Delhi District Court
M/S Wapcos Limited vs M/S C & C Energy Private Limited on 31 July, 2020
In the Court of Sh. Sanjiv Jain, District Judge (Commercial Court)03,
Patiala House Courts, New Delhi
OMP Comm No. 167/2019
M/s WAPCOS Limited
Kailash, 5th Floor, 26, K. G. Marg,
New Delhi110001. ... Petitioner/objector
versus
M/s C & C Energy Private Limited
Block F, Ground Floor,
Mira Corporate Suites 1 & 2,
Old Ishwar Nagar, Mathrua Road,
New Delhi110065. ... Respondent/claimant
Date of institution : 13.09.2019
Date of reserving judgment : 24.07.2020
Date of decision : 31.07.2020
OMP Comm No. 159/2019
M/s C & C Energy Private Limited
Block F, Ground Floor,
Mira Corporate Suites 1 & 2,
Old Ishwar Nagar, Mathrua Road,
New Delhi110065. ... Petitioner/objector
versus
M/s WAPCOS Limited
Kailash, 5th Floor, 26, K. G. Marg,
New Delhi110001. ... Respondent/claimant
Date of institution : 21.09.2019
Date of reserving judgment : 24.07.2020
Date of decision : 31.07.2020
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 1 of Pages 58
: J U D G M E N T :
1. By this common judgment/order, I shall dispose of the objection petitions under Section 34 of the Arbitration & Conciliation Act, 1996 (as amended upto date) hereinafter called the "Act" filed by M/s WAPCOS Limited and M/s C & C Energy Private Limited against the award dated 13.06.2019 passed by the Ld. Arbitrator Sh. S. K. Sarvaria. These petitions are being taken up together since, the parties are the same and the facts in issue directly or substantially are the same.
Brief facts:
2. Briefly the facts are that the Energy Water Sanitization Authority, Government of Rwanda (EWSA. Rwanda), awarded a contract of construction of 15MW peat to peat power plant at Rwanda to M/s Shengil Energy Group (EPC Contractor). M/s WAPCOS Limited Company (WAPCOS), a Government of India Enterprises, under the aegis of Union Ministry of Water Resources was awarded the contract by EWSA to supervise the engineering procurement and construction of the power plant at Rwanda.
WAPCOS associated M/s C & C Energy Pvt Ltd (C & C) for providing the consultancy services vide agreement dated 21.01.2013.
3. The agreement comprised of following scope of work:
1.4 PhaseI: Power Plant Specification review 1.5 PhaseII: Supervision of Power Plant Construction, including witnessing the tests at the manufacturer's work.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 2 of Pages 58 1.6 PhaseIII: Supervision of Power Plant Commissioning, testing and provisional acceptance 1.7 Defects Liability Period: On callon contractual rate.
4. As per the agreement, C & C was obligated to assist in the task of supervising the engineering procurement system of the Plant and providing services of one Project Director, one Mechanical Engineer, one Civil Expert, one Site Engineer, one Engineer as per the staffing schedule (Table I & II) to assist WAPCOS in carrying out the works mentioned in Article 1. As per Article 3, C & C was to assist WAPCOS in the timely submission of deliverables mentioned under Article 4 and it was obligated to assist WAPCOS for preparation and submission of Process Design, Mechanical Design, Electrical Control & Instrumentation and Civil Design Review and Recommendation Reports. The work was to be completed within 15 months as provided in Article 5 i.e. by 20.04.2014. As per Article 9, the remuneration and payment to be made to C & C was fixed at Rs. 1,64,43,000/ excluding all taxes against the provision of manpower for carrying out the tasks. C & C was supposed to raise invoices on the basis of the progressive completion of the work. Article 10.2 of the agreement provided the terms of payment to be made to C & C i.e. mobilization or advance payment @ 20% of the contract prize to be paid within 30 days after receipt of payment bank guarantee of the same with validity of 15 months, 20% upon completion and approval of design reviews to be made on a prorata basis through monthly invoices within 30 days from the approved invoicing day, 10% upon completion and approval of tests before equipment OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 3 of Pages 58 shipment of major equipment, 25% upon completion and approval of Civil Works and equipment installation on a prorata basis, 20% upon completion and approval of Plant Commissioning Tests on prorata basis and 5% after the commercial operation date and against a bank guarantee of contractual amount which would expire at least sixty (60) days after the defect liability period on works 24 months. As per Article 10.3, agreement was back to back basis i.e. WAPCOS was obligated to make the payment to C & C only when the corresponding payment was received by it from EWSA, Rwanda.
5. The scope of work to be performed by them was dependent on the work to be executed by EPC Contractor engaged by EWSA. EPC Contractor delayed the work due to which C & C could not complete the work within the stipulated time as mentioned in the agreement. About 50% of the work could be executed, however, C & C during the agreement period provided the work force as mentioned in the agreement. C & C wrote to WAPCOS that the majority of the works are still pending by the EPC contractor and the project may well go beyond the stipulated time period and thus requested for an extension of six months or till the completion of erection of plant by EPC contractor. It was also mentioned that the financial implication in this respect shall be agreed on mutual understanding. C & C did not stop the work and provided 76 additional mandays for the said work. Thereafter, it withdrew the manpower and the balance work was carried out by WAPCOS.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 4 of Pages 58
6. C & C in terms of the contract raised the invoices of Rs.
1,86,44,882/ against which WAPCOS paid only Rs. 1,16,57,067/. WAPCOS did not pay any amount towards the additional mandays provided by C & C, which amounted to Rs. 13,68,684/. C & C sent a Demand Notice dated 20.03.2016 calling upon WAPCOS to make the payment within 30 days of receipt of the notice. However, no payment was made. Vide letter dated 02.08.2016, WAPCOS denied its liability under the said contract and made the counter claims. It however admitted that a payment of Rs. 3,69,507/ under invoice number CC/201314/07 was due & payable. Various meetings were held but no result came. C & C, thereafter, invoked the Arbitration Clause as provided in Article 11.5 of the agreement. The parties made efforts to amicably resolve the issues but WAPCOS denied all the claims & dues of C & C and did not reconcile with the demands.
7. When the parties failed to agree on the appointment of an Arbitrator, C & C approached the High Court and the High Court vide common order dated 30.05.2017 on the Arbitration Petition Nos. 293/2017 & 294/2017 referred the matter to Delhi International Arbitration Centre, who appointed Sh. S. K. Sarvaria as the sole Arbitrator.
