defence and renders elaborate, reasoned findings thereon which are summarised hereunder:-

18. Regarding the alleged breach owing to absence of one of the joint venture partner/s of the petitioner, M/s Intertech Service (Intertech) & M/s Institute Len Hydro projects (Len Hydro), the impugned award holds as under:- ―73. We have heard the rival contentions of the parties and perused the documents relied upon by them in the proceedings. The main issue to be addressed under this question, according to us, is whether the non presence of the JV partners even at the repeated requests of the Respondent was a breach of contract or a cause for delay attributable to the Claimant. We have already traversed on the various delays caused due to non handing over of site, non handing over of borrow area, varying adverse geological conditions, delays in drawings, delays in decisions etc., and have held that a delay of 63 months from September-2002 to December-2007 is not attributable to the Claimant. We do not find much force in the proposition that the presence of Russian JV partners could have shifted a part of delay of 63 months held as not attributable to the Claimant as being made attributable to the Claimant. Since, we find that the delay of 63 months as not attributable to the Claimant all other factors causing delay are only the overlapping delays which would have no effect on the basic causes of delays of not handing over the site, not handing over the borrow areas for the development of quarry and production of aggregates, adverse geological conditions that resulted in increased quantities due to flattening of slopes, additional items of work done such as use of geogrids & geo-textiles etc., could not have compensated these delays by the presence of the Russian partners. We accordingly hold that there has been no breach on the part of the Claimant as alleged by the Respondent that was responsible for the delay attributable to the Claimant.‖

19. Regarding unauthorized subletting of the work to Rithwik-Swathi JV [hereinafter referred to as RSJV] by the Claimant, which is an aspect strenuously highlighted by the petitioner in these proceedings, the tribunal holds as under:- ―74. The Respondent submits that the Claimant has sublet the work under a contract to M/s. Rithwik-Swathi JV (RSJV) which is a joint venture company and that RSJV was executing the work since the beginning as a sub-Contractor of the Claimant. The Respondent states that this sub-Contractor had stopped the work since the Claimant had not made payments to RSJV and the salaries and dues were not paid since February-2006 as per the letter dated 27.04.2006 at page- 47 Book-11 from a group of persons purporting to be employees of RSJV. The Respondent also relies on the letter at page-48 of Book-11 from RSJV workers union stating that no payments to the workers were made and a letter dated 28.04.2006 written by Rithwik-Swathi JV to the Engineer-in-Charge of the Respondent, copy of which was filed on 05.04.2009 before the Tribunal, wherein RSJV had brought to the notice of the Respondent that they (RSJV) are carrying out the construction work as sub Contractor of M/s. PCL-lntertech Len Hydro Consortium JV with their men and machineries and had expressed that the Claimant JV had unnecessarily retained heavy amounts due to them and the Claimants are not caring for them. Therefore RSJV had requested the Respondent to intervene in the matter and to resolve the situation in the interest of the project. Based on these letters the Respondent sent a fax message to the CMD of the Claimant on 28.06.2006 stating that such subletting of the total work to M/s. Rithwik-Swathi JV is without prior information and consent of the Respondent. It was notified that this is a breach of the contract under Clause-56 which states that the Contractor shall not, with out prior written consent of Engineer-in-charge, sublet any portion of the contract and further had sought clarifications on the matter from the Claimant. On 29.04.2006 the Respondent notified to the Claimant inviting reference to the unauthorized subletting of the work and requested the Claimant to attend a meeting on 02.05.2006 at their Noida office to resolve the issues. The meeting took place on 02.05.2006 wherein the representatives of M/s. PCL and their sub Contractor working at site viz; Ritwik-Swathi JV (RSJV) were present. While great concern was expressed by the Respondent the ultimate outcome of this meeting was that THDC noted that RSJV had been working at the Koteshwara Project along with M/s. PCL since beginning. It was agreed in the meeting that "keeping in view the association (of) sub Contractor, THDC expressed that since the engagement has already been made and the matter being fait accompli THDC has no objection to regularize the engagement". In the said meeting the parties agreed that "M/s. PCL and their sub-Contractor M/s. Rithwik-Swathi JV will immediately resume the work at site so that the valuable working season is not further lost".

75. Both the parties acted upon this minutes of meeting and it was signed by the Claimant PCL-lntertech Len Hydro Consortium JV, the Respondent THDC &the Joint Venture partners of M/s. Ritwik-Swathi JV on 02.05.2006. Further, the Respondent in his letter dated 22.05.2006, inviting reference to this meeting dated 02.05.2006, notified the Claimant at page-67 of Book-ll, giving approval for the engagement of sub-Contractor of RSJV as per agreement Clause-56 of GCC and stated that "as per agreement Clause-56 of GCC regularizing of engagement of Sub-Contractor RSJV i.e., Rithwik-Swathi JV is agreed".

76. The facts being as above we refer to Clause-56 which reads as below: "56.0 SUB-LETTING: The Contractor shall not without the prior written consent of the Engineer-incharge sublet any portion of the contract. Any subletting shall in no way absolve the Contractor of any of his responsibilities under this contract. The provision of labour on a piece work basis shall not be deemed to be a subletting under this Clause". We find that this Clause specifies that the contract shall not be sublet without prior written consent of the Engineer-in-charge in any part of the contract. Further the Clause also specifies that any subletting shall in no way absolve the Contractor of his responsibilities under this contract. It is also a term of this Clause that the provision of labour on a piece work basis shall not be deemed to be subletting of the work. In this case the Respondent produced in Book-Ill pages-2 to 9a copy of the agreement dated 16.11.2002 for subletting between M/s. PCL &M/s. Rithwik-Swathi JV. The agreement between the Claimant and the Respondent is entered on 14.11.2002. Further we find that the meeting held on 02.05.2006 the Claimant and the Respondent along with the authorized representatives of RSJV have noted that RSJV has been working at the Koteshwara Dam project along with M/s. PCL since beginning and have agreed that "keeping in view the association of M/s. PCL sub-Contractor THDC expressed that since the engagement has already been made and the matter being fait accompli THDC has no objection to regularize the engagement". This has been signed by the authorized representatives of the Claimant, the Respondent as well as the RSJV. It is only after the parties came to consensus regarding this matter the official communication reiterating and regularizing the same was made on 22.05.2006 by the Respondent addressed to the Claimant inviting reference to Clause-56 of GCC. We further notice that as per the Contract between the Claimant and the Respondent dated 14.11.2002 page- 6 Vol-1 of the contract under Article-1.0 para-1.[3] it is agreed that "Any modifications / Amendments to the contract shall be affected only by a written instrument signed by the authorized representatives of both the parties". While we find that under Clause-56 there is no provision for regularizing a sub-contract but the parties have the authority to exercise their powers as per Article-1 para-1.3. Hence according to us we find that such exercise of the authority is Permissible under the provisions of the contract under Article-1.3. Therefore, we find that the Respondent along with the Claimant have exercised this authority to modify Clause-56 of the contract and agreeing for regularizing the engagement of the sub-Contractor RSJV being fully aware of the fact that the RSJV was working on the site from the beginning. Further the Respondent has agreed to this engagement as a fait accompli which as per Law Lexicon 3'"'' edition-2005 means "Fact or deed accomplished, presumably irreversible". Hence, we find that objection by the Respondent on this issue is not sustainable. Thus the Respondent having effectively modified the Clause-56 as per Article-1.[3] would have no case to plead that this sub contracting is against the provision under Clause-56 of the contract and this contention of the Respondent deserves to be rejected and accordingly we reject this contention. From the materials placed before us, we are of the considered opinion that RSJV was executing the work as Sub- Contractor right from the beginning and the Respondent never objected and finally regularized the Sub-Contract. Once having regularized it is not open for the Respondent to resist the claim on that ground.‖

