Delhi Transco Ltd. v. KEC International Ltd.

12. Learned counsel appearing on behalf of the petitioner submitted that the claims of the respondent are barred by limitation and are not a continuous breach of action, as the respondent was well aware of the claims, which had been raised in the first letter dated 27th October, 1994 which shows that the respondent was well aware of its right in October 1994 but remained silent and issued the 2nd letter on 8th August, 1999.

13. It is further submitted that a conjoint reading of Section 3 and Article 55 of the Limitation Act, along with clause 30.[4] of the GCC, would make it clear that the present claim is completely barred by limitation, as the notice under Section 21 of the Act, 1996, was issued only on 10th January, 2005.

14. It is submitted that the Arbitral Tribunal ignored the submission of the petitioner, i.e., Article 55 of the Limitation Act specified the time period within which the said claim can be filed. When the cause of action in case of a continuing breach of contract or case of a continuing tort arises, a fresh period of limitation begins to run at every moment during which the breach or tort as the case may continue.

15. It is submitted that the respondent had filed the claim in respect of the events from August 1993, when work was suspended by the respondent till December 1999 and again from January 2000 to November 2001, however, the notice invoking arbitration was issued only on 10th January, 2005.

16. Learned counsel appearing on behalf of the petitioner submitted that the issues relate to a period with effect from August 1993, even before the First Tribunal was constituted. However, the issue of late payments of progressive bills was an issue in the first arbitration that had been decided. The respondent ought to have raised the issue of the contract, over the run period, and ought to have claimed in the first arbitration proceedings, as the same was commenced on 19th April 1999 and concluded on 12th October 2009. The respondent chose to remain silent and had never brought the issue before the previous Tribunal, hence barred under Order II Rule 2 of CPC.

17. It is further submitted that in terms of Clause 30.[4] of the GCC, the respondent was entitled to seek reference immediately after the expiry of the time, but the respondents have not sought an amendment of claims by incorporating additional claims based upon the above-referred letters.

18. Learned counsel appearing on behalf of the petitioner submitted that the learned Arbitral Tribunal has acted in contravention to the public policy principles, as applicable, under the Evidence Act. The respondent has failed to produce any of the audited accounts such as books of accounts, ledger, or annual tax return/balance sheet, rather chose to file only a letter dated 19th July 2003 of Chartered Accountant. The bare perusal of the letter dated 19th July 2003 of the Chartered Accountant (S.S. Kothari & Co.) states, inter alia, that: "We have verified the audited books of account, contract ledger and related documents in respect of contract NO. 1264 (LOA No. XEN/400 KVITL - 11424 dated 21.8.91 of DVB) maintained by RPG Transmission Ltd. (formerly SAE India Ltd.) and certify that under the following heads, the Company has incurred a total sum of Rs. 1,96,01,545.00 (Rupees One Crore Ninety Six Lacs One Thousand Five Hundred Forty Five) in or in relation to the above contract during the period from August 1993 to December 1999 (77 months)."

19. It is further submitted that the respondent's witness has categorically stated during the cross-examination in question no. 37 that: "Question No. 37: I put it to you that the claims raised not mentioned in any of the accounting records of the company w.e.f 1993 till date. Answer: As stated, it is not required to be shown."

20. In view of the above, it is contested that the claims raised in the arbitration, are completely unsubstantiated and are not borne out from any records, rather imaginary and therefore, deserve to be rejected on merits.

21. Learned counsel appearing on behalf of the petitioner also submitted that the respondent/claimant has raised the claims alleging that the petitioner is solely responsible for the delay and therefore, entitled to costs claimed. Whereas, the facts and records clearly show that there is a contributory delay, as the respondent/claimant has failed to fulfill their obligations in a time-bound manner and therefore, the petitioner cannot be burdened with all the imaginary unsubstantiated claims, which ought to have been rejected at the threshold. (On behalf of the respondent)

22. Learned counsel appearing on behalf of the respondent submitted that the petitioner has failed to prove that the Award is patently illegal, where the illegality is such that goes to the root of the matter. Moreover, the petitioner has failed to see that this Court cannot sit in appeal over an arbitration award. Errors of fact, if any, cannot be corrected under Section 34 of the Act, 1996 and the Arbitrator has the last word on facts. The petitioner has failed to set forth any errors of fact in the Award.

23. Learned counsel appearing on behalf of the respondent relied upon catena of judgments to elucidate the Wednesbury Principle, and its application while determining whether an Award is liable to be set aside on grounds of perversity. Further, the impugned Award cannot be stated to be perverse or unreasonable on the anvil of the Wednesbury principle, and, thus, the same cannot be set aside.