8. C & C filed the statement of claims and additional claims inter alia as under:
Claim I Recovery of Rs. 69,87,815/ towards services/man days provided under the contract.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 5 of Pages 58 Claim II Recovery of Rs. 13,68,684/ towards the additional mandays provided by it.
Claim III Interest on the claim amount I & II @ 18% per annum upto 15.08.2017 amounting to Rs.
15,87,900/.
Claim IV Interest Pendente Lite @ 18% per annum. Claim V Preventive Injunction/ Preservation of Assets.
Claim VI Costs.
Additional claims:
Claim I Return of original bank guarantee dated
24.01.2013 amounting to Rs. 32,88,600/.
Claim II Issuance of release letter in respect of advance
payment bank guarantee dated 24.01.2013.
9. It was claimed by C & C that it had duly provided the man days to WAPCOS requisite to the total value of the contract and fulfilled all its obligations under the contract to the satisfaction of WAPCOS and at no point of time, WAPCOS ever raised objection or expressed any dissatisfaction in respect of the services provided by it under the contract. It also provided the additional mandays over & above the contract value as per the extension of contract. It was claimed that the delay was wholly attributable to EPC Contractor and C & C was not in any way responsible for the delay.
It, vide letter dated 17.03.2014, had informed WAPCOS that latter would need additional mandays (over & above the number/contract value) to enable it to fully discharge the obligations towards EWSA, Rwanda, who in response told it that it would be able to secure an OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 6 of Pages 58 extension/renewal/amendment to the contract from ESWA and assured C & C that it would not only pay C & C for such additional mandays but also extend the contract. It was alleged that WAPCOS deliberately did not respond to its letter instead verbally assured about it saying that it was pursuing the matter with ESWA Rwanda and that the parent contract would be extended by it. Believing on the representations, it provided the additional mandays. It was alleged that on the basis of the additional mandays provided by it, WAPCOS could secure an extension to the parent contract from EWSA Rwanda but it refused to pay C & C for the additional man days despite having benefited from the same. It also denied to pay the outstanding dues.
10. In respect of the additional claims, it was submitted that in terms of Clause 10.2 of the contract, it had tendered an advance payment bank guarantee dated 24.01.2013 for Rs. 32,88,600/ and had also tendered a valid performance bank guarantee vide dated 24.01.2013 for Rs. 16,44,300/ in terms of Article 10.4 of the contract but WAPCOS did not release the same nor issued the release letter despite the fact it had duly discharged all the obligations under the contract.
Reply to the claims & counter claims by WAPCOS:
11. WAPCOS contested the claims and filed its reply inter alia that the work was estimated to be completed within 15 months and the amount of C & C for the tasks mentioned under Article 1 of the OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 7 of Pages 58 agreement was fixed at Rs. 1,64,43,000/, which was the maximum amount to be paid for providing of manpower for carrying out the tasks. Mandays were taken as the basis for assessing the contract value, while the terms of payment were milestones based. C & C was supposed to raise the invoices on the basis of progressive completion of milestones and the agreement was on back to back basis as per Article 10.3 of the contract. The payment was to be made after completion of milestones i.e. the bills were to be raised by C & C only after the completion of milestones. Scope of work was not limited to provide specified number of Advisors, Experts and Specialists in the field of thermal power to WAPCOS and the payment was to be made only after the completion of milestone as provided in the agreement that too after receiving the same from EWSA. No dispute/protest was raised while executing the contract, which was wholly dependent on the work executed by EPC contractor engaged by EWSA. It was stated that the work was delayed by the EPC contractor, due to which, they could not complete the scope of work within the time as stipulated in the contract and only 50% of the work was executed by C & C during the contract period i.e. from 21.01.2013 to 20.04.2014. C & C had raised the invoices accordingly, which were duly released by it.
WAPCOS denied the authenticity of the invoice dated 16.09.2016 amounting to Rs. 66,18,308/ and alleged that C & C after the contract period left the site, though, it was advised by WAPCOS to complete the balance work as and when the work is executed by EPC contractor in order to get the balance payment released. It was OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 8 of Pages 58 WAPCOS, being a consultant of International Repute and a Government Organization, which executed the remaining works alone and incurred the expenditure more than the income from the project resulted into losses to it. It was alleged that the act of C & C was not only unethical but also contrary to the terms of contract. It was alleged that C & C was the Associate in the agreement and it was not the SubContractor, thus it was obliged to complete the scope of work in order to complete the milestone as provided in the agreement. It was stated that since the agreement was milestone based, C & C was required to achieve the milestone on the basis of the work executed by the EPC contractor and it cannot take the shelter of the fact that after completion of 15 months, its obligation to provide the manpower was completed and it was not responsible for the completion of remaining works. It was alleged that it deserted the project site, thereby, leaving WAPCOS high & dry in a critical situation. It was stated that in terms of Article 10 of the agreement, without the completion of milestone, any invoice raised by it could not be considered. It denied the claims of C & C and alleged that it never received the letter dated 17.03.2014 allegedly sent by C & C and also alleged that it never sought any extension of time rather abandoned the site of its own and no additional mandays were requested by it to be provided. It never asked it to demobilize the manpower, rather it was C & C, which on its own to the utter disregard of the agreement and against the interest of the project, demobilized its resources from the site.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 9 of Pages 58
12. In the statement of counter claims, WAPCOS raised the following claims:
Counter claimI: Return of advance payment of Rs.
16,44,300/ along with interest.
Counter claimII: Claim towards performance bond @ 10% of the contract value i.e. Rs. 16,44,300/ along with interest.
Counter claimIII: Pendent Lite interest. Counter claimIV: Legal costs.
13. It was alleged that as per Article 10.2.1 of the contract, WAPCOS was to provide 20% of the contract price as advance payment but C & C in its invoice dated 19.12.2003 raised an amount of Rs. 32,88,600/ for release of advance payment, which was paid by it. Since, C & C had completed only 50% of the work, it was entitled to claim the rest of the 50% of the advance payment amounting to Rs. 16,44,300/. It was also entitled to claim 10% of the contract value as the performance bond as per Article 10.4 of the contract and interest Pendent Lite @ 18% per annum as well as the costs.
14. In response to the additional claims, it was stated by WAPCOS that the claims are baseless and that the advance payment guarantee has already been released to C & C.
15. C & C filed the rejoinder reiterating the facts as stated in the statement of claims and additional claims and also filed reply to the OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 10 of Pages 58 counter claims of WAPCOS denying its liability.