20. In the above backdrop, the impugned award goes on to deal with the claims and counter-claims. The summary of the award as regards the claims, is as under:- Claims Description Claim as per the Award Interest awarded till date of award Claim-1 Compensation for losses suffered due to non-handing over of land on right bank of village pendaras. Rs. 12,59,58,440 /- Rs. 5,56,55,996/- Claim-2 Right and left bank excavation and slope stabilization –extra rates and payments for working in hazardous conditions outside the project area. Rs. 82,97,680/- Rs. 36,66,412/- Claim-3 Payment for construction of approach road on right bank from Baily bridge to permanent road. Claim Rejected NIL Claim-4 Payment for diversion structure: Upstream dyke. Rs. 11,27,653/- Rs. 4,98,265/- Claim-5 Payment for approach (haul road) for development of B-1 and B-2 quarries. Rs. 1,16,02,113/ - Rs. 51,26,510/- Claim-6 Payment for purchase of sand and coarse aggregates for tunnel lining, inlet and outlet works. Rs. 16,87,500/- Rs. 7,45,638/- Claim-7 Compensation for abandonment of cable-way/cable crane system for Koteshwar dam and power house and extra payment for placement of concrete by Rotec. Claim Rejected Nil Claim-8 Compensation for idling of plant and machinery. Rs. 24,36,00,000 /- Rs. 8,99,37,120/- Claim-9 Compensation for idling; Man power resources. Claim Rejected Nil Claim-10(A) Compensation for overheads. Rs. 20,93,20,000 /- Rs. 7,72,80,944/- Claim-10(B) Compensation for non-realization of proft. Claim-11 Compensation for undue increase in cost of input materials, during the 45 months original stipulated completion time in the contract. Claim Rejected Nil Claim-12 Compensation for undue increase in cost of input materials: by way of revision of rates for works executed after the expiration of original stipulated completion time of 45 months in the contract (i.e., after May, 2006). Claim awarded The interest on this claim awarded is at 12% simple interest on the balance amount of each bill after setting of the amount of risk and cost advance applicable towards each bill and it shall be computed based on the actual quantities and the bills. Claim-13(A) Compensation towards extra costs/losses on mobilization advance towards interest and BG’s. Rs. 10,03,54,982 /- Rs. 3,70,51,059/- Claim-13(B) Compensation towards extra costs/losses suffered on performance B.G. due to 40 months delay. Rs. 1,11,50,553/ - Rs. 41,16,784/- Claim-13(C) Compensation for 40 months delay on insurances. Claim rejected Nil Claim-13(D) Compensation for the interest levy on Risk and Cost advance. Relief granted by setoff of the claim under Claim-12

21. With regard to the issue of interest, the award grants preaward/pendente lite interest at the rate of 12% and also post-award interest at the rate of 18% percent, till date of payment.

22. The conclusions in the award as regards the counterclaims are as under:- ―220. In the light of the above findings the award of the counter claim is summarized and made as follows: Counter Claims Description Counter claim as per the Award Interest awarded for the post award period only Counter Claim-1 Claim for Rs. 33.19 Cr towards advances made under the Risk and Cost Account Rs. 28.06Cr 18% Counter Claim-2 Claim for Rs. 12.30 Cr recovery of Mobilization Advance. Rs. 6.35Cr 18% Counter Claim-3 Claim for Rs. 10.45 Cr recovery of Equipment Advance. Rs. 10.45Cr 18% Counter Claim-4 Claim for Rs. 11.73 Cr towards Departmentally issued steel at the request of the Claimant on Deferred cost recovery Rs. 11.53Cr 18% Counter Claim-5 Interest for the amount claimed against the claim 1 to 4 Nil 18%

23. As in the case of the claims, post-award interest at the rate of 18% per annum was awarded in respect of the counter-claims as per Section 31(7) (b) of the Act (as it then stood). Pendente lite/pre-award interest was not granted in respect of the counter-claims.

24. It is in the aforesaid conspectus that the present petition has been filed by the petitioner. Submissions on behalf of the petitioner:-

25. Broadly, the following submissions have been made by the learned senior counsel for the petitioner:- Submission regarding offloading/ subcontracting:-

26. It is contended that the respondent sublet and thereby offloaded the entire contract to RSJV and accordingly, reduced its stake to only 5 percent in terms of the back to back agreement with RSJV, almost in the immediate aftermath of the contract agreement dated 14.11.2002.

27. Accordingly to the petitioner, this was a fundamental breach since the contract was awarded on the basis of technical knowhow and experience that could be brought by the lead partner i.e. Intertech LenHydro Consortium. It is further submitted that the agreement dated 16.11.2002 whereby the contract was offloaded to RSJV contemplates that all the claims received from the petitioner shall go to RSJV (the Sub Contractor) after deducting 5%, which alone shall go to the respondent.

28. It is further submitted that since the entire contract was offloaded and the works were executed by RSJV, the respondent has no right to make the claims and therefore, the claims made before the Arbitral Tribunal were not maintainable. It is further submitted that the claims were also not maintainable for the reason that the respondent never incurred loss on account of any increase in the rate of BOQ items since the works were executed by the petitioner by utilizing the vendors, man power and machinery already mobilized and available at site. For any additional machinery, material and man power, the petitioner mobilized the same by making the direct payments to vendors of the contractor/ Respondent. Submissions on Claim No. 12:-

29. The award in respect of claim no.12 has been assailed on the ground that the same results in re-writing of the contract between the parties inasmuch as rate for approximately 95 BOQ items have been revised thereby. It is further submitted that the contract already contains a clause for price escalation and therefore, revision of rates was not proper.

30. It is further contended that if at all revision of rates was to be sought, the same should not to have been done by the sub-contractor since the respondent had completely effaced itself from the site.

31. It is contended that the sub-contractor has neither made any claims against the respondent nor has it made any claims directly against the petitioner. In fact, the petitioner has been making payments directly to the respondent, vendors, suppliers and PRWs as agreed between the parties on 17.03.2007.

32. It is contended that in the circumstances, the claims were not even maintainable since the respondent never incurred any loss on account of any increased cost in executionof BOQ items. It is contended that in the light of these factual aspects, the reliance placed by the Arbitral Tribunal on the various judgments referred to in the award, including the judgment in the case of K. N. Sathyapalan (dead) by LRs Vs. State of Kerala[1], is entirely misplaced. Submissions on No Claim Certificate:-

33. It has been strenuously contended on behalf of the petitioner that the no claim certificate was furnished by the respondent in the background of the controversy regarding offloading/subletting and by issuing the no claim certificate, the respondent avoided imminent action of termination of contract.

34. It is contended that the furnishing of the no claim certificate was part of a package deal wherein under, the petitioner regularized the engagement of the sub-contractor and the respondent gave up its right to raise claims upon the petitioner. In the face of this factual position, the conclusion in the impugned award that the no claim certificate was given under coercion, is stated to be perverse. It is contended on behalf of the petitioner that in view of its factual version regarding the circumstances in which the no claim certificate came to be issued, the said no claim certificate could not be linked with the issue of time extension and was in fact linked to the offloading/subletting in favour of M/s RSJV. Interest on claims:-

35. The petitioner contends that the grant of pre-award/pendente-lite interest is contrary to the legal position laid down by the Supreme Court of India in:i. Jai Prakash Associates Ltd. Vs. Tehri Hydro Development

Corporation Ltd. (THDC)2 ii. Reliance Cellulose Products Ltd. v. Oil & Natural Gas Corporation Limited[3] iv. National Thermal Power Corporation Ltd. Vs. Patel Engineering Ltd[4] Counter-claims; Interest on risk and Cost advance:-

36. It is contended by the learned counsel for the petitioner that the impugned award grievously urges in rejecting the counter-claim seeking interest at the rate of 16% on the risk and cost advance “towards payments to vendors and suppliers”. Other claims:-

37. Apart from the aforesaid, the finding in the impugned award in respect of the individual claims has also been assailed:a) With regard to the claim no.8 and claim no.10 (towards idling/loss of overheads), the award is stated to be based on no evidence. b) The award in respect of the claim no.1, whereby the Arbitral Tribunal awarded a sum of Rs. 12.59 Crores towards the cost incurred by the respondent on “controlled blasting for excavation”, is assailed on the ground that it re-writes the contract between the parties. c) The award in respect of claim nos. 2, 4, 5 and 6 is assailed on the ground that the same is without any cogent basis and contrary to the terms of the contract. d) With regard to the claim no.13(D), it is contended that since the respondent had itself sought financial assistance from the petitioner, it

2021 SCC Online Del 4827 was unwarranted for the Arbitral Tribunal to award any amount on the premise that interest was wrongly levied on the risk and cost account maintained by the petitioner. e) The maintainability of all the claims has been questioned on the basis that the Respondent furnished NCC-1 and NCC-2 and also on the basis that the respondent is an unincorporated entity.

