Full Text
HIGH COURT OF DELHI
Date of order : 20th February, 2023
NATIONAL HIGHWAYS AUTHORITY OF INDIA..... Petitioner
Through: Mr.Anand Murthi Rao, Mr. S.
Nandakumar, and Ms. Deepika Nandakumar, Advocates
Through: Dr.Amit George, Dr.Swaroop George, Mr.Amol Acharya and
Mr.Piyo Harold Saimon, Advocates
CHANDRA DHARI SINGH, J (Oral)
JUDGMENT
1. The petitioner by way of the present petition under Section 34 of the Arbitration & Conciliation Act, 1996, (hereinafter referred to as „Arbitration Act‟) seeks the following prayers:- “i) summon the records from the Arbitral Tribunal; and ii) allow the present petition and set aside the challenged part of the impugned Award dated 11.02.2019; and iii) Stay the operation of the challenged part of the impugned Award dated 11.02.2019 during pendency of the proceedings as the said award has become inexecutable on being challenged under section 34 of the Arbitration and Conciliation Act, 1996; and/or iv) pass such order or further orders as may deem fit in the facts and circumstances of the case in favour of the Petitioner.” BACKGROUND
2. The following course of events has led to the filing of the instant petition:a. The petitioner is an autonomous body working under the supervision of the Ministry of Road Transport and Highways, Government of India, responsible for executing projects for development and maintenance of the National Highways. The respondent is an Engineering and Contracting Company having its registered office Hyderabad. b. The parties came together and entered into a Concession Agreement dated 5th September 2007 for the work of widening the existing 2 lane portion from Km 230/000 to Km 278/000, covering 53.017 kilometers, on National Highway No. 7 (NH-7) in the state of Andhra Pradesh, to 4 lanes through a Concession on BOT Annuity basis, which was to be completed within 24 months. c. During the course of the work, several disputes arose between the parties and the respondent herein invoked the arbitration clause. An Arbitral Tribunal (hereinafter referred to as “Tribunal”) was appointed and the arbitration proceedings were initiated, wherein the disputes were bifurcated into ten claims. d. Upon conclusion of the proceedings, the learned Tribunal made the Arbitral Award dated 11th February
2019. In the said Award, the learned Tribunal rejected the Claims No. 1, 6, and 10 and partially accepted the rest of the claims except Claim No. 7, which was settled between the parties. The learned Tribunal awarded the interest at the rate of SBI PLR plus 2% per annum as per the contract in addition. The learned Tribunal directed that the principal amount as well as the interest thereupon was to be paid by the petitioner herein to the respondent, failing which the entire amount, including interest, would carry the interest rate as aforesaid.
3. The petitioner, being aggrieved by the said Award, approached this Court impugning the Arbitral Award dated 11th February 2019, challenging the findings of the learned Tribunal qua Claims No. 2, 3, 4, 5, 8 and 9. SUBMISSIONS
4. Learned counsel appearing on behalf of the petitioner submitted that the learned Arbitral Tribunal has passed the impugned Award in contravention of the agreement between the parties and in violation of Section 28(3) of the Arbitration Act. It is submitted that the challenged portion of the Arbitral Award is in conflict with public policy of India and results in unjust enrichment of the respondent causing loss to the public exchequer.
5. It is submitted that the learned Tribunal refined the Contract and the terms thereof while making the Award in its contravention and hence, invites the interference of Section 34 of the Arbitration Act.
6. Qua Claim No. 1, that is, compensation for non-handing over the land, it is submitted that the scheduled date for handing over of the Existing Right of Way (hereinafter “EROW”) was on or before 2nd March
2008. The additional right of way was on or before 1st September 2008, i.e., six months from the commencement date. The remaining 50% Additional Right of Way (hereinafter “AROW”) was on or before 1st March 2009, i.e., 12 months from the commencement date. The contract further stipulates the dates for handing over of land for service road and wayside amenities was on or before 1st September 2009, i.e., 18 months from commencement date. However, the documents submitted by the petitioner show that the 100% EROW was handed over on 25th February
2008. The petitioner handed over 67.12% of the AROW to the respondent on 5th June 2009, except a small strip of additional land which was also made accessible and available to the Concessionaire prior to the scheduled date, i.e., 1st September 2009.