Impugned award:
16. Ld. Arbitrator on the basis of the pleadings i.e. statement of claims, additional claims and counter claims of the parties, after examining the documents, appreciation of evidences and hearing the parties passed the impugned award giving the detailed reasons. It was observed that undisputedly, the construction work was to be done by EPC Contractor engaged by EWSA Rwanda, who delayed the construction work to be supervised by the parties together resulting into not only delay in completion of project but also delay in the supervision work to be done by WAPCOS as per the agreement with EWSA Rwanda together with C & C as per the agreement dated 21.01.2013 Ex. CW1/2 executed between the parties. It was also observed that the facts & circumstances show that WAPCOS had direct contract with EWSA Rwanda and there were no contractual rights or duties between C & C and EWSA Rwanda and therefore, C & C was unable to knock the door of EWSA Rwanda or EPC Contractor for redressal of its grievances on account of delay in construction leading to noncompletion of the supervision work for which WAPCOS had engaged C & C. WAPCOS, who is the party to the contract could perhaps seek the redressal of the grievances from it may be under any force majeure clause. It might have also been entitled to impress upon EWSA Rwanda to quicken the construction work to be supervised by it. It was stated that the contractual relationship between WAPCOS and OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 11 of Pages 58 EWSA Rwanda is in the special knowledge of WAPCOS and this Tribunal and C & C are completely in dark about it. It may be possible that WAPCOS may be entitled to be compensated or has been compensated by EWSA Rwanda for delay in the construction work. Ld. Arbitrator discussed the terms & conditions of the agreement Ex. CW1/2 and observed that dominant role in the supervision work of the construction was of WAPCOS and C & C was required to assist it by playing the subordinate role of providing manpower as detailed in Article 2.2. of the contract and Table.
Under these circumstances, C & C had done its role of providing manpower during the contract period to the satisfaction of WAPCOS. It was observed that it is not disputed that after August 2014, WAPCOS alone did the supervision work and completed it as obvious from the document Ex. CW1/AT and received the payment from EWSA Rwanda. It was observed that as per the agreement, WAPCOS was entitled to terminate the agreement and invoke the bank guarantee, impose delay penality and invoke performance bond but no action was taken by WAPCOS against C & C implying that WAPCOS had no grievance against C & C so far as the performance of part of contract by it during the contract period. The main requirement from C & C was to provide manpower which as per the document Ex. CW1/5 had been provided by it and also admitted by RW1. WAPCOS has also admitted that C & C provided the manpower only till August 2014 vide letter Ex. CW1/14 and Table Ex. CW1/AT and thus C & C had performed its basic duty, which was in its control. It was observed that the progress in construction OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 12 of Pages 58 work was not the part of duty of C & C. The fact that the construction work stopped or was not in progress midway of the contract on account of inaction on the part of EPC Contractor does not come to the rescue of WAPCOS. The reading of contract Ex. CW1/2 suggests that C & C was not only to provide requisite manpower but also to assist WAPCOS in the supervision work in question. It cannot be said that on account of inaction on the part of EPC Contractor, C & C has not paid salary/remuneration to its manpower, so why deprive it on this count. When C & C is not at fault and the progress in construction work was not under the control of it and it having provided the requisite manpower as per the requirement of WAPCOS for the contract period in question, it should be paid the amount for its services as per contract Ex. CW1/2. It was held that C & C is entitled to receive the balance amount of Rs. 69,87,815/ for the contract period for which the requisite manpower was supplied by it to WAPCOS.
17. While deciding claim no. 2, it was observed although, it is admitted from the documents of WAPCOS that the manpower of C & C remained in the project site upto August 2014, though, the contract period as per the contract Ex. CW1/2 was 15 months i.e. till 20.04.2014 but he finds great force in the arguments of the counsel for WAPCOS that in the absence of extension of time of contract period, C& C is not entitled to claim any amount beyond the contract period.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 13 of Pages 58
18. As to the interest on the above claims upto 15.08.2017, it was observed that almost all the balance payments were received by WAPCOS as per chart/table Ex. CW1/AT from January 2016 to December 2016, therefore, in a back to back contract, it would not be appropriate to grant interest from the date of invoice. It is clear that the payments are yet to be made to C & C from October 2015 to December 2016. It was observed that since the transaction between the parties is commercial, therefore, rate of interest @ 18% per annum deems appropriate. Accordingly, a simple interest @ 18% per annum w.e.f. August 2016 till the filling of claim i.e. 15.08.2017 amounting to Rs. 13,10,215/ was granted on the amount of Rs. 69,87,815/ including on the admitted amount of Rs. 3,69,507/ in respect of the invoice Ex. CW1/6A.
19. It was also observed that the arbitration was invoked by C & C within limitation, so it is not barred by limitation.
20. As to the counter claims filed by WAPCOS, it was observed that in view of the findings on issue no. 2 (claim no. 1), C & C is entitled to the unpaid balance contractual amount due to it, so there is no question of refund of 50% of the mobilization amount, which seems to have been adjusted by WAPCOS against the payment already admittedly due & paid to C & C. The counter claim is also barred by time, since, it had never been raised by WAPCOS in the prearbitration period and it was raised for the first time on 23.11.2017, though, the contract expired on 20.04.2014. It was also held that there is no question of payment by C & C to WAPCOS OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 14 of Pages 58 claim of 10% of the contract value as performance bond as per Article 10.4 of the contract.
21. As to the cost of arbitration proceedings, it was held that C & C is entitled to arbitration fee on the amount of prearbitration interest of Rs. 13,10,215/ and Rs. 69,87,815/. It was also observed that since the counter claims have been declined, WAPCOS is not entitled to the legal costs of arbitration.
22. Accordingly, an award was passed in favour of C & C and against WAPCOS by partially allowing the claim for a sum of Rs. 82,98,030/ (Rs. 69,87,815/ + Rs. 13,10,215/ interest) along with pendent lite and future interest @ 18% per annum from the date of filing of the statement of claim still its realization along with proportionate arbitration fee paid as its share by C & C on the said amount.
