MBL Infrastructure Ltd v. Rites Limited & Anr.

2.17 Paragraph 17 of the Impugned Arbitral Order further stated that in case the Claimant had any other claim, they could agitate the same before competent authority „as per contract and provisions of law‟. The relevant extract is below:

2.18 The Impugned Arbitral Order was challenged by MBL by filing a Petition under Section 34 of the Act before the learned Single Judge.

2.19 It was contended by MBL before the learned Single Judge that the Impugned Arbitral Order amounts to an interim award and thus, amenable to challenge under Section 34 of the Act, while RITES submitted that the said Order cannot be challenged in a Petition under Section 34 of the Act as it is not an interim award.

2.20 The learned Single Judge by the Impugned Judgment, dismissed the Petition filed by MBL inter-alia holding that the Impugned Arbitral Order had not resulted in a final determination of any of the Petitioner‟s claims and thus is not an interim award, and cannot be challenged under Section 34 of the Act.

2.21 The matter was heard by this Court on 14.02.2023, when Judgement was reserved and parties were directed to file written submissions and citations relied upon. The written submissions have, since, been filed by MBL and RITES. MBL Submissions:

3. Learned senior counsel appearing on behalf of MBL, Mr. Amit Sibal, has submitted that the order rejecting the Amendment Application filed by MBL before the Arbitral Tribunal amounts to an interim award under Section 2(1)(c) of the Act. It was submitted that the claims raised by MBL in the Final Bill could not have been raised before March, 2019 as the work awarded to MBL under the Project was not complete until 06.03.2019. Since the Statement of Claim was filed by MBL on 15.05.2018, the claim for works performed after filing of the Statement of Claim and extra work, loss of profits due to prolongation of the contract and extra cost of overheads could not have been added in the original Statement of Claim. 3.[1] It was further submitted that the learned Single Judge failed to appreciate that the recovery of amounts for work subsequently done cannot be granted with allowing amendment of pleadings and prayers, and additional evidence to be led by MBL. The additional claims were adjudicated upon finally by the Arbitral Tribunal which amounts to an interim award. In this regard, reliance was placed on the following judgments:

(i) Cinevistas Ltd. vs Prasad Bharti[1];

(ii) Lt. Col. H.S. Bedi (Retd) & Anr. vs STCI Finance Limited[2]; and

(iii) National Highways Authority of India vs Abhijeet Angul

Sambalpur Toll Road Limited[3]. 3.[2] Learned senior counsel on behalf of MBL also averred that pursuant to filing of the Amendment Application, additional evidence was also filed by MBL. Since, the cross-examination of the claimant's witness was not concluded at the relevant point in time, no prejudice was caused to RITES, much less on account of delay. Unless the Amendment Application was allowed by the Arbitral Tribunal, the Statement of Claim as originally filed by MBL could not have included the claims of MBL between the period, the Statement of Claim was filed and the completion of the construction works.

4. Per contra, Mr G.S. Chaturvedi, learned counsel, who appears on behalf of RITES has submitted that the Appeal is not maintainable as the Impugned Arbitral Order is not an interim award in terms of the provisions of Section 2(1)(c) of the Act and therefore, was not amenable to challenge under Section 34 of the Act. The Impugned Judgment has rightly dismissed the Petition under Section 34 of the Act stating it to be not maintainable.

4.[1] Further, it was contended that by the Impugned Arbitral Order, the Arbitral Tribunal has kept the additional claims of MBL alive by observing that, “so far as final bill and entitlement of claimant is concerned, the same can be looked into by me even without amendment in Statement of Claim”. Relying on the same, he submitted that the use of the word „entitlement‟ would include all the claims as in the Statement of Claim and the other claims in respect to the Final Bill. Therefore, the Impugned Arbitral Order cannot be an „interim award‟ in terms of the Act. 4.[2] Learned counsel further submitted that the scope of interference by the Court in an Appeal under Section 37 of the Act is extremely limited and the conclusions reached by the Arbitral Tribunal cannot be substituted by the Court in an Appeal.

5. DP has filed a short reply affidavit on 10.03.2023, inter-alia stating that they have absolutely no role to play in the present case as the dispute has arisen between MBL and RITES. It was also stated that DP is not privy to the Arbitration Agreement between MBL and RITES and, hence, submitted that they be deleted from the array of parties. No written submissions have been filed by DP.

