Indian Oil Corporation Ltd v. Institute of Geo Informatics Pvt Ltd

4. Claim of Rs. 8,00,000/- towards demobilization, notice period salary to staff, payment to vendors;

5. Claim of interest @18% on above unpaid amount totaling Rs. 80,48,785/- for the period from 31st December,2010 to the date of actual payment.‖

13. It is pertinent to note that after termination of the contract, the Appellant awarded the same work to M/s Secon Private Limited, Bangalore, through limited tendering process on 01.12.2010 at the ―cost and risk‖ of the Respondent. In this context, the Appellant raised the following counter-claims: ―1. Claim of Rs. 1,39,92,893.15 towards differential contract amount awarded to M/s Secon Private Ltd., supervision charges @ 15% and Service Tax calculated @14.5%.

2. Claim of Rs. 16,79,174.93 towards price discount @10% of nominal contract value.

3. Claim of interest @18% on above claims for the period from the date it becomes due to the date of actual payment

4. Cost of legal and/or Arbitration proceedings.‖

14. The Appellant also raised an objection to the jurisdiction of the Arbitral Tribunal under Section 16 of the A&C Act, challenging the jurisdiction of the Arbitral Tribunal with respect to Claim No.1, 3, 4 and 5 for reason of the same not being notified under Clause 6.6.1.0 of General Conditions of Contract (―GCC‖) and hence falling within ―excepted matters‖ under Clause 9.0.2.0 of GCC. It was the case of the Appellants that the said claims were not arbitrable and the decision in respect thereof could only be rendered by the General Manager of the Appellant.

15. Based on the pleadings of the parties, the following issues were framed by the learned Arbitrator and recorded in the Order dated 23.08.2016: ―a. Jurisdiction of the Tribunal; b. Arbitrability of claims; c. Prevailing site condition & working window for field survey jobs; d. Adequacy of methodology and scope of improvisation; e. Co-operation and supervisory role of client; f. Reasons of termination; and g. Basis of claims and counter-claims.‖

16. The learned Arbitral Tribunal dismissed the objection to its jurisdiction by holding that since all the claims pertained to one single disputed act of termination, it was prudent to view the whole case in totality and examine all the five claims with a fresh look. Having held thus, the learned Tribunal passed an award in favour of the Respondent, allowing all its claims and rejecting all the counter-claims raised by the Appellant. In addition to this, the learned Tribunal awarded costs to the tune of Rs.32,89,924/- to be paid by the Appellant to the Respondent. The Arbitral Tribunal awarded pre-award interest at the rate of 15% for the period (from 01.01.2011 to the date of the award) to be compounded annually and post-award interest at the rate of 12% on the awarded amount compounded monthly.

PROCEEDINGS UNDER SECTION 34 OF THE A&C ACT:

17. Aggrieved by the Impugned Award, the Appellant filed an application under Section 34 of the A&C Act vide OMP (Comm.) 317/2017 assailing the award on the ground of perversity, patent illegality and violation of public policy of India. It was contended on behalf of the Appellant that the learned Arbitral Tribunal wrongly assumed jurisdiction to adjudicate upon Claims No.1, 3, 4 and 5. The said claims were not arbitrable, being covered by ―excepted matters‖ as per clause 9 of the Contract between the parties. On the other hand, it was contended on behalf of the Respondent that this Court in its judgment dated 19.05.2015 had left the said issue open.