Objections by WAPCOS:
23. WAPCOS vide petition no. 159/2019 challenged the impugned award on the following grounds:
i, ii, iii & xii. That from a bare reading of clauses of the agreement, it is evident that C & C was obligated to achieve the milestone and then alone was entitled to raise the invoice. The intention of the parties while executing the contract cannot be interpreted in the manner that the only obligation of C & C was to provide mandays regardless the fact whether it carries out any work or not. Had the contract been of providing the man days as claimed, then what was the intention of first checking and approving the invoice as per Article 10.1.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 15 of Pages 58 iv. That the interpretation of the clauses of agreement would suggest that the payment in the subject agreement was to be made only after the completion of milestone that too after receiving the same from EWSA on back to back basis.
v, vi & vii. That if the findings of the Arbitrator are taken to be correct that the agreement was only for supply of mandays regardless of the work carried out by C & C, then the same would be contrary to the very foundation of the agreement and such an interpretation would change the very nature of the agreement, which is not permissible in law. In this case, initially, C & C while adhering the provisions of the agreement raised the invoices on the achievement of the milestone but after 17.03.2016, it filed the invoice dated 16.09.2016 by putting together all the milestones, which were not achieved by it. It failed to prove whether the work as mentioned in that invoice had been achieved by it or not.
viii, ix & x. CW1 in para 10 of his evidence affidavit has admitted that payments were to be made on a prorata basis against monthly invoices within 30 days from the approved invoicing day and for that C & C was to provide man months (manpower) to complete all the tasks outlined in Article 1 of the agreement. However, as brought out in the statement of defense and RW, the works were not completed by C & C and thus the manpower was not judicially utilized by it to complete the tasks and therefore WAPCOS is not bound to pay for such ineffective and injudicious deployment.
xi. That as the contract was milestone based and there was delay on the part of EPC Contractor to carry out its obligation, so how can C & C made its services for something, which was not done. So, it cannot be said to have performed its part for the purpose of getting discharged from its obligations.
xiii. That for the invoice dated 16.09.2016 filed by C & C for the work allegedly done between AprilJuly 2014, admittedly, it left the site in August 2014, the claim is barred by limitation and no fresh period of limitation arises simply because letters and reminders were written time & again.
xiv. That Arbitrator has granted an exorbitant interest @ 18% OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 16 of Pages 58 per annum without any basis.
xv. That since C & C only completed 50% of its scope of work, therefore, WAPCOS is entitled to claim the rest of 50% of the advance payment i.e. Rs. 16,44,300/ along with interest but the Arbitrator failed to take this into account and dismissed the counter claims.
xvi. That since C & C failed to complete the entire work, therefore, WAPCOS was entitled to claim 10% of the contract value as performance bond as per Article 10.4 i.e. Rs. 16,44,300/ along with the interest but the counter claim was dismissed by the Arbitrator committing grave error. xvii & xviii. That the impugned award on the face of it is against the public policy passed in a cryptic manner causing injustice to WAPCOS.
xix. That the Arbitrator disallowed the counter claims of WAPCOS arbitrarily without any basis and he completely lacked in judicial approach.
xxxii. That the impugned award is against the Fundamental Policy of Indian Law.
Objections by C & C:
24. C & C vide petition no. 167/2019 challenged the impugned award on the following grounds:
i. That the findings of the Arbitrator in respect of issue no. 3 i.e claims towards the additional mandays are cryptic, unreasonable and reflect nonapplication of judicial mind.
ii. That the Arbitrator erred in holding that in the absence of any extension of time of contract period, C & C is not entitled to claim any amount beyond the contract period.
iii & xiii. That the Arbitrator while holding that it is an admitted position that the additional mandays have been provided and duly proved by C & C erred in rejecting the claim solely on the basis that there was no extension of contract period. It is an OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 17 of Pages 58 established position of law that an extension of contract need not necessarily be in writing and the same can be inferred from the conduct of the parties and be proved from the oral evidence, in view of the law laid down in the case of Keshavlal Lallubhai Patel & Ors Vs. Lalbhai Trikumlal Mills Ltd, AIR 1958 SC 512 and Finolex Cables Limited Vs. Mahanagar Telephone Nigam Ltd, (MTNL), 2017 (163) DRJ 370.
iv. That the Arbitrator erred in ignoring the fact that 76 additional mandays were provided by C & C, which fact has not been disputed by WAPCOS and infact duly admitted by it.
v, vi & vii That the Arbitrator erred in ignoring the fact that the contract had been extended by the virtue of promise made by WAPCOS and it was under such promise C & C provided additional 76 mandays over & beyond the stipulated period under the agreement and he also erred in ignoring the fact that it was upon WAPCOS request of additional mandays that the same were provided by C & C or that he ignored the fact that C & C would have never deployed its staff and experts in the absence of a request by WAPCOS.
viii. That the Arbitrator erred in ignoring the evidence that a draft extension agreement was discussed between the parties, which would show that the additional mandays were being provided on WAPCOS request and the intention of the party was to extend the contract and the conduct of the party shows that the contract was impliedly and orally extended by the party.
ix. That the Arbitrator erred in ignoring the fact that C & C would have never deployed its manpower in the absence of promise by WAPCOS that C & C would be adequately compensated for the same.
x. That the Arbitrator erred in ignoring the fact that it was only because of additional mandays provided by C & C that WAPCOS was able to secure an additional contract which fact has been admitted by it in para 20 of the statement of defense.
xii. That the Arbitrator erred in ignoring that the documented invoices were raised by C & C for the additional mandays and the same were acknowledged by WAPCOS.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 18 of Pages 58 xv. That the reliance placed by the Arbitrator of the case Union of India Vs. Md. Samim Azad is misplaced and distinguishable on facts.
vi. That the consequential rejection of interest on the above amount under claim no. II is arbitrary, cryptic and unreasonable.
25. Along with the petition, an application was moved under Section 34 (3) seeking condonation of delay of four days in filing the objections to the impugned award. It was stated that after passing of award, the parties were moving towards an amicable out of court settlement till September 2019. WAPCOS till date, did not formally communicate to C & C that it was no longer interested in continuing with the settlement. It is only now when WAPCOS preferred the petition impugning the award. It is stated that the delay in filing the petition is neither intentional nor malafide. It has a good prima facie case and grave prejudice would be caused to it if delay is not condoned.
Arguments & contentions:
26. I have heard the arguments advanced by Ld. Counsel Sh.
Aakash Tyagi for WAPCOS and Sh. Arshdeep Singh, Ld. Counsel for C & C. The parties also filed the written submissions.