6. We have heard learned senior counsel for MBL and learned counsel for RITES and DP and have perused the record. 6.[1] Learned senior counsel for MBL has submitted that the amended claims pertain only to the extra work, recovery and damages suffered by MBL after the filing of the Statement of Claim and upto the completion of construction, all of which arose during the pendency of Arbitral proceedings. 6.[2] Learned counsel for RITES, on the other hand, has submitted that by the amendments, MBL was not only seeking enhancement of the quantum of claims made but also attempting to change the nature of the case initially set up and as such this cannot be permitted in the guise of amendment. Issues:

7. As discussed above, the issue before us is whether the order dismissing the Amendment Application by the Arbitral Tribunal would constitute an interim award. MBL has submitted that the Arbitral Tribunal has made a final adjudication on the additional claims of MBL and hence, this would constitute a final award in respect to the additional claims and be subject to an Appeal under Section 34 of the Act. It is contended on behalf of RITES that the Impugned Arbitral Order is not an interim award since, the entitlement of MBL has been left open by the Arbitral Tribunal in terms of paragraphs 14 and 17 of the Impugned Arbitral Order (as reproduced in paragraphs 2.16 and 2.17 hereinabove). The Statute and the Law:

8. Section 34 of the Act allows recourse to a Court against any Arbitral Award. Section 31(b) of the Act states that any time during Arbitral proceedings, Arbitral Tribunal may make an interim award on any matter on which it can make a final award. The Act however, does not define what an interim award constitutes, except for a reference in Section 2(1)(c) of the Act which defines an „Arbitral Award‟ to include an „interim award‟. These sections are reproduced below:

9. Recently, the Supreme Court in M/s Indian Farmers Fertilizer Co- Operative Ltd. (IFFCO) v. M/s Bhadra Products[4] has interpreted an “interim award” under the Act. The relevant extract is below: “8. As can be seen from Section 2(c) and Section 31(6), except for stating that an arbitral award includes an interim award, the Act is silent and does not define what an interim award is. We are, therefore, left with Section 31(6) which delineates the scope of interim arbitral awards and states that the arbitral tribunal may make an interim arbitral award on any matter with respect to which it may make a final arbitral award.

9. The language of Section 31(6) is advisedly wide in nature. A reading of the said sub-section makes it clear that the jurisdiction to make an interim arbitral award is left to the good sense of the arbitral tribunal, and that it extends to “any matter” with respect to which it may make a final arbitral award. The expression “matter” is wide in nature, and subsumes issues at which the parties are in dispute. It is clear therefore, that any point of dispute between the parties which has to be answered by the arbitral tribunal can be the subject matter of an interim arbitral award. However, it is important to add a note of caution. In an appropriate case, the issue of more than one award may be necessitated on the facts of that case….” 4 (2018) 1 SCR 848 9.[1] The IFFCO case (supra) further held that sub-section (1) of Section 32 of the Act is also material qua this issue, as it states that the Arbitral proceedings can only be terminated by a final arbitral award as opposed to an interim award. For ready reference, Section 32 of the Act is reproduced hereunder:

9.[2] Therefore, it was held by the Supreme Court in the IFFCO case (supra) that there can be an interim award which finally decides an issue, prior to culmination of proceedings by a final award. The relevant extract is reproduced below: “10. To complete the scheme of the Act, Section 32(1) is also material. This section goes on to state that the arbitral proceedings would be terminated only by the final arbitral award, as opposed to an interim award, thus making it clear that there can be one or more interim awards, prior to a final award, which conclusively determine some of the issues between the parties, culminating in a final arbitral award which ultimately decides all remaining issues between the parties.” 9.[3] The Supreme Court in the IFFCO case (supra) was called upon to decide whether an award delivered by an Arbitrator, which decides the issue of limitation, can be said to be an interim award, thereby being subject to challenge under Section 34 of the Act. Relying upon the decision in McDermott International Inc. v. Burn Standard Co. Ltd.5, the Supreme Court held that since the Arbitral Tribunal has “finally” disposed off the issue of limitation, the award is an interim award. It was held as follows: “15. In McDermott International Inc. v. Burn Standard Co. Ltd. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181], under the heading “validity of the partial award”, this Court held:... The aforesaid judgment makes it clear that an interim award or partial award is a final award on matters covered therein made at an intermediate stage of the arbitral proceedings.

16. Tested in the light of the statutory provisions and the case law cited above, it is clear that as the learned arbitrator has disposed of one matter between the parties i.e. the issue of limitation finally, the award dated 23rd July, 2015 is an “interim award” within the meaning of Section 2(1)(c) of the Act and being subsumed within the expression “arbitral award” could, therefore, have been challenged under Section 34 of the Act.”