18. The learned Singe Judge partly allowed the appeal by the impugned Order dated 04.09.2017. Learned Judge relied on the judgment of SBP & Co. vs. Patel Engineering Ltd. and Anr. reported as (2005) 8 SCC 618 and held that the disputes forming subject-matter of Claims No. 1, 3, 4 and 5 were not arbitrable and thus, there was no reason for the learned Arbitral Tribunal to have adjudicated upon those disputes. Consequently, the Impugned Award was set aside to the extent it dealt with Claims NO. 1, 3, 4 and 5 and the rest of the award was upheld. The Respondent was also granted liberty to take action as per law regarding Claims No. 1, 3, 4 and 5. The relevant portion of the Impugned Order is being reproduced as hereunder: ―15. It is quite clear that the disputes which are subject-matter of claims No. 1, 3, 4 and 5 were not arbitrable. This court while disposing of the arbitration petition under Section 11(6) of the Act on 19.05.2015 had specifically held so. In the light of this, there was no reason for the learned Arbitrator to have gone ahead and adjudicated upon those disputes. The impugned Award to the extent that it deals with claims No. 1, 3, 4 and 5 is held to be entirely illegal. The same has been passed contrary to the provisions of the Act. The Award to the extent it deals with claims No. 1, 3, 4 & 5 is set aside. Rest of the Award is upheld.

16. Petition is disposed of. Liberty is granted to the Respondents to take steps as per law regarding its claim No,1,3,4, &5.‖ PROCEEDINGS UNDER SECTION 37 OF THE A&C ACT:

19. Aggrieved by the Impugned Order, both the parties preferred their respective Appeals. The Appellant filed an appeal, (FAO (OS) (Comm.) 189/2007) under Section 37 of the A&C Act on the ground that the learned Single Judge failed to give any reasons for allowing Claim No.2 raised by the Respondent and disallowing the objections with regard to dismissal of the counter-claims and the cost to the tune of Rs.32,89,924/imposed upon the Appellant. It was argued on behalf of the Appellant that if the arbitral award to the extent of Claim No.1, 3, 4 and 5 was set aside as being not arbitrable, there was no finding except that the Appellant was liable to pay Rs.4,20,000/-to the Respondent. Therefore, the direction by the arbitral tribunal with regard to payment of an enormous amount as cost by the Appellant was entirely unjustified. On the other hand, the Respondent filed Appeal FAO(OS) (Comm) 197/2017. It was argued on behalf of the Respondent that the tribunal had given good and valid reasons as to why the ―excepted matters‖ were arbitrable and consequently, the learned Single Judge had erred in holding otherwise. It was therefore prayed on behalf of the Respondent that the Impugned Award be allowed to stand as being legal and valid.

20. By the judgment dated 23.08.2018, the Division Bench of this Court was pleased to allow the FAO(OS) (Comm) No. 189/2017 and dismissed the FAO (OS) (Comm) 197/2017.This Court, vide Judgment dated 23.08.2018, set aside the Impugned Award with respect to cost imposed upon the Appellant. The relevant portion of the said judgment is reproduced as hereunder: ―8. This court notices that there was practically no controversy with respect to the phraseology of the subject matter exclusion; clearly the plain words of the terms (of contract) and the interpretation given by this court referring the dispute, precluded any adjudication in arbitration. If the claimant Institute had a grievance, it was well within its right to have sought remedies in accordance with law. The tribunal's reasoning in brushing aside the non arbitrability conditions were specious; the learned Single Judge therefore was justified in holding otherwise as, the findings amounted to patent illegalities within Sections 28 (3) and 34 of the Act. The tribunal unfortunately proceeded to ignore the clear and express terms and gloss over this court's order; in doing so, and in adjudicating claim nos. 1, 3, 4 and 5, it fell into error, because it never had the jurisdiction to decide those in arbitration. Such being the case, it was not justified at all in penalizing IOC with substantial and heavy costs for such adjudication - to the extent of Rs. 32,89,924/-; the same is hereby set aside. The appeal FAO (Comm)189/2017 is allowed to the above extent. FAO (Comm) 197/2017 is for the above reasons, dismissed.‖

21. As noted herein before both the parties preferred their respective applications seeking review of the said judgment dated 23.08.2018. The Appellant preferred Review Petition No. 348/2018 to the limited extent that this court had not considered the appellant‘s challenge to the Impugned Order to the extent that learned Single Judge had not considered the Appellant‘s objection to Impugned Award regarding dismissal of its counter-claims. This Court allowed the appellant‘s review petition to the foresaid extent. Similar plea was also been raised by the Appellant with respect to allowing of Claim No.2. However, the same was rejected by this Court on the ground that the Appellant had not raised any such objection in its application to set aside the Impugned Award.