24. Learned counsel appearing on behalf of the respondent submitted that there were several breaches on the part of the claimant. Several of these breaches were continuing breaches of Contract. Thus, the breach of the obligation to supply complete stringing OSM was a continuing pre sequential obligation without which stringing could not be done by the respondent. This continuing breach of contract ceased when the petitioner made the complete supply of Stringing OSM in May 2003.

25. It is further submitted that the cause of action would arise only when the petitioner infringed the right of the respondent or threatened to infringe the right. It is submitted that when the petitioner declined to respond to the respondent's repeated reminders, the cause of action arose for the very first time, in 2003 and/or January 2004. Further, no cause of action for damages or compensation in relation to Clause 25.[2] of accrued to the respondent before 2003-2004.

26. It is also submitted that the Arbitration proceedings commenced on 10th January, 2005, well within the limitation period. Thus, on merits of the case, the Arbitral Tribunal had unanimously declared that the petitioner/ respondent were in breach of contract and the breach of contract was a continuing one which ended in May 2003. The Arbitral Tribunal held that the Claims were not barred by limitation.

27. Learned counsel appearing on behalf of the respondent submitted that Order II Rule 2 of the CPC is confined to a Suit on a specific cause of action and to claims arising from that specific cause of action or to claims that could arise/from that specific action.

28. It is submitted that the cause of action for the previous arbitration was quite different from the cause of action in the present arbitration. It is further submitted that, the cause of action for the present arbitration did not even exist at the commencement of the previous arbitration i.e. on 19th April, 1999.

29. Learned counsel appearing on behalf of the Respondent relied on Dolphin Drilling Ltd. v. ONGC Ltd. AIR 2010 SC 1296, wherein the Supreme Court has held that fresh disputes arising from the same contract can be referred to separate arbitrations. The Respondent has further referred to another case, Telfair Shipping Corporation v. Lnersea Carriers S.A. [1983] 2 LLR 351 where it was held: " The fact that the claim arises out of the same contract does not conclude the matter, for one contract can give rise to many causes of action. There has never been a rule which would oblige a party to bring forward all his causes of action in the same proceeding, even though they may arise out of the same contract or transaction."

30. It is thus submitted that Order II Rule 2 of the CPC or any alleged principle arising therefrom or analogous to, may apply to arbitration proceedings but the same does not apply to the facts in the present case since the dispute in this case is a fresh dispute and a subsequent dispute arising for the first time, when put forward in these proceedings and the cause of action and the claim arising therefrom in arbitration is distinct, different, and subsequent. The Learned Arbitral Tribunal held in paragraph 53 of the Award that: “While we agree with the proposition that 'principles of constructive res judicata apply to arbitration proceedings', we don't agree that they apply in facts of the present case to bar these claims. "

31. Learned counsel appearing on behalf of the respondent submitted that the respondent's counsel in his Cross Examination of J. Ganesh did not address any question on the veracity or sufficiency of the Certificates of the Chartered Accountants. In the Cross-Examination, Mr. J Ganesh deposed as under: "Q 85 Can you produce any such bills raised during the period 1993 to 2001?

Rs.1,39,35,899.00 which was raised toward idle claim for the period August 1993 to December 1999 such a claim was acknowledged by the respondent and the claimant was asked to submit evidence. Q 86 I put it to you that you claim on account of idle charge is unsupported by any evidence and having not been claimed during the relevant time and therefore unjustified and unsustainable. Is it correct?

32. It is further submitted that the Certificates of Chartered Accountants, upon verification of the audited books of account, ledger, and related documents in respect of the Contract, regarding expenses incurred in relation to the Contract under certain heads in the period August 1993 to December 1999 (77 months) and from November 2000 to October 2001 (12 months). It is submitted that it is evident from the record that the petitioner accepted the Chartered Accountant's Certificate and did not raise any objection to the contents of the Certificate issued by the Chartered Accountant after a due audit of the Account Books of the respondent. However, by their communication dated 30th January 2004 the petitioner informed the respondent: "In this regard, it is to inform you that the claim raised by you is not tenable. There is no such provision in the letter of Award under reference." It is submitted that the plea of the petitioner is completely illegal, arbitrary and untenable as discussed by the learned Arbitral Tribunal.