7. Therefore, it is submitted that the EROW and AROW were handed over in time to the respondents as per the Schedule G of the Concession Agreement. It is submitted that the learned Tribunal has observed that major percentage of site, although in stretches, was made available in initial period and approximately 25% site was made available at later stage and reduced the X factor to a small extent. However, there is no basis for the Tribunal to construe that the 25% of land was not handed over is not mentioned in the Award and remained unsubstantiated.
8. Qua Claim No. 2, pertaining to delayed payment of Annuity amount, it is submitted that the learned Tribunal overlooked the reasons provided by the NHAI for the alleged delay in release of the Annuity amount. It is submitted that the delay in Annuity amount was due to the delay in submission of invoice by the respondent by 48 days and even with the invoice certain essential details were not furnished. Moreover, the delay was not even explained by the respondents.
9. It is, hence, submitted that the Annuity of Rs. 19.72 Crores paid on 28th December 2010 was in accordance with the particulars furnished by the respondent and the claim was erroneously decided by the learned Tribunal since the delay was attributable to the respondent.
10. Qua Claim No. 3, pertaining to the interest on delayed payment of 1st Annuity amount, it is submitted that the Project Director of the petitioner released the payment of the 1st Annuity amount only after obtaining the necessary approval from the competent authority vide its letter dated 28th December 2010, hence, the contrary finding of Claim NO. 3 was not in accordance with the terms.
11. Regarding Claim No. 4, that is, the issue of release of penalty recovered towards lane closure, it is submitted that the non-availability calculations that were relied upon by the learned Tribunal with respect to the damaged stretches were flawed. The reasons for making the averments in the plaint are reproduced hereunder:- “a) The lane non availability is accounted in provisions of Clause 6.[3] (b) of the Concession Agreement. In terms of Clause 6.[3] (b) (ii) irrespective of whether the stretch is closed for traffic or not, the stretches which are not safe for the operations shall be considered under lane non availability. b) As per Clause 6.3(d) of the Concession Agreement, the length of a lane that was unavailable for the use of the traffic shall be the actual length of the affected stretch of that lane plus 1 Km. (500m on either side of the affected stretch). Whereas, the IC has failed to consider this provision. c) In terms of Clause 1 of Schedule-L of the Concession Agreement, the Concessionaire shall operate and maintain the project stretch, and ensure the lane availability at the end of each year of the Concession with a minimum of 99% on a cumulative basis. d) Further, as per Clause 6.3(e) of the Concession Agreement, in respect of any annuity payment period, on reporting of the non-availability by the IC or establishment of non-availability, the annuity payable for the immediately succeeding annuity payment period shall be adjusted for such non-availability as under:- Adjusted Annuity= (AA-N)* A/AA Where, AA = Assured Availability N = Non-availability during the previous annuity payment period. A=Annuity e) Assured Availability means the availability of the carriageway assured by the Concessionaire for each annuity payment period. f) The interpretation of the IC that the adjustment of the Annuity does not arise in the case of the lane non-availability less than 1% may not be appropriate as keeping minimum lane availability to 99% is mandatory on part of the Concessionaire in fulfilment of the obligations under the Contract. The adjustment of the annuity is towards nonavailability of the lanes during the operations. There is no such clause in the Contract as such is interpreted by the IC/Concessionaire/Tribunal…. The Concessionaire has to comply with the various provisions enshrined in the Concession Agreement. Therefore, the NHAI rightly adjusted the annuity in accordance with Clauses 6.[1] and Cl. 6.[3] (e) of the Concession Agreement and paid the 2nd Annuity after deducting an amount of Rs. 50,75,837/- towards lane nonavailability of 10479 lane-km-hours. Therefore, the award is erroneous and challengeable under Section 34 of the Act.”