38. Finally, it is contended that the award of 18% for the post-award period is excessive. In the circumstances, the petitioner submits that the majority award suffers from patent illegality and is contrary to the fundamental policy of Indian Law, and therefore liable to be set aside. Submissions on behalf of the respondent:-

39. Learned senior counsel for the respondent has strongly refuted the contentions made on behalf of the petitioner. As regards the issue of no claim certificate, it has been emphasized that the same was not voluntarily given. It is submitted that under clause 58 of the contract between the parties, extension could only be given for delays on the part of the petitioner. Further, there is no provision in the contract for furnishing a no claim certificate as a pre-condition for grant of time extension or as a precondition for regularization of any sub-contracting. Attention is drawn to the letter dated 04.12.2006 addressed by the petitioner, wherein, it is stated that ―time extension has been given as per the provision of the contract in view of the delay in handing over of the excavation area‖.

40. It is submitted that the Arbitral Tribunal has submitted cogent findings of fact with regard to the issue of furnishing of no claim certificate. Attention has been drawn to the sequence of events leading upto the issuance of the no claim certificate to contend that the plea of the so-called “package deal” is unjustified and contrary to the record.

41. It is submitted that the request seeking time extension (EOT-1) was made as far back as 28.11.2005 and in response thereto, vide letter dated 21.03.2006, the petitioner insisted for a no claim certificate as a pre-requisite for extension of time. This was before the regularization of sub-contracting; it was only on 22.05.2006 that the decision was communicated ratifying the sub-contracting.

42. It is submitted that neither in the minutes of the meeting nor in its letter communicating the approval of sub-contracting, there is any mention of NCC or the so-called package deal. It is further submitted that there is no reference to the so-called package deal in any of the subsequent correspondence including the communication whereby claims sought to be raised by the respondent were rejected in the first instance by the Engineerin-chief and thereafter by the CMD of the petitioner.

43. In support of its contention with regard to the conclusions drawn in the impugned award with regard to the NCC, the learned senior counsel for the respondent has relied upon the following judgements:-

1. NTPC Ltd. Vs. Reshmi Construction[5]

2. Ambica Construction Vs. Union of India[6]

3. K.N. Sathyapalan (dead) by LRs Vs State of Kerala[7]

4. Pure Helium India Pvt. Ltd. Vs. ONGC[8]

5. NationalInsurance Company Limited Vs. Boghara PolyfabPvt. Ltd.[9]

6. NHAI Vs. Elsamex-TWS-SNC (JV)10

44. With regard to the claims being barred on account of the alleged unauthorized sub-contracting of the work to RSJV, it is submitted that the sub-contractor was regularized “right from the beginning” and as such, the sub-contracting has no bearing on the entitlement of the respondent to the claims sought to be raised. It is submitted that it is the petitioner's own case that the sub-contracting did not absolve the respondent under the contract. In this regard, reference has been made to the letter dated 22.05.2006 addressed by the petitioner. It is further submitted that the petitioner itself filed its counter claims against the respondent and not against the sub-contractor. Also, attention has been drawn to the fact that no objection to non-joinder of the sub-contractor was ever raised before the Arbitral Tribunal and therefore, the plea is not maintainable at this stage.

45. As regards the issue whether the respondent/claimant was disentitled to raise any claims on account of being an unincorporated entity, reliance has been placed on the following judgments:-

1. Firm Ashok Traders Vs. Gurumukh Das Saluja11

2. Kamal Pushp Enterprises Vs. D. R. Construction Co.12

3. Noida Toll Bridge Company Ltd. Vs. MitsuiMarubeni Corporation13

4. New Horizon Ltd. & Ors v. UOI14

5. GVPREL-MEE (JV) General Power of Attorney Holder Hyderabad Vs. Government of Andhra Pradesh15

6. Faqirchand Gulati Vs. Uppal Agencies Pvt. Ltd. and Ors16

7. Union of India Vs. Susaka (P) Ltd.17

46. With regard to the claim no.12, it is submitted that the same is well founded in the context of elaborate factual findings rendered in the award as regards the inordinate delay on account of breaches attributable to the petitioner. It is submitted that the impugned award is consistent with the settled proposition of law laid down by the Supreme Court and by various High Courts in a number of cases. It is further emphasized that the impugned award balances the rights of the parties by shifting the base date (to the detriment of the respondent) for the purpose of computing the entitlement of the respondent to price escalation in the light of revision of rates. Learned senior counsel for the respondent has relied upon the following judgments in support of his submissions:-

1. State of Karnataka Vs. RN Shetty & Co18

2. KN Satyapalan Vs. State of Kerala19

3. NHAI Vs. Elsamex-TWS-SNC (JV)20

47. As regards interest, it is contended that the award of pendente-lite interest is in accordance with law and that the Arbitral Tribunal has rightly placed reliance on the judgment of the Supreme Court in the case of State of UP Vs. Harish Chandra & Co.,21. It is submitted that the cases relied upon by the petitioner viz Sayeed Ahmed & Co. Vs. State of UP22; Tehri Hydro Development Corporation Ltd. & Anr. Vs. Jai Prakash Associates Limited23; Jai Prakash Associates Limited Vs. Tehri Hydro Development

AIR 1991 KAR 96

48. It is submitted that in any event, the judgment/s relied upon by the petitioner have all been rendered after the impugned award was passed and that when the impugned award was passed, it was perfectly consistent with the prevalent law.

49. As regards denial of interest component under counter claim no.1, it is contended that the same is predicated on factual findings rendered by the tribunal which do not warrant any interference under Section 34 of the Arbitration and Conciliation Act, 1996. It is submitted that the challenge to the other claims awarded by the Arbitral Tribunal are also misconceived inasmuch as factual issues have been sought to be re-agitated by the petitioner. Analysis and Findings:-

50. At the outset, it is important to consider the scope of the present proceedings under Section 34 of Arbitration and Conciliation Act, 1996. The award in the present case is dated 17.12.2010.

51. It has been held by the Supreme Court in the case of Ssangyong Engg. & Construction Co. Ltd. vs. NHAI25, as under:-

61. The tribunal also took note of the contention that in any event the respondent/claimant are covered under the exemption carved out under Section 69-4 (a) of the Partnership Act as the respondent joint venture has two partners who have their addresses in Russia and are of foreign origin.

62. The Arbitral Tribunal also noted as under:-

63. Having considered the above circumstances, the Arbitral Tribunal concluded as under:-

64. No fault, either factual or legal can be found with the aforesaid conclusions drawn by the Arbitral Tribunal. Sub-contracting: whether bars claims?

65. Having considered the submissions of the petitioner with regard to the aspect of sub-contracting of the contract to RSJV, I am unable to accept that the sub-contracting debarred the Respondent/ Claimant from raising/ pursing any claim/s against the Petitioner.