27. Ld. Counsel for WAPCOS reiterated what was stated in the objection petition and stated that the impugned award suffers from patent illegality, which is a ground available under Section 34 of the Act for setting aside an award. In support of his contentions, he OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 19 of Pages 58 referred the case of Patel Engineering Ltd Vs. North Eastern Electric Power Corporation Ltd, SLP (C) No. 358485 of 2020, ONGC Ltd Vs. Saw Pipes Ltd, (2003) 5 SCC 705 and Associate Builders VS. Delhi Development Authority (2015) 3 SCC 49. Ld. Counsel contended that the Arbitrator patently erred in allowing the partial claims of C & C on the basis of assumptions ignoring the relevant provisions of the contract and by disallowing the counter claims preferred by WAPCOS in an arbitrary and unreasonable manner. Ld. Counsel referred the agreement and the relevant Articles and submitted that C & C was obligated to achieve the milestones as prescribed under the agreement and thus alone was entitled to raise the invoice against the achievement of milestone as mentioned under Article 10.2 of the agreement and the intention of the parties while executing the contract cannot be interpreted in the manner that the only obligation of C & C was provide the mandays regardless of the fact whether they carry out the work or not. Further, a conjoint reading of the Articles would clarify that subject contract was a milestone based. The target was to be achieved by C & C in order to raise invoice, which would be first checked and approved by WAPCOS before processing for payment and the amount was payable to it after completion of the milestone and receiving the same from EWSA as the payment was on back to back basis. Ld. Counsel contended that C & C raised the invoice dated 16.09.2016 for Rs. 66,18,308/ by putting together all the milestones, which were not achieved by it. Ld. Counsel contended that all the invoices except the above invoice were initially checked OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 20 of Pages 58 and approved by WAPCOS in terms of Article 10.1 of the contract and the payments were made. Ld. Counsel contended that C & C has admitted in the statement of claims that the work carried out by EPC Contractor got delayed and remained incomplete, when it left the site. Though, as per the agreement, it was to provide the manpower to complete all the tasks outlined in the agreement. Since, the manpower was not judicially utilized to complete the tasks, so WAPCOS is not bound to pay for such ineffective and injudicious deployment. Ld. Counsel contended that as per the chart Ex. CW1/AT, WAPCOS has only received 87% of the payment from EWSA, therefore, C & C is not entitled for any payment. Ld. Counsel contended that since, C & C was the Associate of WAPCOS, it was obligated to share the risk as well. Ld. Counsel contended that it was not the case of C & C before the Arbitrator that WAPCOS has been compensated by EWSA but the Arbitrator proceeded on this assumption and allowed the claims, thus committed patent illegality against the terms of the contract, which is prejudicial to the right of WAPCOS. Ld. Counsel also referred the case of DDA Vs. R. S. Sharma & Co, (2008) 13 SCC 80 in support of his contentions.
28. As to the interest, Ld. Counsel submitted that the Arbitrator granted an exorbitant interest on the claims without any reasoning which is an illegality on his part. Ld. Counsel referred the case of Vedanta Limited Vs. Shenzhen Shandong Nuclear Power, CA No. 10394 of 2018 to contend that the discretion of the Arbitrator to OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 21 of Pages 58 award interest must be exercised judicially. He must take into account loss of use of the principal sum, types of sums to which the interest must apply, the time period over which, the interest should be awarded, the internationally prevailing rates of interest, whether the rate of interest awarded is commercially prudent from an economic standpoint and the rates of inflation etc. It should not be punitive and unconscionable in nature. Ld. Counsel submitted that the Court may reduce the interest rate awarded by Arbitrator, where such interest rate does not reflect the prevailing economic condition or where it is not found reasonable or where it promotes the interest of justice.
29. In respect of the counter claims, Ld. Counsel submitted that since C & C only completed 50% of its scope of work, therefore, WAPCOS is entitled to claim the rest of 50% of the advance payment.
30. In the end, Ld. Counsel submitted that since the awarded amount of Rs. 82,98,030/ has been paid and released to C & C in terms of the order dated 13.09.2019, WAPCOS does not have objection as to the award for a sum of Rs. 69,87,815/ and pre arbitration interest, however, WAPCOS has objection on the pendent lite and future interest @ 18% per annum from the date of filing of claim till its realization as granted by the Arbitrator.
31. Ld. Counsel for C & C per contra reiterated what has been stated in the objection petition and discussed the relevant provisions OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 22 of Pages 58 of the contract. Ld. Counsel also referred the case of Ssangyong Engineering & Construction Co. Ltd Vs. NHAI, 2019, SCC Online SC 1520 to contend that Section 34 of the Act as amended will apply only to the applications that have been made to the Court on or after 23.10.2015 irrespective of the fact that the Arbitration Proceedings may have commenced prior to that date. In the present case, Section 34 of the Act applications have been made in the year 2019. Ld. Counsel submitted that it is now a settled principle of law that the Court cannot examine the merits of the impugned award under the guise of a challenge under Section 34 of the Act and the Court must defer to the interpretation of the contract as provided by the Arbitrator unless the interpretation was so perverse that no reasonable person could have reached that same conclusion (Associate Builders supra). Ld. Counsel submitted that the construction of the terms of a contract is primarily for an Arbitrator to decide unless the Arbitrator constitutes 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. This position of law has also been affirmed in the case of Patel Engineering Ltd supra. Ld. Counsel submitted that none of the grounds raised by WAPCOS can be accepted to set aside the impugned award in the light of these limitations. Ld. Counsel contended that in the instant case, WAPCOS has challenged the interpretation of Article 10 of the contract by the Arbitrator without any averment as to how the approach adopted by the Arbitrator falls within the disqualifications of Section 34 (2) (a) (iv) of the Act. Ld. Counsel submitted that the OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 23 of Pages 58 Arbitrator has a right to provide a reasonable interpretation to the said contract and therefore, there is no occasion for the Court to interfere with this impugned award on this ground.
32. Ld. Counsel further argued that under Section 34 (2) (b) (ii) of the Act, the Court may set aside the award if the same is contrary to the Public Policy of India. In the instant case, the contention of WAPCOS is that the Arbitrator failed to adopt a judicial approach in adjudicating the dispute and it placed reliance on the case ONGC Ltd supra and Associated Builders supra but it failed to highlight that the said decisions were delivered prior to Amendment Act 2015, which clarified the scope of Section 34 of the Act. In the case of Ssangyong supra the Supreme Court has explicitly rejected the lack of judicial approach as a factor in the fundamental policy of Indian law. Therefore, the ground of lack of judicial approach no longer survives after the 2015 Amendment Act. Ld. Counsel further submitted that the contention of WAPCOS that the Arbitrator has contravened statutory provisions by delivering its award without mentioning which statutory provisions have been violated by him by placing reliance on the case of Union of India Vs. Col. L.S.N. Murthy (2012) 1 SCC 718, no longer survives after the 2015 Amendment as it was held in the case of Ssangyong (supra) that mere contravention of substantive law of India by itself is no longer a ground available to set aside an arbitral award.