22. The Respondent also preferred Review Petition No. 361/2018 against the same judgment dated 23.08.2018 but confined it to setting aside the costs awarded.

SUBMISSIONS OF THE APPELLANT

23. Mr Vashisht, learned senior counsel appearing on behalf of the Appellant contended that the findings of the Tribunal were based on no reasoning. He submitted that the Impugned Award to the extent that the Arbitral Tribunal had entertained respondent‘s Claims Nos 1, 3, 4 and 5, was set aside and therefore the Arbitral Tribunal‘s reasoning for allowing the said claims could not be read to support rejection of the Counter Claims. He submitted that the said disputes were not arbitrable and thus the entire Impugned award, including the reasons for allowing the claims, was without jurisdiction.

24. Further, he submitted that the learned Arbitral Tribunal had placed reliance on the documents presented by the Respondent which had been categorically denied by the Appellant and had not been proved by the Respondent.

25. It was further submitted by the learned senior counsel for the Appellant that the learned Single Judge had erred in rejecting the Section 34 petition filed by the Appellant partly without considering the material placed before him for adjudication.

26. The learned senior counsel further submitted that the learned Single Judge failed to appreciate that the learned sole arbitrator had rejected all the counter-claims of the Appellant without assigning any reasons whatsoever.

SUBMISSIONS OF THE RESPONDENT

27. Mr Savla, the learned senior counsel on behalf of the Respondent submitted that the jurisdiction was rightly exercised by the learned Arbitrator who gave cogent reasons for the consideration of all the claims presented by the Respondent.

28. To counter the submission of the findings of the learned Tribunal not being based on any evidence, the learned senior counsel for the Respondent submitted that this ground had not been urged before the learned Single judge and was being raised for the first time before this Court.

29. It was further submitted by the learned senior counsel on behalf of the Respondent that there can be no modification with respect to costs imposed by the learned Arbitral Tribunal. To support his contention, learned senior counsel placed reliance on the decision of the Hon‘ble Supreme Court in The Project Director, National Highways No.45 E and 220, National Highways Authority of India v. M. Hakeem and Anr. reported as (2021) 9 SCC 1 wherein it had been held that there was no power to modify an arbitral award under Section 34 of the A&C Act.

ANALYSIS

30. At the outset, it will be pertinent to note that the limited questions involved in this case are those enumerated in the order dated 17.01.2020 passed by this Court. Therefore, this Court is only concerned with the issues pertaining to the Appellant‘s objections to non-consideration by the learned Single Judge of the rejection of counter-claims of the Appellant and the consequent apportionment of costs.

31. Before moving forward with the legal analysis with respect to the aforesaid issues, it will be apposite to discuss the scope of power of this Court under Section 34/37 of the Arbitration & Conciliation Act, 1996. The findings, of fact as well as of law, rendered by the arbitrator/Arbitral Tribunal are ordinarily not amenable to interference either under Sections 34 or Section 37 of the A&C Act. The scope of interference is limited to only where the finding of the tribunal is either contrary to the terms of the contract between the parties, or, ex facie, perverse. The Arbitrator/Arbitral Tribunal is the final arbiter on facts as well as in law, and even errors, factual or legal, which stop short of perversity, do not merit interference under Sections 34 or 37 of the A&C Act. It is a well settled principle of law that an award based on assessment of facts could only be set aside if it is based on no evidence or in disregard of vital evidence or has taken into account something irrelevant. The finding has to outrageously defy logic. Otherwise, the arbitrator is the ultimate master of the quantity and quality of evidence. An award which does not measure up in quality to a trained legal mind can not be held to be invalid unless it is found to be arbitrary or capricious. In other words, the findings or the ultimate award has to be perverse. The award has to be so bad so as to shock the conscience of the Court.