66. At the outset, it is important to refer to the minutes of the meeting dated 02.05.2006, whereby the decision was taken to regularise the subcontract. The said minutes records as under:- ―MINUTES OF THE MEETING HELD ON 02.05.2006 WITH M/S PCL-JV REGHAR4DING KOTESHWAR HEP (400 MW) The meeting was called by THDC vide letter No. THDC/KDP/PLG/06- 07/8-11/31. Dated 29.04.2006 to review the progress status of construction of civil works of Koteshwar Dam, Spillway and Power House at THDC Noida Office wherein representatives of M/s PCL and their sub-Contractor work M/s Rithwik Swathi JV (RSJV) attended the meeting. The list of participants is placed at Annexure-1 Following issues were discussed and decided: THDC expressed that as per the Agreement No. THDC/RKSH/CD- 197/AG dated. 14.11.2002 the civil works were scheduled to be completed by May, 2006 However as per the status of works which was discussed, it is anticipated that the works under the Agreement shall be completed by March, 2008. THDC also expressed that the pace of work by M/s PCL/sub contractor engaged by M/s PCL is not in tune with time schedule which was discussed during the meetings taken by CMD, THDC on 16.11.2005 & 04.03.2006. THDC further practically stopped their operations and valuable time is being lost. The excavation activates for the foundation in the main area have been almost completed and still concrete works has yet not started. The concrete work which commenced in the power dam area is also almost stand-still THDC expressed concern at the stoppage of work. THDC took strong exception to the engagement of sub Contractor by M/s PCL without obtaining prior approval. It was informed by M/s PCL that the formal engagement of the Sub-Contractor under Clause 56 of the Contract Agreement has not been accomplished since certain issues were being resolved with their sub-contractor viz M/s Rithwik Swathi JV. THDC noted that M/s Rithwik Swathi JV has been working at the Koteshwar Project alongwith M/s PCL since beginning. Keeping in view the association of M/s PCL sub-contractor THDC expressed that since engagement has already been made and the, matter being fait accompli THDC has no objection to regularize the engagement. On the progress of commissioning the project, it was agreed that M/s PCL and the Sub-contractor M/s Rithwik Swathi JV will immediately resume the technical man-power and the equipment, which is required for the construction of Dam, Spillway and Power House shall be made available to match the construction requirements PCL have also informed that he order for placing of concrete was tied up with M/s Rotec industries INC, USA. The Letter of Credit would be opened by their sub-contractor for which PCL will extend necessary cooperation and documentation.PCL have also assured that all necessary steps would be taken for starting concreting.

1. M/S PCL Intertech Len Hydro Consortium JV (R.D. Soni)

2. M/s Rithwik Swathi JV a) M/s Rithwik Projects Ltd. (C.M.Ramesh) b) M/s Swathi Constructions Pvt. Ltd. (P. Pulla Rao)

3. THDC Ltd. (M.S. Gusain)‖

67. Significantly, in the letter dated 22.05.2006, it was communicated to the respondent as under:- “Tehri Hydro Development Corporation Ltd. (A Joint Venture of Govt. of India & Govt. of U.P.) Koteshwar Hydro Electric Project Koteshwar, Tehri Garhwal (Uttaranchal) Pin-249 001 Phone: (01378) 231445, Fax: (01378) 231337 NO: THDC/KHEP/DGM/D&PH/PCL/06/92 Dated: 22 May, 2006 The Chairman & Managing Director M/s PCL intertechLenhydro Consortium (JV) Raghava North Block, 7th Floor R.R. Tower, Chirag Ali Lane Hyderabad – 500001 (A.P.) Sub:- Regarding engagement of sub contractor. Ref.:- Your letter no.PCL/KOT/F-4/20 dt. 20.05.2006. With reference to your above letter on subject cited above you may refer meeting held on 02.05.2003 at THDC Noida office wherein it was directed that THDC has no objection to regularize the engagement as the mater being fait accompli. As per agreement clause No.56.0 of GCC, regularizing of engagement of sub contractor (RSJV) i.e. Ritwik Swathi JV is agreed. However, engagement of sub contractor shall no way absolve the M/s PCL – IntertechLenhydro Consortium (JC) of any of his responsibilities under the contract. (U.K. Thakur) DGM (D&PH)”

68. It can be seen from the above, that it was the respondent’s own stand that engagement of the sub-contractor shall not absolve the respondent of any of its responsibilities under the contract. Also the petitioner itself has filed its counter claim against the respondent and not against the subcontractor. No objection regarding non-joinder of the sub-contractor was raised before the Arbitral Tribunal.

69. Moreover, it is the respondent’s own case that in consideration for regularizing the sub-contracting, the respondent itself submitted no claim certificates to the petitioner, and the said no claim certificates are sought to be enforced against the Respondent. Clearly, therefore, the petitioner continued to deal with the respondent for the purpose of the work even after the sub-contracting was regularized. In fact, in the Statement of Defence filed by the Petitioner before the Arbitral Tribunal it was clearly averred that:- ―….the respondent agreed to regularise the engagement of the subcontractor from the very beginning and the same was also formally notified by the respondent vide its letter dated 3.5.2006 to the claimant and its sub-contractor. However, it was also noted that the engagement of the sub-contractor shall in no way absolve the PCL- IntertechLenhydro JV of any of its responsibilities under the contract…..‖

70. In Hudson’s Building and Engineering Contracts (11th Edition), it has been emphasised that no privity of contract between and owner and another contractor can arise out of a sub-contract concluded between the owner’s main contractor and the other contractor. It has been observed therein as under:- “13.016. It cannot be over-emphasized that no privity of contract between an owner and another contractor can arise out of a subcontract concluded between the owner‘s main contractor and the other contractor. Where the sub-contractor has been selected by the owner, as in the case of nominated sub-contracts, early attempts were made to argue that the main contractor or the A/E had on the facts contracted as an agent or trustee of the owner, and at one time this view appears to have prevailed in the courts, at least in relation to nominated or selected sub-contractors. However, the later cases made it clear that only the most special and unusual facts, showing that the owner expressly or by some unusual conduct authorized the main contractor or the A/E so to contract, would justify such a finding, which is contrary to the purpose of the usual main contract and the practice and expectation when negotiating contracts informally between the various parties in the construction industry. The history of the courts finally (and rightly) rejecting the notion of privity between a building owner and his selected subcontractor is shown in the cases illustrated at the end of the present subsection, but under the present system of nomination, which is widely used and understood in the industry, it can often happen that architects need to obtain quotations from and negotiate with tendering subcontractors (particularly those whose work or products are subject to long delivery dates) during the planning stage of a project at a time when the identity of the ultimately successful tendering main contractor may still be unknown. In such cases it is generally well understood by the parties that the sub-contractor will in due course be required to enter into a sub-contract with the successful main contractor when appointed……

71. In the case of Davis vs. Collins41, it was held as under:- ―………………….. There is a well-known division of contracts for work and labour into two broad classes. One class is where the work and labour can, on the true construction of the contract, only be performed by the contracting party himself or by some staff that he employs. The other class is where, from all the circumstances of the case, including of course the true construction of the contract, it is to be inferred that it is a matter of indifference whether the work should be performed by the contracting party or by some sub-contractor whom he employs. ……………………………….”

72. In the present case, the Petitioner having regularised the subcontracting, and having insisted that the same will not absolve the Petitioner of any of its responsibilities under the contract, it became a matter of [1945] 1 All ER 247 indifference whether the work was performed by the Respondent itself or through its sub-contractor. The sub-contracting did not absolve the Respondent from its obligations under the contract; equally, it did not obliterate the Respondent’s right to raise claims upon the Petitioner.

73. The impugned award, has dealt extensively with the objection raised by the petitioner before the Arbitral Tribunal regarding sub-letting of the work to RSJV in paragraphs 74-76 (reproduced hereinabove), and has concluded as under:-

(i) The Petitioner regularised the engagement of sub-contractor;

(ii) The same was done under Clause 56 of the GCC in terms of which the sub-contracting in no way absolved the Contractor of any of his responsibilities under the Contract;

(iii) The petitioner agreed for regularising the engagement of the sub-contractor being fully aware of the fact that the subcontractor was working on the site from the beginning. The above findings rendered by the Arbitral Tribunal cannot be interfered in these proceedings so as to reach the conclusion that sub-contracting disentitled the Respondent from raising any claims. No claim certificate: whether a quid pro quo for regularising subcontracting

74. As regards NCC-1 being in the nature of a quid pro quo in return for the petitioner regularizing the sub-contracting, the following facts are relevant:-

(i) The first request for time extension was made by the respondent vide communication dated 28.11.2005 wherein after setting out the various delays that had been occasioned, it was requested as under: “The contractual responsibility of contractor are dependent on timely fulfilment of certain obligations by the Employer for the timely achievement of planned schedules and programs, the Employer has to timely fulfill its part of the contractual obligations as explained herein above and in our earlier correspondence. The contract has got delayed mainly for the reasons beyond our control and therefore the Extension of Time in terms of GCC Clause 58 is requested. In view of facts stated above, you are requested to kindly accord approval of Extension of Time from Mile Stone 2 to 6 as 30.6.2008 and merge Mile Stone 2 to 6 into a single mile Stone and grant Extension of Time in respect of the above Mile Stone upto 30.6.2008. The revised Construction Program is being modified taking into view the development on 15.11.05 and would be submitted shortly.”