12. Qua Claim No. 5, discussing deductions in the change of scope amount, it is submitted that the learned Tribunal arbitrarily made the deductions. It is submitted that the Tribunal erred in not considering the SOR rates provided by the petitioner and allowed the claim based on incorrect calculations. Learned counsel submitted that the learned Tribunal wrongly allowed the claim of cost increase in height of the VUPs whereas the petitioner and the Independent Engineer opined that no variation was allowed.
13. It is submitted that the learned Tribunal has wrongly observed that the petitioner had initially recommended Rs. 1,05,34,093/- whereas the said figure was recommended by the Independent Consultant only. It is further submitted that the Tribunal awarded the amount of Rs.56,06,679/, whereas Rs. 52,62,648/- was recommended by the HQ. The said calculation was based on SOR Rates, however, the learned Tribunal wrongly declined to consider the same. The learned counsel for the petitioner further made submissions that the said Claim No. 5 and each item under the said Claim were wrongly decided by the learned Tribunal.
14. Regarding Claim No. 8, that is the extra thickness of 10mm Bituminous Concrete laid/to be laid for renewal coat of Rs. 13,79,50,102/-, learned counsel submitted that as per the terms of the Concession Agreement, the renewal of wearing surface of road pavement with 40mm thick Bituminous Concrete is required to be carried out in the entire Project Highway at the specified frequency of once in every 5 years, irrespective of whether the Roughness Index or BBD is less than the prescribed limits given in the Concession Agreement. Therefore, the respondent‟s claim for the extra thickness of 10mm Bituminous Concrete laid/ to be laid for renewal coat is baseless and is liable to be rejected. The learned Tribunal has wrongly awarded Rs. 11,03,60,082/- along with interest to the Concessionaire without even discussing the contentions raised by the petitioner.
15. Therefore, it is submitted that the impugned Award may be set aside.
16. Per Contra, learned counsel appearing on behalf of the respondent vehemently opposed the instant petition and submitted that the scope of Section 34 of the Arbitration Act is limited only to the stipulations in its sub-section 2, therefore, the impugned Award does not warrant interference of this Court.
17. It is submitted that the impugned Award is a result of the resolution of the disputes in terms and conditions of the Agreement between the parties. The learned Tribunal was well within its powers and jurisdiction while interpreting the terms of the Agreement. Moreover, the Hon‟ble Supreme Court have repeatedly held that the interpretation of contract conditions is within the realm of the Arbitral Tribunal and the Court is not sitting in appeal over the decision of the Arbitral Tribunal under Section 34 of the Arbitration Act. It is further submitted that the grounds raised on behalf of the petitioner on merits of the case while challenging the impugned Award are not maintainable in view of Section 34 of the Arbitration Act. Reliance has been placed upon ONGC vs. Saw Pipes Ltd., AIR 2003 SC 2629 to submit that the petitioner has failed to show that there is any patent illegality arising from statutory provisions or contract provisions or that the impugned Award shocks conscience of the court.
18. The learned counsel for the respondent submitted that there is no illegality in the impugned Award. The learned counsel for the defendant opposed the submission that the Award is contrary to the public policy and submitted that the petitioner has failed to show by way its pleadings or even oral submissions that the impugned Award is in conflict with the public policy.
19. Regarding Claim No. 1, it is submitted that the number of days of delay in handing over the encumbrance free site or any part of the site is to be calculated for proper calculation of the X factor. It is submitted that the substantial portion of the land was not handed over in time. Moreover, for even a part of the site being handed over late, the Agreement provides for compensation. Therefore, the finding of the learned Arbitral Tribunal that the entire site was handed over on 14th May 2010, which was substantiated by the letter of the Independent Consultant dated 27th November 2010, was rightly made. It is also stated that the respondent was entitled to compensation since the reasons for delay were unforeseeable.
20. Qua Claim No. 2, it is submitted that the petitioner has tried to misrepresent that it was not responsible for the delay in payment. It is submitted that by order and judgment dated 24th July 2019, this Court dismissed the challenge to the Claim for interest on delayed payment of annuity and payment due under the Claim has also been made by the petitioner and therefore, the challenge to the present Claim no longer survives.