32. The contours of power of the Court under Section 37 have been elaborately discussed by this Court in UBV Infrastructure Ltd. v. National Highways Authority of India reported as 2020 SCC OnLine Del 60. The relevant portion of the judgment is reproduced as hereunder: ―7. At the outset, we may delineate the scope of interference in a Section 37 petition, as was discussed by us in a recent judgment in Ministry of Youth Affairs & Sports v. Swiss Timing Ltd., reported as 2019 SCC OnLine Del. 10934, relevant paras whereof are reproduced herein below:— ―19. We are also mindful of the law on interference by the courts in respect of findings of facts based on appreciation of evidence, returned by the Arbitral Tribunal. In Sutlej Construction Limited v. Union Territory of Chandigarh reported as (2018) 1 SCC 718 the Supreme Court has held as follows:— ―11. It has been opined by this Court that when it comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the Court and would not include what the Court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be ―justice‖. Associate Builders v. DDA, (2015) 3 SCC 49.

12. The approach adopted by the learned Additional District Judge, Chandigarh was, thus, correct in not getting into the act of reappreciating the evidence as the first appellate court from a trial court decree. An arbitrator is a chosen Judge by the parties and it is on limited parameters can the award be interfered with. (Sudarsan Trading Co. v. State of Kerala [Sudarsan Trading Co. v. State of Kerala, (1989) 2 SCC 38; Harish Chandra & Co. v. State of U.P., (2016) 9 SCC 478 and Swan Gold Mining Ltd. v. Hindustan Copper Ltd., (2015) 5 SCC 739.

13. The learned Single Judge ought to have restrained himself from getting into the meanderings of evidence appreciation and acting like a second appellate court. In fact, even in second appeals, only questions of law are to be determined while the first appellate court is the final court on facts. In the present case, the learned Single Judge has, thus, acted in the first appeal against objections dismissed as if it was the first appellate court against a decree passed by the trial court.‖

20. In Ssangyong Engineering Construction Co. Ltd. v. National Highways Authority of India reported as 2019 SCC OnLine SC 677, the Supreme Court has reiterated the aforesaid view in the following words:—

35. What is clear, therefore, is that the expression ―public policy of India‖, whether contained in Section 34 or in Section 48, would now mean the ―fundamental policy of Indian law‖ as explained in paragraphs 18 and 27 of Associate Builders (supra), i.e., the fundamental policy of Indian law would be relegated to the ―Renusagar‖ understanding of this expression. This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western Geco (supra), as explained in paragraphs 28 and 29 of Associate Builders (supra), would no longer obtain, as under the guise of interfering with an award on the ground that the arbitrator has not adopted a judicial approach, the Court's intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in paragraph 30 of Associate Builders (supra).

36. It is important to notice that the ground for interference insofar as it concerns ―interest of India‖ has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the ―most basic notions of morality or justice‖. This again would be in line with paragraphs 36 to 39 of Associate Builders (supra), as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground.

37. 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.

38. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (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.‖

21. Reliance is also placed on a recent judgment dated 18.10.2019 passed by the Supreme Court in SLP NO. 13117/2019, The State of Jharkhand v. HSS Integrated SDN, wherein it has been emphasised that the Award passed by an Arbitral Tribunal can be interfered with in proceedings under Sections 34 and 37 of the A&C Act only in a case where the finding is perverse and/or contrary to the evidence and/or the same is against public policy. In the instant case, none of the above circumstances exist for interference.‖

8. Thus a scrutiny conducted under Section 37 of the Act is more in the nature of a judicial review, only to consider as to whether the learned Single Judge, in exercise of the powers under Section 34 of the Act has overlooked any patent error that may have crept in the Award or has taken a glaringly preposterous and legally unsustainable view, which would call for interference.” (emphasis supplied)

33. In view of the legal principle as enunciated herein above, it is evident that the scope of powers of this Court when dealing with a case under Section 37 of the A&C Act is extremely narrow.