(ii) It was in response to this letter, that the petitioner addressed a communication dated 21.03.2006 stating as under:- “Tehri Hydro Development Corporation Ltd. (A Joint Venture of Govt. of India & Govt. of U.P.) Koteshwar Hydro Electric Project Koteshwar, Tehri Garhwal (Uttaranchal) Pin-249 001. Phone: (01378) 231343, 231300, 231445, Fax: (01378) 235343, 231337 To, PCL-IntertechLenhydro Cons. (J.V.) Camp-Koteshwar Dam Project Koteshwarpuram. Sub:- Extension of time - regarding In continuation of your letter no. PCL/Kot./F-4/438 dt. 28.11.2005 you are requested to submit the no claim certificate for the period for which time extension has been sought. Sr. Manager (D&PH) KHEP-Koteshwar”

75. By this time the controversy regarding the sub-contracting had not broken out. According to the petitioner itself, it was only on 27.04.2006 that it received a communication from a group of persons purporting to be employees of RSJV, whereupon the petitioner acquired knowledge as to the sub-contract. This aspect is noted in paragraph-74 of the impugned award. Thereafter, a meeting is stated to have been held on 02.05.2006 wherein it was decided to regularize the engagement of the sub-contractor. A letter to this effect was thereafter addressed on 03.05.2006 followed by another letter dated 22.05.2006. The extension of time (EOT-1) was granted on 16.06.2007, which was obviously after issuance of the concerned no claim certificate (NCC-1), which was itself undated and reads as under:- “PCL – INTERTECHLENHYDRO CONSORTIUM JOINT VENTURE Camp Office: Koteswar Dam, Post – POKHRI Distt. Tehri Garhwal (Uttaranchal) E-mail: pclilc@sancharnet.in Ph.: Office: 01376-231242, 231388, Fax:01376-231547 NO CLAIM CERTIFICATE NAME OF CONTRACTOR: M/s P.C.L. IntertechLenhydro Consortium J.V. AGREEMENT NO.& DATE: THDC/RKSH/CD-197 dtd. 14.11.2002 DATE OF START AS PER AGREEMENT: 31.08.2002 DATE OF COMPLETION AS PER AGREEMENT: 31.05.2006 Mile Stone Date as per agreement Provisional extension granted Date under which extension now applied for I 31/10/2003 28/12/2003 28/12/2003 II 31/12/2004 31/12/2005 31/12/2006 III 30/04/2006 - 31/01/2008 IV 31/12/2004 30/04/2006 30/11/2006 V 31/12/2005 - 30/09/2007 VI 31/05/2006 - 31/03/2008 Details of reasons for which extension is applied for: Reasons are explained in our letter no.PCL/KOT/F4-438 dtd: 28/11/2005 Certified that we shall not demand my claim and / or compensation whatsoever in future in account on account of grant of this time extension nor claim any increase in the rates entered in our contract for the work in the extended period. For PCL IndertechLenhydro Consortium J.V. (SARAT RAO) Project Director”

76. Significantly, the above no claim certificate referred to a communication dated 28.11.2005 whereby the time extension had originally been sought. There is no reference in the said no claim certificate to the intervening developments regarding regularization of the sub-contractor.

77. It is in this background that the Arbitral Tribunal considered the objection as to whether the claims referred by the respondent were precluded on account of the said no claim certificate being issued as part of a “package deal” whereby the Respondent/ Claimant gave up its claims in return for regularisation of sub-contracting.

78. It is also notable that when the occasion arose for the respondent to raise financial claims upon the petitioner, the same came to be discussed during the meeting dated 17.03.2007, the minutes of which, inter-alia, record as under:-  ―The discussions were held on above claims/payments. It was informed by the project that the claims from Sl. No. 1 to 7 had already been rejected by project, however these issues are being raised by the contractor again & again. For Sl. No. 8 the details about analysis of rates of placement of Geogrid is yet to be submitted by the contractor. For Sl. No. 9 ie. payment of dry stone pitching 75% payment of provisional rates has already been released and request of the contractor for release of payment on account of extra efforts due to typical location of site and uneven surface is being examined by the project. For Sl. No. 10 ie payment of extra lead for disposal of muck is under consideration of the project and will be settled by end of Mar-07.  It was instructed by the CMD to the Project that all the above mentioned claims/payments should be analysed immediately and decision should be conveyed to the contractor by the end of Mar-07. In case the contractor is not satisfied with the decisions of THDC, he may opt for redressal of the same as per contract provision.‖

79. It is notable that while recording the aforesaid minutes, that the respondent would opt for redressal/adjudication of its claims in terms of the contract provisions, there was no observation made to the effect that the claims were precluded in view of the alleged quid pro quo arrangement/ understanding, at the time of regularization of the sub-contract. Even when the claims were thereafter raised before the concerned Engineer-in-chief, the rejection order thereon did not contain anything to this effect. When the said rejection order of Engineer-in-chief was appealed before the CMD of the petitioner, the same was also rejected vide communication/order dated 04.06.2007. However, again, the said communication makes no mention of the NCC or the so-called package deal. Notably, EOT-1 was granted on 16.06.2007 whereas the regularization of the sub-contract had taken place on 02.05.2006 itself. There was no reason why future correspondence would not explicitly refer to the quid pro quo/package deal arrangement. Indeed, there was no reason for the petitioner to not draw up/execute an agreement/document clearly stating that in consideration with regularization of the sub-contract, the respondent/contractor had agreed to give up all its outstanding claims.

80. In these circumstances, in these proceedings, this Court is unable to conclude, in derogation of the factual findings rendered in the impugned award, that there is any inter-connection, as alleged by the petitioner, between the no claim certificate/s and the regularisation of sub-contracting. Whether Claims are precluded/ barred on account of the No Claim Certificate/s [NCC-1 and NCC-2]

81. The relevant findings in the impugned award on this issue are as under:-

(i) There is no provision in the contract for furnishing of a no claim certificate for the purpose of grant of time extension, yet the Petitioner insisted on such no claim certificate and withheld the grant of EOT till the same was furnished;

(ii) From the correspondence, particularly, letter dated 4.12.2006 of the Respondent, it is evident that the first EOT was given in lieu of delay in handing over of the requisite excavation area and the no claim certificate sought was not as per the contract, and was not given voluntarily;

(iii) EOT-1 was sought by the Respondent/Claimant on 28.11.2005, no claim certificate was sought by the Petitioner on 21.3.2006 as a pre-condition for grant of EOT-1, and the same was granted only on 16.6.2007 i.e. after nearly 18 months of delay;

(iv) EOT-1 had been withheld on account of non-furnishing of

NCC-1; and on the very date on which EOT-1 was granted after furnishing of NCC-1, arbitration was invoked by the Respondent/ Claimant; such invocation of Arbitration was itself the instantaneous protest to NCC-1 being sought;

(v) By the time EOT-1 was granted, application for EOT-2 was already pending which subsumed the period covered by EOT-1; EOT- 2 was sought on 14.2.2007 even before EOT-1 was approved. NCC-2 was requested by the Petitioner on 4.10.2007 and furnished by the Respondent on the same day. Only thereafter EOT-2 was given on 15.11.2007. This shows that the furnishing of NCC was in the nature of a pre-condition imposed by the Petitioner for grant of EOT. This was not contemplated under the contract, in terms of which grant of EOT was to be governed by GCC Clause 58.

(vi) NCC-2 which was furnished as a pre-condition for EOT-2, in fact, subsumed the period covered by EOT-1, and specifically states that the same is without prejudice to the rights of the Respondent under the Contract.