33. Learned counsel appearing on behalf of the respondent submitted that the petitioner did not give access to the respondent, and did not make agreed payments. The completion of the works by the respondent was delayed till the completion of the entire line in August 2003. There was a delay of 10 years beyond the initial agreed completion period of the works in August 1993. This delay clearly arose from the petitioner not giving Access to the Site in its entirety and from the petitioner making Short Payments and depriving the respondent of the use of money. The respondent was in no way responsible for non-Access to the Site or for Short Payments or any alleged "contributory delay'' and none was ever alleged by the petitioner. As a result the respondent was ready to complete the project till the work to the stage of commissioning and thus, suffered increased costs. Therefore, it is submitted that there was no contributory delay on the part of the respondent Award holder and the petitioner is solely responsible for whatever delay was caused.

34. Learned counsel appearing on behalf of the respondent, based on the aforementioned submissions, reiterated that there is no substance in the petition purportedly under Section 34 of the Act, 1996. As is clear from the above there is neither infirmity in the Award made by the learned Arbitral Tribunal, nor is there any illegality, far from patent illegality, or conflict with any public policy of India or any contravention of any fundamental policy of Indian law or any conflict with the basic notions of morality or justice.

FINDINGS AND ANALYSIS

35. Heard learned counsel for the parties and perused the record. I have also perused the impugned arbitral Award as well as the entire arbitral record brought on record. I have also given thoughtful consideration to the submissions advanced by the parties.

36. The challenge to the impugned arbitral Award inter alia has been made on the ground that the impugned Award dated 29th January 2015, is patently illegal and liable to be set aside.

37. The petitioner has sought the indulgence of this Court under Section 34 of the Act, 1996 which is reproduced hereunder:

38. The law regarding a challenge to an arbitral Award under the Act, 1996 is no more a res integra. The challenge of an Award under Section 34 of the Act, 1996 arising out of Arbitration proceedings must satisfy the tests laid down by virtue of the provisions of the Act, 1996, and the law settled by way of pronouncements by the Hon’ble Supreme Court.

39. As far as Section 34 of the Act, 1996 is concerned, the position is now well-settled that the Court does not sit in appeal over the arbitral Award and may not interfere on merits. The Court may only interfere on the limited ground provided under Section 34 of the Act, 1996 i.e. if the Award is against the public policy of India. As per the legal position clarified through decisions of this Court that violation of Public Policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of justice of India, conflict with justice or morality, and the existence of patent illegality in the arbitral Award. The concept of the fundamental policy of Indian law would cover compliance with statutes and judicial precedents, adopting a judicial approach, and compliance with the principles of natural justice and reasonableness.

40. It is pertinent to reiterate that the intention of the legislature while enacting the Act, 1996 was the expeditious and effective disposal of matters. The Act has been set forth with the intention to limit the interference of the courts in Arbitral Proceedings.

41. An unfettered scope of intervention into the functioning of the Arbitral Tribunal functioning would defeat the spirit and purpose of the Arbitration Act. Therefore, the Hon'ble Supreme Court has repeatedly reiterated that the Court’s scope of intervention is limited in the cases of a challenge under Section 34.

42. In UHL Power Co. Ltd. v. State of H.P., (2022) 4 SCC 116, the Hon’ble Supreme Court reiterated the narrow scope under Section 34 of the Act, 1996 and held as under:

17. A similar view, as stated above, has been taken by this Court in K. Sugumar v. Hindustan Petroleum Corpn. Ltd. [K. Sugumar v. Hindustan Petroleum Corpn. Ltd., (2020) 12 SCC 539], wherein it has been observed as follows: (SCC p. 540, para 2)

”

43. Further in SsangyongEngg. & Construction Co. Ltd. v. NHAI, (2019) 15 SCC 131, the Hon’ble Supreme Court went on to say that reappreciation of evidence cannot be permitted under the ground of patent illegality in a Section 34 petition under Act, 1996. The relevant portion has been reiterated below:-

38. “Secondly, it is also made clear that reappreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality on the face of award.”

44. A reference to the above-stated pronouncements makes it clear that this Court while exercising its jurisdiction under Section 34 of the Act, 1996 shall not sit in appeal and/or re-examine the facts and evidence of the case.

45. It is therefore clear that the decisive test is that first, the learned Arbitrator had to adopt a judicial approach; second, the principles of natural justice had to be upheld; third, the decision must not have been egregious, or rather, perverse.

46. It is crucial to elucidate on the Wednesbury Principle to understand the reasoning given by the learned Arbitral Tribunal while rendering the Award. This principle is also known as the principle of reasonableness. The actions of administrative authorities can be challenged based on reasonableness. Lord Green developed these principles in the famous case of Associated Provincial Picture Houses Ltd v. Wednesbury Corporation [1947] 2 All ER 680. The action of the administrative authorities would be declared unconstitutional if it meets the following circumstances:

1. If the action has no backing of the law;

2. There is no evidence to back the action of the authority;

3. The action is based on irrelevant and extraneous considerations;

4. The action is so outrageous and is so unreasonable that no reasonable person in their wildest of dreams would reach that particular conclusion.