10. The judgment of the learned Single Judge of this Court in Cinevistaas case (supra), relies on the IFFCO case (supra) to set aside an interim award of an Arbitral Tribunal under Section 34 of the Act. The facts in the Cinevistaas case (supra) were that the Arbitral Tribunal had rejected an application for amendment of claims, which were inadvertently missed by the claimant. The Single Judge held that the order rejecting the Amendment Application is an interim award and amenable to challenge under the provisions of

Section 34 of the Act. Relying on the judgment of the Supreme Court in Shah Babulal Khimji v. Jayaben D. Kania[6] and IFFCO case (supra), the learned Single Judge, held that the decision as to whether an order constitutes an interim award or not, is to be made based on the nature of order and not the title of the application for which the order was passed. The Court further held that where there was a finality attached to the award/order, it would amount to an interim award. The impugned order rejected certain substantive claims finally, and thus was an interim award, as follows:

31. Accordingly, the present petition is allowed, the petitioner is allowed to incorporate the amendments as sought for by them in the SOD, subject to payment of costs of Rs. 1 lakh to the respondent. The amended SOD shall be filed within 10 days from today.” Conclusion:

11. In the present case, the learned Single Judge, relying on paragraphs 14 and 15 of the Impugned Arbitral Order, has held that the entitlement of MBL can be looked into, even without amendment in the Statement of Claim and, hence, found that no final view in the matter has been taken by the Arbitral Tribunal. 11.[1] It is in these circumstances that the learned Single Judge held that the Impugned Arbitral Order does not have in it any elements of finality. Paragraphs 24 and 25 of the Impugned Judgment, in this regard state: "24. What clearly emerges from the foregoing observations of the learned Arbitrator is that firstly, he has unequivocally said that the petitioner‟s entitlement to any amounts arising from the final bill as approved by respondent No. 1 (which would take account of any deductions made by respondent No. 1) “... can be looked into by me, even without the amendment in Statement of Claims”. The learned Arbitrator has also observed that the “... manner of passing of the same, can always be looked into by me, without amendment of Statement of Claims.” It is clear from these observations that the learned Arbitrator has not taken a view nor foreclosed a decision as to the amounts cleared by respondent NO. 1 against the final bill raised by the petitioner, which would imply that the impugned order is not dispositive of any claims that the petitioner wishes to raise in relation to the final bill. If any doubt was to remain in this regard, the learned Arbitrator has, in so many words, qualified the dismissal of the amendment application by the following observations, which bear repetition: “15. In view of above, I am disallowing amendment of Statement of Claim dated 29.01.2021 by Claimant with the above qualification pertaining to Final Bill due to above reasons and reason of delay.”

25. Accordingly, in the opinion of this court, the impugned order does not comprise a final determination of any of the petitioner’s claims, including the enhanced quantum of claims stated to have arisen from the final bill raised upon respondent No. 1. The impugned order is accordingly not an interim award; and is not amenable to challenge under section 34 of the A&C Act.

26. In the above view of the matter, the present petition is not maintainable; and is accordingly dismissed, taking note of the aforesaid observations made by the learned Arbitrator that he would consider the quantum of claims sought to be raised by the petitioner arising from final bill dated 03.02.2020."

12. We are respectfully unable to agree with these findings of the learned Single Judge. The Impugned Arbitral Order is, to our minds, a matter of immense significance for MBL as it would decide the future trajectory of the dispute obtaining between the parties. 12.[1] In our view, the extract from the judgment of the Supreme Court in IFFCO case (supra) is clear and categoric. A decision of an Arbitral Tribunal which brings a quietus to an issue before it and is an order which the Arbitral Tribunal is empowered to pass at the final stage would constitute an interim award within the meaning of Section 31(6) as also Section 34 of the Act.

13. MBL has filed a table giving a summary of claims and amended claims along with its written submissions to explain the amendments in detail, which is reproduced below: "SUMMARY OF CLAIMS AND AMENDED CLAIMS Claim No. Description Claims Amount (Rs.) Amended Claims (Rs.)