34. Having discussed the scope of interference under Section 37 of the A&C Act, we would now discuss the limited questions posed before this Court: i. Non-consideration by the learned Single Judge of Appellant‘s objections in respect of rejection of counter-claims by the learned Arbitrator; and ii. Setting aside of the complete costs imposed upon the Appellant by this Court in its judgment dated 23.08.2018.

(i) Non-consideration by the learned Single Judge of Appellant’s objections in respect of rejection of counter-claims by the learned

35. The Appellant had challenged the rejection of counter claims by the learned Arbitral Tribunal before the learned Single Judge. It is the case of the Appellant that learned Single Judge failed to deal with the said objection of the Appellant.

36. A perusal of the Impugned Order reveals that the learned Single Judge has not dealt with the objections of the Appellant qua the rejection of the Counter Claim by the learned Arbitral Tribunal. This fact has been highlighted by this Court vide order dated 17.01.2020 while allowing the Review Petition filed by the Appellant. It was contended that the matter needs to be remanded to the learned Single Judge for the consideration of the objections raised by the Appellant qua the rejection of the Counter Claim by the Arbitral Tribunal. However, this matter has been pending before this Court for almost 5 years now and as observed hereinbefore, the jurisdiction of the court under Section 34 or under Section 37 of the Arbitration & Conciliation Act does not extend to reevaluating or reappreciating evidence. In the given circumstances, this Court does not consider it apposite to examine the reasoning of the Arbitral Tribunal in rejecting the Counter Claims.

37. A plain reading of the impugned award indicates that the Arbitral Tribunal had found that the primary issue involved in the claims as well as counterclaims was the dispute regarding termination of the Contract. Undisputedly, the respondent had made assertion that the termination of the Contract was illegal and unjustified. The respondent claimed that the delay in executing the work was based on various factors beyond its control including those attributable to the Appellant. The Arbitral Tribunal had found in favour of the respondent that the delay was for reasons beyond its control and also included delays attributable to the Appellant. The Arbitral Tribunal had faulted the appellant for not performing certain obligations under the Contract including the delay in supplying alignment maps. The Arbitral Tribunal concluded that there was lack of seriousness on the part of the appellant. It had also noted that the respondent had complained regarding non-supply of route marked on a topo-sheet as required under Clause 1.1.[2] of Section II of the Specifications. The Arbitral Tribunal found that there was delay on the part of the appellant in awarding the Contract. Further, the Contract had been awarded at the onset of monsoon and the monsoon had seriously hindered the execution of the works. The Arbitral Tribunal had concluded that the respondent‘s request for adjustment of time in completing the survey was justified. Based on its conclusions, the Arbitral Tribunal awarded an amount of ₹20,87,501/- towards loss of potential profit (Claim No.3). The Arbitral Tribunal held that the termination of the Contract by the appellant had deprived the claimant of the opportunity to earn profit from the balance work for not fault on its part. Accordingly, the Arbitral Tribunal awarded 15% of the balance work as loss of profit. In addition, the Arbitral Tribunal had also awarded ₹8,00,000/- as financial costs incurred for demobilization of resources (Claim No.4).

38. The appellant had raised four counterclaims. It claimed a sum of ₹1,39,92,893.15 towards differential in the contract amount, supervision charges and service tax between the value of the Contract awarded to the respondent and as awarded to M/s Secon Pvt. Ltd. The said counterclaim was premised on the basis that the respondent had breached the terms of the Contract by not maintain the progress as required. The appellant was therefore entitled to terminate the Contract and recover the loss incurred by it including any additional expenditure incurred for getting the work completed. In addition, the appellant claimed a sum of ₹16,79,174.93 (Counterclaim No.2) as price discount for delay in execution of the works. The appellant‘s claim, as noticed above, was premised on the basis that the respondent had delayed in executing the works. The appellant also claimed interest and costs (Counterclaim Nos.[3] and 4). Undisputedly, if the Arbitral Tribunal‘s findings in respect of the said claims are accepted; the appellant‘s counterclaims would fail.

