M/S. UBV INFRASTRUCTURE LTD. v. NATIONAL HIGHWAYS AUTHORITY OF INDIA

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 vs. 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 Vs. 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. vs. National Highways Authority of India reported as 2019 SCCOnline 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 and Ors. vs. M/s HSS Integrated SDN and Anr., 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.

9. While addressing arguments before us, Mr. Cinmoy, learned counsel for the appellant/petitioner did not lay any stress on the rejection of Counter- Claim No.10 by the AT, which was a matter of challenge in the Section 34 petition, but he submitted that the learned Single Judge has overlooked crucial material while upholding the Award qua Claim No.8 granted in favour of the respondent/NHAI. Learned counsel also submitted that though the respondent/NHAI had confiscated the Plant and Machinery and equipment of the appellant/petitioner, it had allowed it to deteriorate in value and had thereafter, auctioned the said equipment at a devalued price of Rs.73,52,333/-, but had failed to give any adjustment of the said amount to the appellant/petitioner. It was argued that a set off for the said amount ought to have been given to the appellant/petitioner.

10. Taking the latter contention first, when queried, learned counsel for the appellant/petitioner conceded that the issue of set off was neither raised, nor argued before the learned Single Judge. That being the position, the appellant/petitioner cannot be permitted to take the said ground before us for the very first time. We decline to examine the said ground. Even otherwise, we do not find any merit in the submission made by the learned counsel for the appellant/petitioner for claiming set off inasmuch as under Clause 61 of the GCC, it was agreed that the property lying at the site would vest with the respondent/NHAI as the contract was terminated on account of the fault of the appellant/petitioner. The AT as well as the learned Single Judge were therefore right in concluding that when the appellant/petitioner had no right, title or interest left in the Plant and Machinery at the site on termination of the contract, there was no occasion for granting it any amount towards the tentative costs for making the Plant and Machinery and equipment operational.

11. Reverting to the first argument of the learned counsel for the appellant/petitioner that Claim No.8 had been partly awarded by the AT in favour of the respondent/NHAI against all principles of natural justice and that the learned Single Judge had overlooked the fact that the AT had followed an improper procedure to award the said amount, we find no reason to differ with the said conclusion drawn by the learned Single Judge. It may be noted that Claim No.8 of the respondent/NHAI was towards recovery of balance 20% work to the tune of INR 39,82,01,266/- which they had pegged at INR 6,06,10,60,643/-. According to the learned counsel for the appellant/petitioner, documentary evidence in support of additional costs incurred towards balance work remaining on termination of the contract, had not been produced before the AT and it was subsequently called for by the AT after orders were reserved, against which one of the arbitrators had recorded a dissent note. This Claim was based on serial No.40 of the Contract Data and Clause 60 of the GCC which entitled the respondent/NHAI to recover from the appellant/petitioner, a sum equivalent to 20% of the value of the work not completed towards additional costs for completion of the work. The respondent/NHAI had claimed a sum of Rs.6,06,10,60,643/- on the ground that the appellant/petitioner had committed a fundamental breach of the contract by providing forged bank guarantees. The AT as well as the learned Single Judge have observed that the appellant/petitioner had submitted forged bank guarantees and it could not claim ignorance or plead victimization by its agent as there were institutional requirements for opening, maintaining and renewing of bank guarantees prescribed by the Bank, which the appellant/petitioner had to conscientiously comply with. Therefore, the appellant/petitioner could not wriggle out of its liability having committed a fundamental breach of the contract.

12. Conditions of termination have been provided for in Clause 59 of the GCC, as follows: - “59. Termination. 59.[1] The Employer or the Contractor may terminate the Contract if the other party causes at fundamental breach of the Contract. 59.[2] Fundamental breaches of Contract include, but shall not be limited to the following: (a) xxx xxx xxx (b) xxx xxx xxx

(c) xxx xxx xxx

(d) xxx xxx xxx

(e) xxx xxx xxx (f) xxx xxx xxx (g) xxx xxx xxx (h) if the Contractor, in the judgment of the Employer has engaged in corrupt or fraudulent practices in competing for or in the executing the Contract. For the purpose of this paragraph: “corrupt practice” means the offering, giving, receiving or soliciting of anything of value to influence the action of a public official in the procurement process or in contract execution. “Fraudulent practice” means a misrepresentation of facts in order to influence a procurement process or the execution of a contract to the detriment of the Employer, and includes collusive practice among Bidders (prior to or after bid submission) designed to establish bid prices at artificial non-competitive levels and to deprive the Employer of the benefits of free and open competition.”

13. Under Clause 40 of the Contract Data, the percentage required to be applied to the value of the work not completed, representing the employers’ additional cost for completing the works, was agreed between the parties at 20%. The learned Single Judge upheld the unanimous view taken by the AT that by providing forged bank guarantees, the appellant/petitioner had caused a fundamental breach of the contract. A natural corollary to that was that the appellant/petitioner had to pay costs equal to 20% of the balance work. It is to be noticed that additional liquidated damages for which there was a separate provision, were not payable under Clause 60 of the GCC whereunder an amount became payable on account of termination of contract for committing a fundamental breach.

14. Thus, the contention of the learned counsel for the appellant/petitioner that evidence was required to be produced by the respondent/NHAI before any amount could be awarded under this head, cannot be accepted. In any case, ultimately, the AT did not look into the additional documents and evidence provided by the respondent/NHAI after conclusion of the hearing and therefore, no prejudice has been shown to have been caused even if such documents were sought by the AT. What was finally awarded by the AT, i.e. Rs.2,85,07,967.14/-, works out to be far below 20%, as was claimed by the respondent/NHAI under Claim No.8 that was raised for a sum of Rs.6,06,10,60,643/-. The said claim was not allowed in entirety by the AT and only a part thereof was awarded. In this context, the learned Single Judge has observed as below: - “31..........In my opinion, the view of the Tribunal that once the petitioner had submitted forged Bank Guarantees, the respondent had rightly invoked Clause 59 and terminated the contract is not only a possible but a plausible view. Thus, Claim No.8 has rightly been allowed by the Tribunal in favour of the respondent. The Tribunal has interpreted the terms of the contract and based on the documents, has come to a finding holding the petitioner responsible for furnishing forged Bank Guarantees. It is a settled law that the Tribunal is the master of facts and evidence led before it.”

15. The aforesaid conclusion does not appear erroneous on the material before us. As discussed hereinabove, the scope of an appeal under Section 37 of the Act is far more restricted than the scope of a petition under Section 34 of the Act. There is no illegality in the procedure adopted by the learned Single Judge in the disposal of the petition filed by the appellant/petitioner under Section 34 of the Act and nor is there any perversity that shocks the conscience of the court.

16. In the light of the foregoing discussion, the impugned judgment is upheld and the appeal is dismissed in limine alongwith the pending application.

(ASHA MENON) JUDGE (HIMA KOHLI)

JUDGE JANUARY 08, 2020