(vii) The Tribunal finally held that the scenario under which the No

Claim Certificate was sought for ―persuades us to come to a conclusion that the said certificate was given not voluntarily but under compulsion faced with the huge investment already made by the Claimant and the various hindrances attributed to the respondent…‖

82. The impugned award also relied upon, and applied the law laid down in the following judgements to reach the aforesaid conclusion:- (1) NTPC Ltd. Vs. Reshmi Constructions42 (2) Ambica Constructions Vs. Union of India.,43 (3) K.N. Sathyapalan (dead) By LRs Vs. State of Kerala44, (4) Pure Helium India Pvt. Ltd. Vs. ONGC45, (5) National Insurance Company Limited Vs. Boghara Polyfab Pvt. Ltd46.

83. In M/s. Sab Industries Limited vs. M/s Gas Authority of India Ltd.47, a Division Bench of this court, in the context of the Arbitral Tribunal having rejected the plea that claims were barred on account of a no claim certificate, and the Single Judge of this court having set aside the award on that count, held that it was impermissible under Section 34 to carry out a full scale reappraisal of the award; the examination of the award must be only from the lens of “patent illegality”. In this regard, it was observed as under:- “16. In the present case-unlike in Master Construction (supra) and Genus Power Infrastructure (supra) the dispute was not at the stage of referring the matter to arbitration; instead it was at the stage of objections to the award. Having overruled GAIL's plea with respect to non-arbitrability, the Tribunal proceeded to consider the claims on the merits and rendered its findings. These materials were in the form of running bills, joint surveys and minutes of meetings, recommendations/verifications of the consultants, etc. After taking note of all these facts, the Tribunal awarded some amounts to SAB. This distinction, to the Court's mind, makes all the difference. The learned Single Judge, in this case, did not examine the correctness of those findings from the lens of ―patent illegality‖ or the other relevant factors which would render an arbitral award invalid or unenforceable in terms of the settled law (Oil and Natural Gas Commission v. Saw Pipes, (2003) 5 SCC 705). The court highlighted that: ―Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the Court. Such award is opposed to public policy and is required to be adjudged void.‖ (paragraph 30)

17. In Oil and Natural Gas Commission (supra), the Supreme Court set aside the arbitral award on the ground that the tribunal had failed to consider Sections 73 and 74 of the Contract Act, and relevant precedents, in awarding damages. What is ―patent illegality‖ has been clarified in subsequent cases. Several later judgments have highlighted that Section 34 permits an extremely narrow window for the court to set aside the arbitral tribunal's award. Firstly, the court does not act as if it were an appellate court, revisiting the evidence and undertaking an extensive factual review of the merits of the dispute with the mandate to 2015 SCC OnLine Del 12752 cure or correct the errors (Ref Sumitomo Heavy Industries v. ONGC Ltd. (2010) 11 SCC 296 and Kwality Manufacturing Corporation v. Central Warehousing Corporation (2009) 5 SCC (Civ) 406). The Court can set aside an award if it finds that the tribunal has made an error on the face of the contract, or provided a ―patently illegal‖ interpretation of the law. Equally, if the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction (Ref MSK Projects (I) (JV) Ltd. (supra); G. Ramachandra Reddy v. Union of India (2009) 6 SCC 414; McDermott International Inc. v. Burn Standard Co. Ltd. (2006) 11 SCC 181 and Renusagar Power Co. Ltd. v. General Electric Co. (1984) 4 SCC 679). In Mc Dermott International (supra), the Supreme Court clarified the Court's inherent limitation by reason of Section 34 in such matters: ―112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. (See Pure Helium India (P) Ltd. v. ONGC [(2003) 8 SCC 593] and D.D. Sharma v. Union of India [(2004) 5 SCC 325]).

113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award.‖

18. Secondly, unless the Tribunal commits a patent error of law in adjudicating upon a question submitted to it, the Court will not intervene (J.G. Engineers Pvt. Ltd. v. Union of India (2011) 5 SCC 758). The expression ―patently‖ illegal was explained as an error ―which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice.‖

19. The impugned judgment in this case went by a bare reading of the pleadings and the judgments of the Supreme Court to conclude that SAB was precluded from claiming the amounts in the light of the NDC. As is evident from the above discussion, the judgments of the Supreme Court were rendered in the context of fact situations where demands for arbitration were in issue; here, however, there was a reference. The merits of both questions - arbitrability (whether SAB's claim was not maintainable because of accord and satisfaction on account of NDC) as well as the merits of the award had to be considered. However, the Single Judge - in a linear manner, if one may so describe it-held that since the dispute could not be arbitrable, the award was patently illegal. This Court holds that once the arbitrator considered GAIL's plea and overruled it, that fell within his jurisdiction. Unlike at the stage of making a reference, the parties had proceeded further. We note that the final bill was paid in October, 1999 and the statement of claim in arbitration was made in 2001-clearly within the period of limitation. Consequently, the mere fact that the NDC had not been protested contemporaneously, or that there was no specific plea about coercion in the statement of claim, did not result in waiver. The arbitrator accepted SAB's plea that without signing the dotted line, it could not have secured the amounts released to it; that was a finding of fact. Such finding could not be said to be patently illegal. This Court notices, however, that the merits of each of the claims made in the award, had not been gone into by the learned single judge, who rested his decision on the narrow ground of non-arbitrability due to accord and satisfaction.‖

84. It is also notable in the facts of M/s. Sab Industries Limited (Supra), as in the present case, the plea regarding the NCC being vitiated had not been specifically taken in the statement of claims, and it was only taken in response to the NCC being cited against the Claimant. In that context, it was observed by the Division Bench as under:

85. Likewise, in Delhi State Industrial & Infrastructure vs. Sukumar Chand Jain48, it was held by a Division Bench of this court, in the context of an Arbitral Tribunal having pronounced upon the issue as to whether the no claim certificate barred the Claims, and the single judge having dismissed the Petitioner under Section 34, held as under:-

86. In Wishwa Mittar Bajaj and Sons Vs. Union of India49, a Division Bench of this court while dealing with an appeal arising out of a Section 34 Petition wherein the Single Judge had set aside the arbitral award on the basis of a no claim certificate and acceptance of full and final payment in lieu of the said certificate, held as under:-

95. Given that the Petitioner (and also the Respondent) failed to exercise its right to conduct cross-examination of the respective witnesses, despite serious controversy on factual issues surrounding NCC, sub-contracting etc., the scope for interfering with factual findings rendered in the impugned award, is all the more narrower. Claim No.12

96. Claim no.12 pertains to revision of rates beyond the contract for reasons of delay, not attributable to the respondent/claimant. The petitioner has objected to the findings rendered by the Arbitral Tribunal qua this claim. Essentially, the petitioner has urged that revision of rates results in rewriting of the contract, especially since the contract between the parties contains a price escalation clause. With regard to this claim, the Arbitral Tribunal has inter-alia held as under:-

97. It can be seen, that the award passed by the Arbitral Tribunal qua this claim is pursuant to its findings with regard to the various delays that were occasioned and which have found to be not attributable to the respondent/claimant. The tribunal goes on to rely upon K.N. Sathyapalan (Supra) to hold that the rates quoted at the time of bidding could not remain valid indefinitely particularly in the light of the delay that was occasioned for reasons not attributable to the respondent/claimant. Accordingly, the tribunal proceeds to pronounce upon the rate analysis based on which the revised rates were claimed by the respondent/claimant and found, as a matter of fact, that the said rates were in conformity with the accepted principles of deriving the rate and also as per the CWC guidelines. The tribunal found that in the rate analysis of each item, an additional amount of 9.77% had been added towards the interest burden on account of bank guarantee costs etc. which was found to be unjustified and the tribunal accordingly deleted the same and accordingly worked out the revised rates which were made out from the actual contract executed and beyond the contract period ending 31.05.2006.

98. Further, relying upon the judgment in the case of State of Karnataka Vs. R.N. Shetty & Co50, the Arbitral Tribunal proceeds to direct that since AIR 1991 KAR 96 the rates that have been derived were based on price analysis prevailing as on 31.05.2006, the same shall be subject to price variation in accordance with the price variation formula contained in the contract. Further, for the purpose of applying for the price variation formula, the tribunal directed that the relevant base dates would be those prevailing on 31.05.2006. Evidently, this was directed by the tribunal since the rates derived by the Arbitral Tribunal were based on the price index prevailing on 31.05.2006 and as such for the purpose of price variation beyond 31.05.2006, it was untenable to retain the base date as originally envisaged.