33. Ld. Counsel submitted that in interpreting the contract, the OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 24 of Pages 58 Arbitrator has applied his mind and discussed the issues in detail and has given a reasonable, meaningful, appropriate and effective interpretation of the contract after detailed discussions and noting the submissions of the parties. He has also dealt with the various submissions made by the parties relating to jurisdiction, limitation and back to back payment in details. He has correctly interpreted Article 10 of the contract as provided for the schedule of payment. Ld. Counsel submitted that Article 10.2 of the contract does not provide that in the absence of these milestones been met, the payment shall not become due. The arguments of WAPCOS would necessarily entail the discussion of the merits of the case and a re appreciation of the evidence is impermissible in the proceedings under Section 34 of the Act. Ld. Counsel further submitted that the reading of the contract is also consistent with the testimony of CW1. Ld. Counsel submitted that since C & C had no control over the completion of milestone and would have no recourse, if through either the fault of WAPCOS or any other third party such as EPC Contractor, the milestone could not be achieved. Thus, the reading adopted by the Arbitrator is appropriate and reasonable.
34. As to the limitation, Ld. Counsel submitted that the Arbitrator has rightly noted that C & C has invoked arbitration by its letter dated 17.02.2017, which was within the period of limitation of three years. The delay in filing the statement of claim was caused solely by WAPCOS, who refused to consent for the arbitration.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 25 of Pages 58
35. As to the interest, Ld. Counsel submitted that the award of interest @ 18% is reasonable and cannot be interfered with. Under Section 31 (7) (a) & (b) of the Act, the Arbitrator has a discretion to include interest at such rate at it may deem to be reasonable. In the instant case, he has exercised his discretion and awarded the interest giving the reasons for the period from which, the interest would be payable holding that the transaction between the parties was commercial. Ld. Counsel referred the cases of Bhandari Foils & Tubes Vs. Mawana Sugars Ltd 2019 SCC OnLine Del 8008, Pel Industries Ltd VS. S. E. Investment Ltd, 2018 SCC OnLine Del 8746 and Subhash Verma Vs. Darshan Singh, 2019 SCC OnLine Del 7169, wherein the Delhi High Court has upheld the grant of 18% as being within the realm of reasonability in cases of a commercial nature. Ld. Counsel submitted that the case of Vedanta Limited (supra) referred by WAPCOS related to an international award, however, the instant case relates to domestic award.
36. As to the rejection of claim for additional mandays, Ld. Counsel submitted that the award can be set aside partially even for patent illegality as held in the case of J. C. Budhraj Vs. Chairman, Odisha Mining Corporation Ltd (2008) 2 SCC 444 and MMTC Limited Vs. Alcari S. A, 2013 OnLine Del 2932. Ld. Counsel submitted that the decision refusing to grant compensation for additional mandays is irrational and arbitrary. The Arbitrator ignored the law that in certain cases, an extension of contract can be implied from the conduct of the parties as held in the case of Bharat OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 26 of Pages 58 Petroleum Co. Ltd Vs. Great Eastern Shipping Co. Ltd (2008) 1 SCC 503 and Keshavlal Lallubhai Patel (supra) and Finolex Cables Ltd (supra). Ld. Counsel submitted that from the evidence of the parties, it is clear that the parties by their conduct had extended the contract and thus the finding of the Arbitrator in the face of such or wellbeing evidence is so irrational that it would be rendered infirm. The Arbitrator wrongly relied on the decision of Union of India Vs. Md. Samim (supra). Ld. Counsel submitted that the said case dealt with a situation, where a party was claiming future entitlement based on its conduct outside the scope of the contract but in this case C & C was claiming compensation for the work already done by it. Ld. Counsel submitted that the Arbitrator has accepted the fact that C & C was mobilized on site till August 2014 and therefore, it ought to be compensated for the additional mandays. Even if, the Arbitrator concluded that the contract was not extended, C & C would be entitled to payment for the services admittedly provided. By failing to compensate for the same, the Arbitrator has violated the most basic principle of quantum meruit i.e. where a party does certain work in legitimate expectation of compensation, the same work must be compensated as held in the case of Food Corporation of India Vs. Vikas Majdoor Kamdar Sahkari Mandli Ltd, (2007) 13 SCC 544, which principle is also incorporated in Section 17 of the Indian Contract Act. Ld. Counsel submitted that the said principle is based on equity and justice to ensure that no party is unjustly enriched. Reliance is also placed on the case of Mrs. Kavita Trehan & Anr Vs. Balsara Hygine Products Ltd, 1995 SC 441.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 27 of Pages 58 Adjudication/findings:
37. I have given my thoughtful consideration to the rival contentions and gone through the impugned award and the relevant documents as well as the case law supra.
38. Section 34 (3) of the Act provides a limitation period of three months for filing objections against an arbitral award. Proviso to Section 34 (3) of the Act provides an extended period of 30 days for filing the application and the court has the discretion to condone the delay, provided sufficient cause is shown by the party which prevented it from approaching the court in the limitation period of three months. In the case of DDA v/s Durga Construction, (2013) SCC Online Del 4451, it was held that although the courts have the jurisdiction to condone the delay, the approach in exercising such jurisdiction cannot be liberal and the conduct of the applicant will have to be tested on the anvil of whether the applicant acted with due diligence and dispatch. The applicant would have to show that the delay was on account of reasons beyond the control of applicant and could not be provided despite all possible efforts by the applicant. The proviso to Section 34 (3) of the Act is similar to that of Section 5 of the Limitation Act. It also relates to extension of period of limitation.
39. In the instant case, it has been submitted on behalf of C & C OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 28 of Pages 58 that the parties were moving towards amicable out of court settlement and carrying out the discussions, which were continuing even in September 2019. WAPCOS did not communicate to it that it was no longer interested for amicable settlement. It was when WAPCOS filed the petition impugning the award, C & C filed the petition. There is delay of four days in filing the petition.
I am of the view that sufficient cause has been explained by C & C for filing the objections beyond the period of 90 days as contemplated under the Act. The act of C & C seems to be bonafide and it cannot be said that there was intentional delay on its part. I therefore, allow the application and condone the delay.
40. Section 34 (1) of the Act provides that the arbitration award may be set aside by the Court on an application/petition for setting aside the same on any of the grounds specified in Section 34 (2) of the Act within the time prescribed. It reads as under:
"34.Application for setting aside arbitral award (1)Recourse to a court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and sub sec tion (3).
