GAIL GAS LTD. v. PALAK CONSTRUCTION PVT LTD.

45. This para 43 reads as follows: (Sumitomo case [(2010) 11 SCC 296: (2010) 4 SCC (Civ) 459], SCC p. 313)

43. … The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.[3] but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn. [(2009) 5 SCC 142: (2009) 2 SCC (Civ) 406] the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding. O.M.P. (COMM) 73/2018 Page 16

24. In Ssangyong Engineering & Construction Co. Ltd. (supra) the Supreme Court has re-examined the scope of the power of the Court especially in light of the Arbitration and Conciliation (Amendment) Act, 2015 and held as under: “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 O.M.P. (COMM) 73/2018 Page 17 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.

39. 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.

40. 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 Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.

41. The change made in Section 28(3) by the Amendment Act really follows what is stated in paragraphs 42.[3] to 45 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to O.M.P. (COMM) 73/2018 Page 18 decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2A).”

25. Applying the above test to the facts of the present case, it is seen that the Arbitrator has based his finding on the “Status for Intimation” that was exhibited as Ex.PW1/8 before the Arbitrator. Only for the purpose of convenience and relevance, a portion of the same is reproduced hereinbelow: Sl. N o. Intimati on Letter No. Intimati on Date(a) Gas arrived to Meerut date/an y other docum ent date (b) Location Work qty. to be cover ed Durati on of Sched ule Schedul ed completi on date Pneum atic testing date (c) Actual completion __ __ Conside red point for calculati on LD % 1 1 21.08.20 Parta pur ind area Mtr. weeks 30.10.20

08.11. 04.07.2011 9 a & c 0.[5] 2 2 07.09.20 Mohkam pur phase 1 & 2 Mtr. weeks 16.11.20

02.02. 19.08.2011 79 a & c 0.[5] 3 3 10.09.20 Devlok colony (B&C)

1779. Mtr. weeks 19.11.20

17.11. 25.08.2011 In ti m e a & c

26. A reading of the above document would clearly show that the completion date was certified by the Engineer-in-Charge based on various sectors/areas of work. Based thereon, the liquidated damages were also assessed by the Engineer-in-Charge. The said document O.M.P. (COMM) 73/2018 Page 19 clearly negates the assertion of the learned senior counsel for the petitioner that the work in question had to be treated as an “integrated system”. The learned Arbitrator found that not only were different completion dates prescribed for each area of work, but also gas was supplied using the pipelines at different periods. It is also to be noted that the petitioner in its reply and counter claim also did not assert its defence/counter claim on the basis of this being a case of “integrated system”. The reliance of the learned senior counsel for the petitioner on a stray sentence in the cross examination of the witness of the respondent purportedly admitting the work to be an “integrated system”, cannot be accepted as an estoppel or an admission of fact by the respondent so as to find fault in the Impugned Award.

27. As far as the contention of the learned senior counsel for the petitioner that the respondent itself had not completed the documentation for issuance of the Completion Certificate, the Arbitrator in his Impugned Award has held as under: “In view of evidence on record as discussed above it is crystal clear that claimant submitted bill dated 12.11.2013 after submission of completion and last commissioning and handover done on 17.04.2013 vide ex. Pw 1/8 which has been dully signed by the engineer in charge, WGKI. They have also placed on proved on record ex. Pw 1/26 invoice to the Krishan Cap Box P. Ltd. situated at Meerut which shows that gas was supplied to them by the respondent after handover and commissioning of the same by the claimant. It is also proved on record that when MOM dated 26.06.2015 Ex Rw-1/13 was not complied with by the respondent by releasing payment RA bill no -14, the claimant submitted another final bill Ex Pw-1/5 dated 30.04.2016 for sum of Rs. 83,55,834/- which included RA 14 bill amount of Rs. O.M.P. (COMM) 73/2018 Page 20 28,19,085/-. As such I decide the issue no.1 and hold that claimant submitted the bill for Rs. 52,53,092/- dated 12.11.2013 after successful testing and commissioning of the complete pipeline work. In view of the authority cited above, there is no substance in the submission by Ld Counsel that under clause 94.[1] of GCC and clause 94.[2] the contract is eligible to present to final bill only after a completion certificate has been issued to the claimant which can only be issued when the work is actually measured by the respondent. In the given circumstances no value can be given to letter dated 03.05.2016 Ex.Rw-1/17 inviting the claimant to undertake joint measurement of work before submission of final bill which the claimant failed to do. Similar is my opinion about letter dated 12.07.2016 Ex-Cw- 1/X[2] with regard the document submitted by the claimant which were lacking in terms of contract.”

28. The above findings being arrived at by the Arbitrator on appreciation of evidence led before him, cannot be challenged before this Court by calling upon this Court to re-appreciate such evidence.