99. In the case of NHAI vs. Elsamex-TWS-SNC-JV51; a Division Bench of this court considered claims virtually on the same lines as the present claim. The claims that fell for consideration therein were as under:- ―a) Claim No.1: Financial compensation due to delay in execution in terms of revised rates for the quantities executed after contract period in respect of the BOQ items (amount claimed-Rs.84,33,52,141/-) b) Claim No.2: Payment of adjustment of the above revised rates from the base date adopted for derivation to the billed date as applicable under Sub-Clause 70.[1] of Contract.‖

100. In the background of the Arbitral Tribunal having awarded amounts under the above mentioned claims, a Single Judge of this court dismissed the petition under Section 34 of the Act. In that context, the Division Bench observed as under:-

101. The above observations of Division Bench would apply in the context of Claim No.12. Incidentally, the Arbitral Tribunal in the present case, has also relied upon State of Karnataka vs. R.N. Shetty & Co., Engineers and Contractors52, the same judgment relied upon by the Division Bench in NHAI Vs. Elsamex-TWS-SNC (JV) (Supra).

102. The findings/conclusions drawn by the Arbitral Tribunal are based on a detailed consideration of the rate analysis submitted for each item and premised on the factual finding/s regarding the delay that was occasioned, for reasons not attributable to the respondent.

103. There is nothing ex-facie perverse about the aforesaid findings and it cannot be said that the view taken by the Arbitral Tribunal is not even a possible view so as to warrant interference under Section 34 of the Arbitration and Conciliation Act, 1996.

104. Since the award is evidently based on the consideration of the relevant rate analysis for each item of work, it is futile for the petitioner to contend that revision of rates is precluded on account of payment made by the petitioner to the vendors of M/s RSJV or to take the plea that no loss was incurred on account of increased cost of execution. It is impermissible in these proceedings to embark upon a minute factual re-appraisal or to embark upon a merit based review of the rate analysis of each BOQ item, as undertaken by the Arbitral Tribunal. The same is clearly beyond the ambit of Section 34 of Arbitration & Conciliation Act., 1996. Challenge qua the award on other claims

105. The petitioner has also challenged the award qua other claims adjudicated by the Arbitral Tribunal particularly claim no.8 (towards idling of plant and machinery) and claim no.10 (towards the losses suffered due to overheads). AIR 1991 Kar 96

106. Perusal of the award qua claim no.8 reveals that the same is based on the details and particulars of the plant and machinery deployed as referred to in the correspondence/documents placed on record before the Arbitral Tribunal. The award specifically notes as under:- ―130. We have heard the parties based on the documents and the submissions made. We find that the Claimant has produced the documents, details and the invoices in

ANNEXURE-198&ANNEXURE- 199 with regard to CLAIM-8 & CUIM-9. We have examined the delays on various counts as claimed by the Claimant and after detail examination of all the delays considering the over lapping delays we have held in earlier paras that there is a net delay of 63 months not attributable to the Claimant which includes the period from the beginning of contract from September-2002 to December-2007. All other delays are only overlapping delays. The claim made under CLAIM-8 by the Claimant is for the delay of idling of plant &machinery for two stretches viz; (A) 26.177 months in the original 45 months period of the contract. Hence, the Respondent's contention that the entire contract period is taken as idling is not acceptable. This 26.177 months idling period is determined based on the weighted average period by considering the product of the sum of the cost of plant & machinery and the deployment months divided by the sum of the cost of plant a machinery to obtain weighted average period of machinery. This is worked out from the fundamentals and hence the weighted average delay for the equipment deployed for 26.177 months up to May-2006 is reasonable. The loss claimed is for this 26.177 months idling which amounts to Rs. 19.47Cr as per

ANNEXURE-198 at page 587 of C-1-3 which we consider as reasonable. (B) 11.012 months in the period beyond the original contract period from June-2006 to May-2007 i.e., for a period of 12 months beyond the original contract period and adopting the same procedure as in (A) above the claim is Rs. 8.495Cr. As the period from September- 2002 to December-2007 amounting to 63 months is a delay that is not attributable to the Claimant, the losses suffered due to the idling of plant and machinery from June-2006 to May-2007 falls within this period. However, it is not justifiable that 11 months of idling of plant & machinery would occur in the period of 12 months from June-2006 to May-2007. However, considering the proportion of the delay with respect to the total period as in (A) above i.e., 26 months to 45 months is 58% of the total period is the idling period under (A) above the period of delay in the 12 months accounts to 6.35 months as against 11 months. Correspondingly the claim amount works out to 8.495 x (6.35/11.012) = Rs. 4.89Cr.

131. Thus the total amount allowable under CLAIM-8 is Rs. (19.47 +

132. In the light of the above circumstances and the reasons recorded therein we award an amount of Rs. 24.36Cr towards this CLAIM-8 as against the claim of Rs. 27,96,41,427/-.‖

107. The law is well settled that the Arbitral Tribunal is the sole judge of the quality and quantity of evidence. The merit based review, as sought by the Petitioner, has been frowned upon by the Supreme Court in a catena of cases.

108. The same also applies to the challenge qua other claims including claim no.10 (towards losses suffered due to delays on overhead and profits), claim no.1 (towards losses suffered due to non handing over of land on right bank of village Pendaras); claim no.2 (towards extra rates and payments for working in hazardous condition outside the project area in respect of right and left bank excavation and slope stabilization), Claim no. 4 (towards Payment for construction of diversion structure upstream of dyke), claim NO. 5 (towards payment for the construction of approach (haul road) for the development of B-1 and B-2 quarries), claim no. 6 ( towards payment for purchase of sand and coarse aggregates for tunnel lining, inlet and outlet works), claim no.10(A) (towards losses suffered due to overheads), claim no.13(A) (towards extra costs/losses suffered on mobilization Advance towards interest and BG’s, claim no.13(B) (towards extra costs/losses suffered in performance BG due to 40 months delay) and claim no. 13(D) (towards losses suffered due to the interest levy on risk and cost advance). It is noticed that for adjudicating each of the aforesaid claims, the impugned award takes note of the respective contentions of the parties and then proceeds to adjudicate claims based on the documents/material on record. Reasons have also been given in the impugned award in support of the conclusion in respect of each claim.

109. For instance, for the purpose of claim no.10(A) (towards losses suffered due to overheads), the tribunal proceeded to apply a formula taking into account the provisions of overheads in the contractual rates, the delay that was occasioned, the total contract sum involved and the contract period, and on that basis have computed the proportionate loss of overheads taking into account the delay that was occasioned. It cannot be said that the view taken by the Arbitral Tribunal is not even a possible view so as to warrant interference under Section 34 of the Arbitration and Conciliation Act, 1996.

110. Likewise, while adjudicating claim no.1, the tribunal, after arriving at a factual conclusion with regard to the manner in which the excavation work was carried out and recourse to control blasting was necessitated, proceeds to work out the amount payable to the claimant for the same taking into account the nearest possible rate for the corresponding item in the contract. Again, it cannot be said that either the conclusion or the methodology adopted in the impugned award is not plausible.

111. For claim no.4, the tribunal has interpreted the relevant specification regarding the “backfill” in respect of the upstream dyke and has come to the conclusion that the item of dyke envisages rock muck corresponding to item at serial no. 13.[4] of the schedule of quantities towards the cofferdam works and it cannot be treated as “backfill”. In the circumstances, the tribunal applied the relevant rate applicable to “rock muck” and worked out the entitlement of the respondent.

112. As regards claim no.5, the tribunal found that the respondent/claimant had to construct a haul road which was greater in length viz-a-viz that envisaged at the time of entering into contract. After working out the total additional length of the road constructed by the respondent, the tribunal works out the entitlement of the respondent based on the applicable excavation rates and the cost of maintenance. Again, no fault can be found with the approach of the Arbitral Tribunal.