1. Refund of amount withheld for slow progress/milestone/Liquidated Damages @10% 3,71,23,235.00 4,06,03,294.00

2. Release of amount deducted from various bills for Security Deposit Rs.2,03,01,647/- 2,00,56,457.00 2,03,01,647.00

3. Release of net payable (after deductions made by RITES) amount of 20th RA Bill 7,98,546.00 5,94,54,976 (4,34,12,519.00 + 7,84,988.00 + 1,32,27,336.00 + 20,30,133.96) (Claims no. 2, 4 & 5 were sought separately in the Statement of Claims

4. Work done measured but part rates pending 1,30,17,774.00

5. Work done but not measured (BOQ items unmeasured & unpaid extra & deviated items) To be quantified but the same is merged in the amended SOC)

6. Unauthorized/wrong deductions from RA Bills from time to time upto the 23rd Final Bill 60,06,850.00 51,74,128.00

7. Extra cost of overheads and Loss of Profits due to prolongation of Contract 12,18,09,881.00 36,75,04,959.67

8. Amount due to change in Legislation 1, 11,96,681.00 Rs.1,24,92,855.66+ Rs. 3,96,820.00 on unpaid escalation and Rs.16,37,561.00 GST on unpaid work done Rs.1,45,27,236.66 Impact of environment compensation charge Rs.6,81,200.00 Total: Rs.1,52,08,436.66

9. Cost of extra work/maintenance work/ AMC charges because of delay in take-over of the project 95,[2] 0,672.00 1,32,86,648.77

10. (a) Cost of Legal & Arbitration (b) Cost of stamp duty payable on arbitration award and other statutory costs for enforcement of award (as per actual). As per actual As per actual

11. Account of interest on delayed payments being interest@ 18% p.a. anti-lite, pendent-lite and post-lite and interest on the amounts claimed. As per actual As per actual Total: 21,95,30,096 (Except Claim NO. 5, 10 & 11) Rs.52,15,34,091.06 (Except Claim no. 10 & 11)"

14. The amended claims are stated to be claims based on events subsequent to the filing of the Statement of Claim. The Impugned Arbitral Order by rejecting the Amendment Application has finally adjudicated upon the additional claims of MBL for the work done upto the completion of the Project, as the right of MBL to proceed further with its additional claims has effectively been foreclosed.

15. MBL would not be able to proceed with adjudication of its additional claims without an amendment to the Statement of Claim since, to adjudicate upon the additional claims, the Arbitral Tribunal would be required to allow the Amendment Application and take on record the amended claims, permit RITES to file an amended statement of defence, and thereafter, permit both parties to adduce evidence in respect of their respective contentions.

16. The Arbitral Tribunal‟s approach as reflected in paragraph 17 of the Impugned Arbitral Order, which is, that MBL could agitate its claim before “competent authority” is inexplicable. The arbitral disputes between MBL and RITES with respect to the Project are being adjudicated by the Arbitral Tribunal in the present proceedings. Clause 25 of the contract between the parties is the disputes settlement and arbitration clause which encompasses all disputes between the parties. Referring certain disputes to another forum, especially when this Arbitration has been on for more than five years, will be unnecessary and further delay the proceedings. Adjudicating upon additional claims under the Final Bill in separate proceedings will also lead to multiplicity of proceedings.

17. There is another aspect which requires to be highlighted. Admittedly, the Arbitral Tribunal reserved Judgment on this Amendment Application for almost a period of one year prior to rejecting the Amendment Application inter-alia on the ground of delay. During the period, orders on the Amendment Application were reserved, the Arbitral Tribunal preceded further in the Arbitral proceedings without any decision on the Amendment Application. In doing this, the Arbitral Tribunal also delayed the final adjudication of the additional claims/counter-claims of the parties. Directions:

18. In these circumstances, we are unable to agree with the learned Single Judge. The Impugned Judgment and the Impugned Arbitral Order is set aside with the following directions:

(i) The amended Statement of Claim dated 29.01.2021 shall be taken on record by the Arbitral Tribunal subject to payment of costs in the sum of Rs. 50,000/- by MBL to RITES;

(ii) RITES shall be permitted to file its amended Statement of

(iii) Both parties shall be given an opportunity to adduce additional evidence in support or against the additional claims.

19. Since, the adjudication of the Amendment Application has taken up substantial additional time, both parties and the Arbitral Tribunal shall endeavour to conclude the Arbitral proceedings at the earliest, and no later than 6 (six) months from the date of receipt of a copy of this Judgment.

20. It is clarified that we have not examined the merits of matter, hence all rights and contentions of the parties are left open.

21. The Appeal and all pending Application(s) are accordingly disposed off. There shall be no order as to costs.

(TARA VITASTA GANJU) JUDGE (RAJIV SHAKDHER)

JUDGE MAY 01, 2023