(2)An arbitral award may be set aside by the court only if
(a) the party making the application furnishes proof that
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any in dication thereon, under the law for the time being in force; or OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 29 of Pages 58
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contem plated by or not falling within the terms of the submis sion to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration;
Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submit ted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accor dance with this Part; or
(b) the court finds that
(i) the subjectmatter of the dispute is not capable of settlement by arbitration under the law for the time be ing in force, or
(ii) the arbitral award is in conflict with the public pol icy of India.
Explanation I For the avoidance of any doubt, it is clar ified that an award is in conflict with the public policy of India only if the making of the award was induced or affected by fraud or corruption or was in violation of Section 75 & Section 81."
ii) It is in contravention with the fundamental policy of Indian law;
iii) It is in conflict with the most basic notions of moral ity or justice.
ExplanationII For the avoidance of doubt, the test as to whether there is a contravention with the fundamen tal policy of Indian law shall not entail a review on the merits of the dispute.
[2 (A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 30 of Pages 58 set aside by the court, if the court finds that the award is vitiated by patent illegality appearing on the face of the award: Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.
41. Normally, the general principles are that the decision of the Arbitrator unless there is an error apparent on the face of the award which makes it unsustainable, is not to be set aside even if the court as a court of law would come to a different conclusion on the same facts. The court cannot reappraise the evidence and it is not open to the court to sit in appeal over the conclusion of the arbitrator. It is not open to the court to set aside a finding of fact arrived at by the arbitrator and only grounds on which the award can be cancelled are those mentioned in the Arbitration Act. Where the arbitrator assigns cogent grounds and sufficient reasons and no error of law or misconduct is cited, the award will not call for interference by the court in exercise of the power vested in it.
42. In Sudarsan Trading Co. v. Government of Kerala & Anr.
1989 AIR 890, it was observed that Court cannot substitute its own evaluation of the conclusion of law or fact to come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. Whether a particular amount was liable to be paid or damages liable to be sustained, was a decision within the competency of the arbitrator in the case. By purporting to construe the contract, the court could not take upon itself the burden of saying that this was contrary to the contract and, as such, beyond OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 31 of Pages 58 jurisdiction.
43. In the case of Hiedelberg Cement India Ltd Vs. The Indure Pvt Ltd, OMP (Comm) No. 413/2019 decided on 29.01.2020, it was held that law of judicial review and interference in proceedings under Section 34 of the Act is no more res integra. Reference of the case Associate Builders v/s Delhi Development Authority, (2015) 3 SCC 49 was made, where the Supreme Court has held as under: "19. When it came to construing the expression the pub lic policy of India contained in Section 34(2)(b)(ii) of the Arbitration Act, 1996,this Court in ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705: held: (SCC pp. 727 28 & 74445, paras 31 & 74)
31. Therefore, in our view, the phrase public policy of India used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied O.M.P. (COMM) 413/2019 Page 30 of 37 from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/deci sion is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term public policy in Renusagar case [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] it is required to be held that the award could be set aside if it is patently illegal.
The result would be award could be set aside if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality, or (d) in addition, if it is patently illegal.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 32 of Pages 58 Illegality must go to the root of the matter and if the il legality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.
74. In the result, it is held that: (A)(1) The court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:
(i) a party was under some incapacity, or
(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any in dication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or
(iv) the arbitral award deals with a dispute not contem plated by or not falling within the terms of the O.M.P. (COMM) 413/2019 Page 31 of 37 submission to arbi tration, or it contains decisions on matters beyond the scope of the submission to arbitration.
(2) The court may set aside the award:
(i)(a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties, (b) fail ing such agreement, the composition of the Arbitral Tri bunal was not in accordance with Part I of the Act,
(ii) if the arbitral procedure was not in accordance with:
(a) the agreement of the parties, or (b) failing such agreement, the arbitral procedure was not in accordance with Part I of the Act. However, exception for setting aside the award on the ground of composition of Arbi tral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 33 of Pages 58
(c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.
(3) The award could be set aside if it is against the pub lic policy of India, that is to say, if it is contrary to: (a) fundamental policy of Indian law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently il legal. (4) It could be challenged: (a) as provided under Section 13(5); and (b) Section 16(6) of the Act.......
44. It was held that in the very recent judgments, the Supreme Court has once again reiterated the law related to the examination by a Court of an Award under Section 34 of the Act. In Ssangyong Engineering & Construction Co. Ltd. vs. National Highways Authority of India Ltd. 2019 SCC OnLine SC 677, the Supreme Court has 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 As sociate Builders (supra), i.e., the fundamental policy of Indian law would be relegated to the Renusagar under standing of this expression. This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western Geco (supra), as ex plained 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 arbitra tor has not adopted a judicial approach, the Court's in tervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as con tained 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).
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 34 of Pages 58
36. It is important to notice that the ground for interfer ence 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 under stood as a conflict with the most basic notions of moral ity or justice. This again would be in line with O.M.P. (COMM) 413/2019 Page 34 of 37 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 un derstood 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 para graphs 36 to 39 of Associate Builders (supra). Explana tion 2 to Section 34(2)(b)(ii) and Explanation 2 to Sec tion 48(2)(b)(ii) was added by the Amendment Act only so that Western Geco (supra), as understood in Asso ciate Builders (supra), and paragraphs 28 and 29 in par ticular, is now done away with.
38. Insofar as domestic awards made in India are con cerned, an additional ground is now available under subsection (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality ap pearing 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 funda mental 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 reappreciation of evidence, which is what an appellate court is permit ted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 35 of Pages 58
40. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substan tive law of India, by itself, is no longer a ground avail able 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 con travenes Section 31(3) of the 1996 Act, that would O.M.P. (COMM) 413/2019 Page 35 of 37 certainly amount to a patent illegality on the face of the award.
41. The change made in Section 28(3) by the Amend ment 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 decide, unless the arbitrator con strues the contract in a manner that no fairminded or reasonable person would; in short, that the arbitrator's view is not even a possible view to take. Also, if the ar bitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of juris diction. This ground of challenge will now fall within the new ground added under Section 34(2A).
42. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of As sociate 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. Addi tionally, 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 per verse.
45. It was also observed that recently, in Hindustan Construction Company Limited & Anr. Vs. Union of India & Ors., 2019 SCC OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 36 of Pages 58 OnLine SC 1520, the Apex Court has held as under:
55. Further, this Court has repeatedly held that an appli cation under Section 34 of the Arbitration Act, 1996 is a summary proceeding not in the nature of a regular suit see Canara Nidhi Ltd. v. M. Shashikala2019 SCC O.M.P. (COMM) 413/2019 Page 36 of 37 OnLine SC 1244 at paragraph 20. As a result, a court reviewing an arbitral award under Section 34 does not sit in appeal over the award, and if the view taken by the arbitrator is possible, no interference is called for - see Associated Construction v. Pawanhans Helicopters Limited. (2008) 16 SCC 128 at paragraph 17.