39. The learned Arbitral Tribunal examined the counter claims under three different heads based on the pleadings of the parties and the material placed before it, i.e., nature of the Counter Claims, quantification of the Counter Claims and conclusion regarding the Counter claims. The relevant portion of the Impugned Award, inter alia, reads as follows: “Discussion under the head nature of claims

1. Claim of Rs.1,39,92,893.15 towards differential contract amount awarded to M/s Secon Private Ltd. supervision charges @ 15% and Service Tax @14.5%. Respondent has claimed this amount assuming that the work that would be carried out by M/s Secon Private Ltd. shall be exactly the same that has been tendered and Claimant has not carried out any work. This is not the truth. It is observed that the 2% quantity of work carried out by the Claimant as has been recorded in the Termination letter dtd. 02- 11-2010 has not been accounted for. It is also noted that Respondent has claimed differential amount for the works that has neither been carried out nor paid so far.

2. Claim of Rs. 16,79,174.93 towards price discount @ 10% of nominal contract value The Respondent has claimed the maximum price discount of 10% as per provision available in the Contract agreement. It is noted that the Work awarded to M/s Secon Private Ltd. has been inordinately delayed by over 4 years till date for reasons not attributable to the Contractor as per statement made by the Respondent. Provision of Price Adjustment for delay in completion has been dealt in GCC Clause No. 4.4.0.0 and its sub-clauses. Price discount is applicable on delay in final completion of work as per approved progress schedule. In this case, there is no approved progress schedule and completion of work has been unduly delayed by reasons not attributable to Claimant.

3. Claim of interest @18% on above claims for the period from the date it becomes due to the date of actual payment Interest on due amount also needs a relook keeping the reasons of delay in view for the purpose of calculating time-period for which interest is due.

4. Cost of legal and/or Arbitration proceedings Respondent has submitted their cost of legal and/or Arbitration proceedings in a separate sealed cover. Discussion under the head quantification of the Counter Claims ―Respondent had submitted their counterclaims based on total differential amount of the nominal work order values awarded to Claimant and M/s Secon Pvt. Ltd. This does not account for:  any work executed by Claimant. As per termination letter dtd. 02-11-2010, Claimant had executed 2% of Survey work.  any variation in quantity. It is very unlikely that tendered quantities and executed quantities remain exactly same for all the items. Precisely for these reasons, Respondent was asked to submit present status of work executed by M/s Secon Pvt. Ltd. From the submitted documents it is observed that completion of work has been delayed by more than four years and the works are still in progress. The reason for the delay has been attributed to pipeline laying works. Respondent has claimed 18% interest on this period of time over-run as well from the Claimant. Claimant can't be held responsible for delay in completion of Respondent's Project. This is considered absolutely illogical and unfair.‖ Conclusion regarding the Counter Claims ―Counter-claim No. 1 of Rs.1,39,92,893.15 towards differential contract amount, supervision charges and Service Tax This counter-claim has generated from deliberate termination of the Contract by the Respondent for no valid reasons. The process of re-awarding the terminated work is found unprofessional and questionable. The counter-claim No. 1 is disallowed in totality Counter-claim No. 2 of Rs. 16,79,174.93 towards price discount The Counter-claim No. 2 is disallowed in totality. Counter-claim No. 3 Dealt under "award on interest" Counter-claim No. 4 Dealt under "award on Cost".‖