47. Lord Diplock in Council of Civil Service Unions and others v Minister for the Civil Service [1984] 3 All ER 935 remarked that a decision will be struck down based on Wednesbury principles when it is so outrageous in its defiance of logic or of accepted moral standards that no sensible person who had applied his mind to the question to be decided could have arrived at it.

48. The Wednesbury principle in the field of Arbitration has been settled by the Supreme Court in ONGC v. Western Geco International Ltd. (2014) 9 SCC 263. The Court held that the Wednesbury principle would apply in the matter of setting aside an Award and further that the Wednesbury principle is treated as part of the fundamental policy of the law. The relevant paragraphs are reproduced hereinbelow:

49. In order to properly adjudicate upon the instant petition and to analyse the degree of perversity or patent illegality in the impugned Award, the relevant portions of the Award are reproduced hereinbelow:

50. A bare reading of the impugned Award makes it evident that according to the majority view of the learned Arbitral Tribunal, there were several breaches on the part of the claimant and that these were continuing breaches of Contract. The learned Arbitral Tribunal has taken the books of accounts into consideration to grant the compensation of the delays as per the Statement of Claims.

51. It is evident that the learned Arbitral Tribunal considered the Clause 2.[2] and 15 of the Special Conditions of Contract to properly adjudicate upon the claims and hold the concerned party responsible for the same.

52. The Award is observed to be well-reasoned and as the respondents have submitted, errors of facts, of any, cannot be corrected under Section 34 of the Act, 1996. The learned Arbitral Tribunal has the last word on the facts and thus, this Court may not sit in appeal and reappreciate evidence to verify facts.

53. It is clear that the impugned Award cannot be stated to be perverse or unreasonable on the anvil of the Wednesbury principle, and, thus, the same cannot be set aside under Section 34 of the Act, 1996 in the absence of patent illegality or perversity on the face of the Award.

54. Thus, the Award has clearly been in consideration of the facts and submissions on record. The learned Arbitral Tribunal had considered the contractual clauses which adjudicating upon the claims laid down by the claimant.

55. Following the triple test of perversity, it is evident that the Arbitrator, being a creature of the contract, has rightfully stayed between the lines of the Contract to adjudicate the dispute. The facts of the matter have been harmoniously applied with the parallel reading of the Contractual clauses.

56. The learned Arbitral Tribunal has clearly adopted a judicial approach and adjudicated the dispute whilst keeping the principles of jurisprudence and natural justice alive.

57. Thus, the learned Arbitral Tribunal has considered the positions of the parties and adjudicated the dispute in the most appropriate manner.

CONCLUSION

58. In light of the facts, submissions, and contentions in the pleadings, this Court finds that the petitioner has failed to corroborate with evidence on how the Learned Arbitral Tribunal had erred in adjudicating the dispute.

59. The law which has been settled by the Hon’ble Supreme Court is that the scope of interference with an Arbitral Award under Section 34 of the Act, 1996 is fairly limited and narrow. The Courts shall not sit in an appeal while adjudicating a challenge to an Award which is passed by the Arbitral Tribunal, the master of evidence, after due consideration of facts, circumstances, evidence, and materials before him.

60. In the instant petition, it was argued that the impugned Award was patently illegal and thus liable to be set aside. As stipulated by the aforementioned precedents, it is essential that there should be illegalities or deficiencies at the face of the Award and/or shock the conscience of the Court for it to qualify to be set aside by an act of this Court.

61. The petitioner has failed to make out such a case and was unable to show that the Award is patently illegal on the face of it. A perusal of the impugned Award makes it evident that there is no patent illegality or error apparent on the face of the record. The learned Arbitral Tribunal has passed the impugned Award after considering all the relevant material placed before it during the arbitral proceedings. The Award is wellreasoned and is not in contravention of the fundamental policy of Indian law, and thus there is no reason for interfering in the impugned Award.

62. The petitioner has failed to show that any grounds that are stipulated under Section 34 of the Act, 1996, are being met.

63. In view of the above discussion of facts and law, this Court finds no reason to set aside the impugned Arbitral Award.

64. Accordingly, the instant petition stands dismissed along with pending applications, if any.

65. The order be uploaded on the website forthwith.