21. Learned counsel, regarding Claim No. 3, submitted that the Independent Consultant had rightly calculated the percentage of lane closure based on the lane closure calculations submitted by the petitioner and after having found them containing overlapping portions. The learned Arbitral Tribunal had come to a finding of fact that the lane availability was more than 99% which is the required availability under the Schedule 'L' of the Contract. Therefore, there was no occasion to levy of any penalty. It is submitted that the Contract explicitly states that the recovery for lane closure can be made only if there is any violation of the obligation under the Contract or the respondent‟s failure to perform any obligations under the Agreement. Since the petitioner also admits that the non-availability of certain lanes for the period in issue was due to heavy rains, the petitioner could not have deducted any amount as the deduction is in clear violation of 6.3(a) of the Concession Agreement. It is submitted that the petitioner could not have recovered any amount towards lane closure.
22. It is also submitted that the short question involved in Claim No. 8 was that in the absence of any provision in the Contract specifying the thickness of renewal coat what shall be the thickness of the renewal coat. The learned Arbitral Tribunal noted that respondent was required to keep the roughness value for less than 3000mm/km. It was also noted that the respondent had submitted test result at every 100m of stretch there as some stretches on left-hand side and right-hand side. The learned Arbitral Tribunal rightly observed that the Petitioner/ Independent Engineer did not think about technical requirement and that even if the Bituminous Concrete was to be laid at the cost of concessionaire but to provide/ consume more material than the optimum requirement is national wastage. Thereby, learned Arbitral Tribunal, which is composed of technical experts, agreed with the respondent and held that at the most the petitioner could have made respondent provide 40 mm renewal coat at few select areas but 40 mm thickness renewal coat was not required at all areas and the provision of the same was unnecessary in terms of the Contract.
23. Hence, in light of the objection to the maintainability of the grounds invoked as well as the arguments on merits, it is submitted that the instant petition is liable to be dismissed.
24. Heard the learned counsel for the parties and perused the record.
FINDINGS AND ANALYSIS
25. The petitioner has assailed the Award made by the Tribunal, which has been thoroughly perused and considered by this Court. The petitioner has raised challenge to certain findings, i.e. with respect to Claims No. 2, 3, 4, 5, 8 and 9, and the Award thereto passed by the learned Arbitral Tribunal and has not assailed the validity of the entire Award.
26. The petitioner has invoked Section 34 of the Act, which is reproduced hereunder:-
30. While elaborating upon the grounds available under the provision, and that have been invoked by the petitioner vis-à-vis the impugned Award being in conflict with the public policy, the Hon‟ble Supreme Court in Ssangyong Engineering & Construction Co. Ltd. vs. NHAI,
paragraph 30 of Associate Builders (supra). ***
25. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paragraphs 18 and 27 of Associate Builders (supra), or secondly, that such award is against basic notions of justice or morality as understood in paragraphs 36 to 39 of Associate Builders (supra). Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in particular, is now done away with.
26. Insofar as domestic awards made in India are concerned, an additional ground is now available under subsection (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within “the fundamental policy of Indian law”, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
27. Secondly, it is also made clear that re-appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
28. To elucidate, paragraph 42.[1] of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.[2] of Associate Builders (supra), however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award. ***
30. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being a ground for challenge under “public policy of India”, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.”
31. The petitioner has also raised the ground of patent illegality while challenging the Award. The Hon‟ble Supreme Court in Associate Builders vs. DDA, (2015) 3 SCC 49, while interpreting the same has observed as under:-
This last contravention must be understood with a caveat. An arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do.”
32. A bare perusal of the above-referred pronouncements make it evident that the phrases are not to be construed in their plain meaning and have to be given due caution and consideration while being invoked to assail any Arbitral Award. To successfully raise a challenge against an Arbitral Award, the petitioner ought to satisfy this Court that the grounds as provided in the Section 34 of the Arbitration Act are met. It is, therefore, clear that the decisive test is that first, the Arbitrator had to adopt a judicial approach; second, the principles of natural justice have to be upheld; and third, the decision must not have been egregious, or rather, perverse.