40. Mr. Vashisht, learned senior counsel appearing for the appellant contended that since the claims raised by the respondent were not arbitrable, the impugned award made in regard to those claims is required to be ignored and if the findings in relation to the counterclaims are seen on a standalone basis, the rejection of counterclaims is unreasoned. He submitted that Counter-claim no.1 had been rejected with the observation that the termination of the Contract was ―for no valid reasons‖ and the process for re-awarding terminated work was ―unprofessional and questionable‖. He submitted that apart from the said findings, there was no other findings for rejecting the counterclaims. The said contention is unmerited. Notwithstanding that the award made in favour of the respondent in respect of the claims has been set aside, the factual findings recorded by the Arbitral Tribunal in regard to those claims cannot be ignored. It is relevant to note that the Impugned Award in respect of the certain claims made by the respondent – which were founded on the premise that the termination of the Contract was illegal – was set aside solely on the basis that the said claims were not Notified Claims and were thus not arbitrable. However, the factual averments on the basis of which the respondent had premised its claims, were also its assertions in defence of the counterclaims raised by the appellant. The operative part of the Impugned Award in respect of certain claims made by the respondent was set aside on the ground that those claims were not arbitrable. However, the findings of the Arbitral Tribunal were based on the rival contentions relevant to the counterclaims and are required to be read as the Arbitral Tribunal‘s reasoning for rejecting the counterclaims as well.

41. Mr. Vashisht, learned senior counsel appearing for the appellant had contended that since dispute whether the termination of the Contract was illegal or not was not a Notified Claim, no finding returned in that regard in the Impugned Award could be sustained. He contended that the Arbitral Tribunal was thus required to adjudicate the counterclaims by accepting the termination of the Contract to be legal and justified. We find no merit in this contention. Whilst the Arbitral Tribunal may not have jurisdiction to decide the claims raised by the respondent which are not notified, we are unable to accept that the respondent was precluded from raising any defence in respect of the counter-claims raised by the Appellant. The Arbitral Tribunal had full jurisdiction to decide the counter-claims on the basis of evidence and material placed on record by the parties. In terms of the Contract, the Appellant (its designated officials) retains the power to determine the claims that can be referred to arbitration. But it has no power to curtail the defence that can be raised by the respondent to its counterclaims.

42. It is material to note that the Learned Sole Arbitrator is not a person from judicial background; he is an ex-employee of the Appellant and one of the panel of three persons chosen by the Appellant. The learned Arbitrator was not expected to render an award structured as a judgement; he was merely to give his conclusion and indicate the reasons for the same. We find that the Learned Arbitrator has sufficiently indicate his reasons for making the award.

43. We are also unable to accept that the Impugned Award is liable to set aside as it is based on documents which, according to the Appellant, were not proved. It is relevant to note that the Indian Evidence Act, 1872, does not apply to arbitral proceedings and we are unable to accept that the Impugned Award is not based on relevant material.

44. As discussed herein above, Courts cannot interfere if the arbitrator‘s view is a plausible one and is supported by reasons. An award cannot be set aside on mere re-appreciation of the evidence led by the parties. The Court cannot substitute its own opinion in place of the finding of the learned arbitrator. It has been repeatedly held that while entertaining appeals under Section 34 or 37 of the A&C Act, this Court does not sit as a Court of appeal over the award of the Arbitral Tribunal and therefore, this Court is not required to re-appreciate or re-assess the evidence or the material on record.

45. In the present case, the learned senior counsel for the Appellant has failed to point out any perversity or any patent illegality that vitiates the Impugned Award. We find no ground to interfere with the Impugned Award to the extent it rejects the Counter-claims.

(ii) Setting aside of complete costs imposed upon by the Appellant by this Court

46. This Court vide order dated 17.01.2020, while disposing of the Review Petition No. 361/2018, observed that the issue regarding the setting aside of the complete cost imposed upon by the Appellant ‗would be considered by the Court at the stage of disposing of the appeal on the aspect on which the judgment dated 23.08.2018 stands reviewed’.