113. Likewise, for the purpose of claim no.6, the tribunal works out the extra cost incurred by the respondent for purchase of sand and coarse aggregates for tunnel lining, inlet and outlet works.

114. For the purpose of claim no.13(A), the tribunal takes note of the relevant contract provisions with regard to mobilization advance and reached the conclusion that in a situation the work is extended beyond the contract period for no fault of the contractor, and on account of breaches on the part of the employer, and the mobilization advance would not be recovered within the contract period, the respondent could not be burdened with the interest on mobilization advance for the period of delay beyond the original contract period. Again, it cannot be said that the view of the Arbitral Tribunal is not even a possible view to take in the facts and circumstances of the case.

115. Likewise, the tribunal found merit in the claim towards the cost of extension of bank guarantee during the extended period of contract for which amounts were awarded to the respondent vide claim no.13(B).

116. Similarly, for the purpose of Claim 13(D), while considering claim towards losses suffered due to interest levy on risk and cost advance, the tribunal while allowing the said claim has taken note of the fact that the risk and cost advance was given towards materials. It is observed that the payment for the same was given directly by the petitioner to the vendors and that the claimant/respondent was never in receipt of the said amount. Further, it was held that the provision under the contract for 16% interest was only towards mobilization advance, while the material advance as per clause 9(ii) & clause 9(iii) of the contract was meant to be on an interest free basis. The tribunal went on to state that as per the minutes of the meeting held on 17.03.2007 no mention of any such interest was made. As a result, it was held that the interest of 16% was never agreed upon by both parties, nor was it ever communicated to the respondent/claimant. It was noticed that till 09.07.2007, by which time 84 invoices had already been paid, no issue of interest had ever been raised. The tribunal went on to conclude, based upon a reading of the correspondence/ minutes of meetings etc. that the risk and cost advance was intended to be interest free advance. It cannot be said that the view taken by the Arbitral Tribunal is not a possible view to take in the present facts and circumstances.

117. In the circumstances, this court concludes that the challenge of the petitioner to the aforesaid claims is beyond the scope of Section 34 of the Arbitration and Conciliation Act, 1996. Award in respect of counter claims

118. Likewise, while adjudicating the counter claims qua the advances made to the respondent under the risk and cost account, the tribunal, based on the correspondence /material on record, concludes as under:- ―207.[....] (i) this risk and cost advance is given towards the materials

(ii) the payment of the cost towards the materials is made directly by the Respondent to the respective vendors, (iii) the Claimant is not in receipt of this amount, (iv) the provision under the contract @16% is only towards mobilization advance, (v) while the material advance is an interest free advance as per the contract, (vi) this is a special arrangement towards procuring materials as per the minutes of the meeting held on 17.03.2007 where no mention of interest is made, (vii) the interest of 16% is not agreed in the minutes of meeting held on 17.03.2007, (viii) nor this is communicated to the Claimant and agreed,

(ix) till 09.07.2007 by which time nearly 84 invoices have been paid and no issue of interest has been raised while making payment towards the cost, (x) When the issue of interest was raised bythe Respondent on 09.07.2007 the Claimant has protested against this interest as the interest at 16% was never discussed or highlighted in the meeting nor the minutes of the meeting was communicated to the Claimant, (xi) as per the contract Clause-9(ii) &9(iii) advances towards equipment or secured advance towards materials is interest free, (xii) the board of the Respondent in its resolution dated 12.03.2008 resolved that in case of any additional cash deficit arising during construction, essential material inputs such as steel etc., shall be provided by THDC and issued to Contractor, as reproduced earlier, with a commitment of the Contractor for its adjustment from all his dues/claims, what-so-ever,

(xiii) even the Board resolution which is subsequent to the letter dated

09.07.2007 also does not specify any interest to be charged on this special advance. In the light of the above we are of the opinion that the risk and cost advance which is a special advance provided towards materials and machinery is to be interest free advance and cannot be considered on the same footing as mobilization advance in so far as interest is concerned and further this risk and cost advance is to be recovered on the same criteria as that of the secured advance for materials as per Clause-9(iii). While awarding the interest on revised rates under CLAIM-12 we have allowed for the interest to be calculated after a setoff is made towards the amount of risk & cost advance.

208. In view of the above the interest of Rs. 5.13Cr does not deserve to be considered and therefore it is rejected.

209. In the light of the above we allow the principal amount of Rs. 28.06Cr advanced by the Respondent towards risk and cost account as asset off against the claims, awarded to the Claimant.‖

119. The petitioner seeks to re-agitate the issue of the interest on the risk and cost advance and essentially calls upon this Court to arrive at a different view as regards thereto. Again, this cannot be permitted in proceedings under Section 34 of the Arbitration and Conciliation Act, 1996. Interest

120. As regards the issue of interest, the petitioner has relied upon the following clauses in the contract to contend that the contract between the parties specifically barred award of pendente lite /pre-award interest:- ―Clause 50.0 Interest ON MONEY DUE TO THE CONTRACTOR No omission on the part of the Engineer-in-charge to pay the amount due upon measurement or otherwise shall vitiate or make void the contract, nor shall the contractor be entitled to interest upon any guarantee or payments in arrears, nor upon any balance which may on the final settlement of his account, be due to him. Clause 51.0

NO CLAIM FOR DELAYED PAYMENT DUE TO DISPUTE ETC. No claim for interest or damage will be entertained or be payable by the Corporation in respect of any amount or balances which may be lying with the Corporation owing to any dispute, difference or misunderstanding between the parties or in respect of any delay or omission on the part of the Engineer-in-Charge in making intermediate or final payments or in any other respect what-so-ever.

121. It is contended on behalf of the petitioner that as per the law laid down by the Supreme Court of India in the case of Secretary Irrigation Department, Government of Orissa & Ors. Vs. G C. Roy53, it is beyond the jurisdiction of an Arbitral Tribunal to award the pendente lite interest in derogation of the agreement between the parties. The petitioner has further relied upon the following judgments that the power to award interest by an Arbitral Tribunal is subject to an agreement between the parties.

i. Delhi Airport Metro Express Private Limited v. Delhi Metro Rail Corporation54, ii. Jaiprakash Associates Ltd. v. Tehri Hydro Development Corporation Ltd. (THDC)55, iii. Reliance Cellulose Products Ltd. v. Oil & Natural Gas Products Limited.56

122. It has been further contended that reliance placed by the Arbitral Tribunal on the judgment of Supreme Court of India in the case of State of U.P. Vs. Harish Chandra and Co57, is misplaced for the following reasons:- ―i. Harish Chandra, (1999) 1 SCC 63 was a judgment which was delivered in the context of the Arbitration Act, 1940. The 1940 Act contained no provision akin to Section 31 (7)( a) of the 1996 Act. Section 29 of the 1940 Act does not make the power to grant interest to award subject to the agreement between the parties. ii. The award in the instant case has been passed under the 1996 Act. Section 31(7)(a) of the 1996 Act makes the power to grant interest subject to an agreement between the parties. There is thus a clear difference in the statutory scheme of the 1940 and 1996 Acts. iii. The law prevailing as on the date of the passing of the award was Sayeed Ahmed, (2009) 12 SCC 26 and it was therefore binding on the Tribunal as on the date of passing of the award. iv. The 1996 Act is very different from the 1940 Act and therefore the provisions of the 1996 Act have to be interpreted and construed independently of the 1940 Act. v. In the case of Harish Chandra as well, the Hon'ble Supreme Court holds that in case there is an agreement between the parties barring the payment of interest, the same cannot be granted, however, relying upon clause 1.[9] as available in the said agreement, the Hon'ble Court interpreted the said clause to not to bar payment of interest to the contractor in all circumstances. vi. In Harish Chandra, there is no clause akin to Clause 50.‖

123. It has also been contended that identical clauses as also in the judgments of Harish Chandra (supra) and Sayeed Ahmed (Supra), were also the subject matter of consideration by the Supreme Court in Jai Prakash Associates Ltd. Vs. THDC58, wherein, the Supreme Court has held that the said clause 50 and 51 impose a bar on the power of the tribunal to grant pendente lite interest. In this regard, reference is made to the following portion of the above-mentioned judgment:-