33. In the instant case, it is pertinent to see that grounds that have been invoked and the contentions that have been raised on behalf of the petitioner are substantially on merits of the case and the Arbitral Award. The petitioner has proceeded with extensive and elaborate arguments and contentions on merits while assailing the impugned Award has not raised the grounds of patent illegality, contravention of public policy, findings on no evidence and Award having been passed by giving no reasons or contravention. At this stage, it is hence essential to reiterate and elaborate upon the scope of Section 34 of the Arbitration Act.
34. It is time and again reiterated that a Court while exercising jurisdiction and powers under Section 34 of the Arbitration Act shall not sit in appeal by examining and re-examining the case on its merits. In Ssangyong Engineering & Construction Co. Ltd. (Supra), the Hon‟ble Supreme Court held that re-appreciation of evidence cannot be permitted under the ground of patent illegality in a Section 34 petition under the Act. The relevant portion has been reiterated below:- “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.”
35. This is so because the decision of the Arbitral Tribunal is final and this Court is not required to carry out an exercise of re-adjudicating the disputes. An Arbitral Award may be impeached on the ground of patent illegality but only under the conditions as explained by the Hon‟ble Supreme Court in Delhi Airport Metro Express Pvt Ltd vs. Delhi Metro Rail Corporation (2022) 1 SCC 131, in the terms as reproduced hereunder:-
The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression “patent illegality”."
36. A similar finding was earlier enunciated in State of Jharkhand v. HSS Integrated SDN, (2019) 9 SCC 798. The relevant paragraph of the judgment is reiterated below: “6.2. This Court has observed and held that the Arbitral Tribunal is the master of evidence and the findings of fact which are arrived at by the arbitrators on the basis of the evidence on record are not to be scrutinised as if the Court was sitting in appeal.”
37. Therefore, this Court shall also not indulge into the arguments on merits that have been raised by the petitioner, keeping in view the spirit, purpose and essence of the Arbitration Act. To enter into merits of arbitral proceedings and an arbitral award and re-appreciate all arguments while also re-adjudicating the disputes between the parties would mean to defeat the purpose of the legislation itself.
38. It is not an argument on behalf of the petitioner that the impugned Award is patently illegal, since the petitioner has only raised the challenge to the particular grounds and not the entire Award. Further, the ground of no-evidence has also not been raised on behalf of the petitioner. The ground that has been raised on behalf of the petitioner is that the Award is in contravention of the public policy of the Country, however, none of the ingredients to this challenge, as have been elaborated upon by the Hon‟ble Supreme Court in Ssangyong Engineering & Construction Co. Ltd. (Supra), have been established by the petitioner, by way of its pleadings or even the arguments advanced on its behalf during the course of hearing. The petitioner has failed to show that the impugned Award is against the public policy of India. There is also no substantive case made out for violation of law, public policy or even patent illegality.
CONCLUSION
39. Upon perusal of the pleadings and upon hearing the counsel for the petitioner, it is found that the grounds that have been invoked and the contentions that have been raised on behalf of the petitioner are essentially and substantially on merits of the case, dispute between the parties and the Arbitral Award. As discussed in the foregoing paragraphs, this Court shall not sit in appeal and re-adjudicate the disputes between the parties while exercising its jurisdiction under Section 34 of the Arbitration Act. Hence, the petition does not stand on this ground.
40. Secondly, the petitioner has raised the ground of contradiction to the public policy, however, has miserably failed to establish the same. Therefore, keeping in view the contentions raised in the pleadings, the arguments advanced, the discussion on law in the foregoing paragraphs, this Court is of the considered view that there is no merit in the instant petition since no grounds as provided for under Section 34 of the Arbitration Act have been made out to successfully challenge the Arbitral Award dated 11th February 2019.
41. Accordingly, the instant petition is dismissed.
42. Pending applications, if any, also stand dismissed.
43. The order be uploaded on the website forthwith.