47. This Court, vide Judgment dated 23.08.2018, allowed the Appeal filed by the Appellant holding, inter alia, as follows: ―…….The tribunal‘s reasoning in brushing aside the non-arbitrability conditions were specious; the learned Single Judge therefore was justified in holding otherwise, as the findings amounted to patent illegalities within Sections 28 (3) and 34 of the Act. The tribunal unfortunately proceeded to ignore the clear and express terms and gloss over this court‘s order; in doing so, and in adjudicating claim nos.1,3,[4] and 5, it fell into error, because it never had the jurisdiction to decide those in arbitration. Such being the case, it was not justified at all in penalizing IOC with substantial and heavy costs for such adjudication - to the extent of Rs. 32,89,924/-; the same is hereby set aside‖

48. It is the case of the Respondent that the cost of Rs.32,89,924/includes the cost of Arbitration incurred for the adjudication of the Claims as well as the Counter Claims. The Respondent argued that since all the Counter Claims were rejected, the Appellant is to be saddled with some amount of cost. Learned senior counsel for the Respondent further submitted that the Respondent paid the Arbitral Fee for both sides after the Appellant refused to pay the Arbitral Fee.

49. This Court deems it appropriate to examine the finding of the Arbitral Tribunal regarding the cost in the Impugned Award: “Award on Cost The Claimant has submitted their expense statement of Rs.29,75,033/till 28-11-2016. Thereafter, they have made payment of Rs.4,75,000/towards balance payment of Arbitrator's fees and expenses. On review of the statement, it has been observed that expenses of Rs.1,60,109/are irrelevant in present arbitration matter and disallowed. The Respondent has filed their expense statement of Rs.25,52,306.62 towards total cost of arbitration. An amount of Rs. 32,89,924/- (Rupees thirty two lakh eighty nine thousand nine hundred twenty four only) is awarded for payment to the Claimant by the Respondent as cost of arbitration.‖

50. The Impugned Award reveals that the cost of Arbitration incurred by the Appellant was Rs.25,52,306.62/- whereas the cost of Arbitration incurred by the Respondent was Rs. 32,89,924/-. Both sides incurred a substantial amount towards the cost of the Arbitration. The cost of Arbitration must be inclusive of Lawyer Fee/ Arbitrator‘s Fee/ all other expenses incurred during the course of arbitration etc. Both Claims and Counter Claims were adjudicated together and there is no apportionment qua the cost of Arbitration incurred for Claims and Counter Claims. In addition, the Respondent never had a Claim for ‗Cost of Arbitration‘. The Appellant raised a Claim for ‗Cost of Arbitration‘ and the learned Arbitral Tribunal, while deciding whether the Appellant is entitled for cost of arbitration, granted the benefit to the Respondent, which was beyond the prayer of the Respondent.

51. Learned senior counsel for the Respondent submits that they paid the complete Arbitral Fee as the Appellant refused to pay the Arbitral Fee. However, there is no such document available on record to show that the Respondent also paid the Appellant‘s share of the Arbitral Fee. Even otherwise, the learned Arbitrator had ample power to pass an award for the recovery of the unpaid Arbitral Fee from the Appellant. However, there is no such direction in the Impugned Award. Hence, in the absence of any cogent evidence to this effect, it cannot be presumed that the Respondent paid the Appellant‘s share of the Arbitral Fee.

52. It is well settled that costs follows event. In the present case, the Appellant has substantially prevailed in its challenge to the Impugned Award. Consequently, the costs awarded, which are obviously on the basis that the respondent had succeeded in its claims, cannot be sustained. This Court vide Judgment dated 23.08.2018, has already held that ‗it was not justified at all in penalizing IOC with substantial and heavy costs for such adjudication to the extent of `32,89,924/-; the same is hereby set aside’.

53. Learned senior counsel for the Appellant failed to show that there is any sufficient cause or error apparent on the face of the record warranting review of the Judgment dated 23.08.2018 in that regard.

CONCLUSION

54. In the light of the discussion and reasoning provided herein above, the conclusion of the learned Arbitral Tribunal to reject the Appellant‘s counter-claims does not warrant any interference by this court. However, as observed earlier, that the Impugned Award to the extent that it awards costs in favour of the respondent is set aside.

55. The present Appeal is disposed of in the aforesaid terms.

56. The parties are left to bear their own costs.

GAURANG KANTH, J. VIBHU BAKHRU, J. JANUARY 10, 2023