29. Having said so, the “Status for Intimation” also shows that for certain area the defect as pointed out in the letter dated 06.05.2013 would have been within the Defect Liability Period. The learned senior counsel for the petitioner submits that for these areas as well, the defects have been pointed out not only in the letter dated 06.05.2013 but also in the subsequent meetings between the petitioner and the respondent. However, the learned senior counsel for the petitioner has not been able to co-relate such area with the letters pointing out the defects. In any case, it is not shown that this was pleaded as a defence before the Arbitrator. Certainly the Arbitrator cannot be faulted if an argument based on a document is not made before him. O.M.P. (COMM) 73/2018 Page 21

30. As far as the claim of liquidated damages in form of Price Reduction Schedule is concerned, it is noted that the said claim was raised only with the counter claim filed by the respondent. The counter claim was filed by the respondent only on 20.08.2016. Therefore, again no fault can be found with the finding of the Arbitrator on this counter claim.

31. As far as the submission that the work of rectification has been awarded to a third party, the Arbitrator has noted that no such rectification work had been carried out till the date of the Award. In fact, on a query being raised, the learned senior counsel for the petitioner admitted that no such work had been carried out till date. The counter claim of the petitioner towards rectification of alleged defects, therefore, was clearly unsustainable and was rightly rejected by the Arbitrator.

32. The learned senior counsel for the petitioner further submits that the letter dated 06.09.2010 of the respondent seeking permission from the Engineer-in-Charge for the use of locally available yellow sand for the purpose of sand padding, cannot be relied upon inasmuch as in the cross examination of CW-1 dated 03.06.2017, the CW-1 admitted that there was no written approval for the same from the Engineer-in-Charge. He submits that as per Clause 60, any deviation from the contract has to be approved by the petitioner and in the absence of such approval, the Arbitrator has erred in not granting Counter Claim no.3 in favour of the petitioner.

33. The Arbitrator has noted that the petitioner failed to prove any loss on account of use of locally available sand for the purpose of sand padding and in any case the respondent had got the samples approved by O.M.P. (COMM) 73/2018 Page 22 the Engineer-in-Charge vide its letter dated 06.09.2010. In view of the above finding, the Counter Claim of the petitioner is unsustainable and was rightly rejected by the Arbitrator.

34. The learned senior counsel for the petitioner further submits that in the Final Bill dated 31.04.2016 an amount of Rs.9,97,102/- was liable to be deducted as the actual value of the work on the basis of as-Built drawings was Rs.67,75,291.80 excluding tax, and not Rs.77,72,393.80 as claimed in the bill. The same was pleaded before the Arbitrator in the Rejoinder to the Counter-Claims as also in the evidence affidavit of Mr. Ram Babu, that is the representative of the petitioner. He further submits that an amount of Rs.80,000/- which was deducted from RA bill no. 7 as also of Rs.50,000/- which was deducted from the RA Bill no. 8, could not have been claimed in the final bill as both the above bills stood paid on 13.12.2011 and 19.03.2012, respectively. The Arbitrator having completely failed to give any finding in this regard, the Award is liable to be set aside.

35. I am unable to accept the above arguments of the learned senior counsel for the petitioner. Issues framed by the learned Arbitrator have been culled out in the Impugned Award. There was no issue framed before the learned Arbitrator with respect to the alleged discrepancy in the final payment. In fact, even in the pleadings, I do not find any such submissions having been made by the petitioner. The Award cannot be challenged on a new plea being raised before this Court especially when the plea involves disputed question of facts. O.M.P. (COMM) 73/2018 Page 23

36. The next challenge of the petitioner is with respect to the claim of the respondent towards procurement of Warning Mat of the specification of 300*1 mm instead of 200*3 mm as stipulated for in the contract.

37. The learned counsel for the petitioner submits that the arbitrator failed to consider that the claim of the respondent was expressly barred by limitation. He submits that with its letter dated 28.07.2010, the issue of Warning Mat was treated as closed and the respondent never raised any demand towards the same till the filing of its Statement of Claim on 12.07.2016. He further submits that, in any case, the respondent had claimed an amount of Rs.5,98,878/- for the said claim as per Appendix H filed before the Arbitrator and the Arbitrator has erroneously awarded an amount of Rs.7,33,634/- for the same. Therefore, the award in this respect cannot be sustained.

38. The Arbitrator on the issue of Warning Mat has held as under:- “After consideration of submission of the parties I am of the opinion that neither the claim is for additional payment for additional work for which notice is required. The respondent has not denied that no such amount as claimed by the claimant is an additional amount claimed as the mat of superior quality was procure and used under protest in term of email ex pw -1/22 (coly) and ex pw - 1/23. Further, more the claimant has claimed for the entire length of open cut trench RM 40541.00 as per Gail Gas report. EX. Pw-1/27. The argument that the claimant itself admit warning mat of size 300 X 1mm was a PTS (Particular Technical Specification) and that size 200x0.[3] mm was a technical specification. Therefore, as per order of precedence set out in clause 1.[6] of SCC, the specification of size 300 X 1 mm would prevail goes against the respondent as no contractor would use O.M.P. (COMM) 73/2018 Page 24 the warning mat of bigger size of 300x1mm at his cost and risk.”

39. I do not see any reason to interfere with the finding of the learned Arbitrator except to the fact that the learned Arbitrator has erred in awarding a sum of Rs.7,33,634/- to the respondent when the claim of the respondent was only for Rs.5,98,878/-. The Award would therefore stand modified to the said limited extent.

40. The next challenge of the petitioner is to the award of Rs.5,85,000/- to the respondent towards rent for storage and handling of material at the stockyard of the respondent.

41. The learned senior counsel for the petitioner submits that the contract does not permit the respondent to claim any amount towards rent and even otherwise the respondent failed to prove the rent receipts which were not even in the name of the petitioner but in the name of Mr.Ashwani Goyal, Manager of the respondent company. He further submits that the claim relates to the year 2010-2011 and is therefore, barred by limitation.

42. The Arbitrator has held as under:- “It has been argued by representative of claimant that vide Ex. Cw- 1/X10 the respondent inform total 88,460 RM of MDPE pipe was issued to the claimant towards handling and storage for pipeline works at Meerut. Out of the said quantity only 59736.50 RM were required to be consumed in work. Ballance quantity of 26,051.51 RM of pipe has been either issued to other contractor by Respondent or returned back to CWC Ghaziabad store yard. The email dated 21.09.10, 23.04.11, 19.09.12 and letter dated 22.07.13 Ex Pw-1/15 further proved the pipes were unloaded in the warehouse in 2010 and some more pipes latter on without any specific detail where as O.M.P. (COMM) 73/2018 Page 25 clause 28.[1] states location of dumpyard/ store yard location city wise "for Meerut it is CWC Ghaziabad and there was no any storeyard at Meerut by the respondent." The rent receipt paid by representative of the claimant was no doubt for personal use but as discuss about extra pipe were kept by the claimant in his rented store yard which was belonging to respondent. It cannot be said by the respondent that the claim is not maintainable as is based on false and fabricated documents. In fact the email and rent receipt coupled with deposition of the claimant has proved on record that unloading and dumping outside the scope of work were done by the respondent in the store yard of the claimant. Hence the issue is decided and claimant is held entitled to sum of Rs. 5,85,000.00/towards extra expenditure”

43. I have considered the above submission of the learned senior counsel for the petitioner, clearly the contract between the parties was not one of lease of space. It had also not been pleaded before the learned Arbitrator that such claim was raised by the respondent any time before filing of the Statement of Claim. Even if the said claim was to be raised, there had to be prior negotiation or at least acceptance of the petitioner to such liability. As far as the Award of this Claim of the respondent is concerned, the same was clearly beyond the scope of the Arbitrator, being beyond the scope of the Agreement itself. The same cannot, therefore, be sustained.

44. The petitioner further challenges the Award of Rs.1,04,602/towards extra expenditure incurred on installing the RCC Marker of bigger size than specified in the contract. The learned senior counsel for the petitioner submits that the only basis for awarding the said amount was Appendix C filed by the respondent without any supporting documents for the proof of the costs. He submits that the rates for RCC O.M.P. (COMM) 73/2018 Page 26 Marker were changed from Rs.1600/- to Rs.444/- as admitted by RW-1 in its cross examination and even the Final bill raised by the respondent was in accordance with the revised rate of Rs.444/-. He submits that therefore, the amount mentioned in Appendix C on which the claim of the respondent was based, was not proved. The learned counsel for the petitioner submits that the letter dated 22.10.2011, relied upon by the respondent to show that it had the petitioner‟s consent, was false and fabricated. He submits that the same bears the name of one Mr. Rajesh Srivastava who is not the competent authority under the contract. He further relies upon the cross examination of CW-1 on 29.04.2017 to submit that no approval for changing the technical specifications for the RCC markers was sought; in absence of the same the claim of the respondent could not have been granted by the Arbitrator. In any case, the respondent raised no such claim prior to filling of the Statement of Claim and therefore, the said claim is a complete afterthought and barred by limitation.

45. Learned senior counsel for the respondent could not deny the above submissions of the learned senior counsel for the petitioner that the Final Bill had been raised with the revised rate of Rs.444/- and that no such claim was raised at the time of filing the Final Bill. The letter dated 22.10.2011 had been denied by the petitioner. There is no mention in the Award as to how this document was considered as being proved by the respondent. In view of the above, the finding of the learned Arbitrator on this claim of the respondent cannot also be sustained and is set aside. O.M.P. (COMM) 73/2018 Page 27

46. In view of the above findings, the petition is partially allowed. The parties shall bear their own costs.

NAVIN CHAWLA, J NOVEMBER 27, 2019