56. Also, as has been held in the recent decision Ssangyong Engineering & Construction Co. Ltd. v. NHAI 2019 SCC OnLine SC 677, after the 2015 Amendment Act, this Court cannot interfere with an ar bitral award on merits. "
46. In the backdrop of the above, let me now examine the objections against the impugned award agitated by the parties, visa vis the contentions of Ld. Counsels for the parties.
47. In the instant case, there is no objection or dispute relating to appointment of the Arbitrator to whom the parties had submitted their claims and counter claims. The parties herein had joined each and every arbitration proceeding and filed reply to the claims/counter claims. The arbitration proceedings and attendance sheet confirm that C & C as well as WAPCOS had regularly appeared before the Ld. Arbitrator and were given due opportunities to defend and / or plead their respective cases. Only thereafter the impugned award was passed by the Arbitrator dealing with each of OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 37 of Pages 58 the claims, rival contentions and the findings thereon.
48. On a perusal of objections made by the parties, I find that the challenge is on substantive questions of facts which is not permissible under law. Even otherwise, from a careful perusal of the arbitration proceedings and the award therein, I find that the Arbitrator has given his findings only after considering the pleadings, documents and arguments advanced before him, that too after taking into account the oral and documentary evidence. Further, the scope and purview of deciding the present objections being limited one does not permit this Court to replace the finding given by the Arbitrator, by its own by reappreciating the evidence produced before the Arbitrator. However, in order to see as to whether the Arbitrator had travelled outside the terms and conditions of the contract agreement, as alleged by the parties, I deem it appropriate to consider the real controversy between the parties, which gave rise to the cause of action for filing the claim and the manner in which it was appreciated by the Arbitrator in reference to the terms of contract agreement.
49. As evident from the record, EWSA, Rwanda had awarded a contract of construction of 15MW peat to peat power plant at Rwanda to EPC Contractor. WAPCOS was awarded a contract to supervise the engineering procurement and construction of the plant. WAPCOS associated C & C for providing the consultancy services to EWSA vide agreement dated 21.01.2013 Ex. CW1/2. The scope OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 38 of Pages 58 of work was defined in the agreement as per which, C & C was obligated to assist WAPCOS in the task of supervising the engineering procurement system and providing services of one project director, one mechanical engineer, one civil expert, one site engineer and one engineer as per the schedule/Table. It was also obligated to associate WAPCOS in preparation of designs and recommendation reports. As per the agreement, the work was to be completed within 15 months i.e. from 21.01.2013 to 20.04.2014. The remuneration was fixed at Rs. 1,64,43,000/. As per the agreement, C & C had to raise the invoices on the basis of the progressive completion of work. Terms of payment were defined in Article 10.2 of the agreement. As per Article 10.3 of the agreement, all the payments were to be made to C & C after receipt of corresponding payment from EWSA on back to back basis. The details of the man months/mandays and rates were defined in Table I and II attached with the agreement. Perusal of the tables would show that the man months/mandays were not to be provided for whole of the period of 15 months i.e. the contract period but for the specified/limited period depending upon the requirement. It is not in dispute that the scope of work was dependent on the work to be executed by EPC Contractor engaged by EWSA. The record reveals that EPC Contractor delayed the work due to which, C & C could not complete the work within the stipulated time. Nevertheless, during the agreement period, C & C had provided the work force as per Table I of the agreement. C & C raised the invoices for the work done Ex. CW1/6A to Ex. CW1/6E, which were verified and duly paid by WAPCOS. C & C OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 39 of Pages 58 before the expiry of the contract period had claimed to have written a letter dated 17.03.2014 Ex. CW1/7 to WAPCOS apprising the status of the progress inter alia that the majority of works are still pending by EPC Contractor and the project may go beyond the stipulated time period and requested for an extension of six months or till the erection of plant by EPC Contractor. WAPCOS has denied having received the letter Ex. CW1/7. The record shows that C & C continued providing the services beyond the contract period upto August 2014. It has submitted a chart Ex. CW1/5 giving the details of additional 76 mandays provided after the contract period to supervise the work. In the instant case, there is no record to show that WAPCOS had granted any extension to C & C. It is also not in dispute that when C & C withdrew the manpower in August 2014, the construction of plant had not been completed by EPC Contractor. The balance supervision and consultency work was carried out by WAPCOS. C & C raised an invoice Ex. CW1/6F dated 16.09.2016 for Rs. 67,18,308/ but it was not released/paid by WAPCOS. Various letters were exchanged by the parties and meetings were held. WAPCOS in its reply dated 27.10.2016 informed that they are unable to reconcile the demand visavis justification, which led to arbitration.
50. The Arbitrator in the impugned award observed that undisputedly, EPC Contractor delayed the construction works to be supervised by the parties together resulting into not only delay in completion of project but also in the supervision work. Facts & OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 40 of Pages 58 circumstances show that WAPCOS had direct contact with EWSA, Rwanda and there were no contractual rights or duties between C & C and EWSA. Thus, C & C could not knock the door of EWSA or EPC Contractor for redressal of its grievances on account of delay in construction leading to noncompletion of supervision work. It was WAPCOS, which could perhaps seek the redressal and was entitled to impress upon EWSA to quicken up the work to be supervised. It was also observed that the contractual relationship between WAPCOS and EWSA was in the special knowledge of WAPCOS and the Arbitration Tribunal and C & C were kept in dark about it. It may be possible that WAPCOS may be entitled to be compensated and has been compensated by EWSA for the delay. It was observed that dominant role in the supervision was of WAPCOS and C & C was required to assist it by playing the subordinate role of providing manpower as per the contract and Table I, which role was duly performed by C & C by providing the manpower during the contract period to the satisfaction of WAPCOS. Ld. Arbitrator discussed the contract, terms & conditions and the documents placed/relied by the parties as well Ex. CW1/AT and observed that after August 2014, WAPCOS alone had done the supervision work, completed it and received the payment from EWSA. It was also observed that as per the agreement, WAPCOS could terminate the agreement and invoke the bank guarantee, impose the delay penalty and invoke the performance bond but nothing of the sort was done by WAPCOS against C & C implying that WAPCOS had no grievance against C & C so far as the performance of part of contract by it during the OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 41 of Pages 58 contract period. The main requirement from C & C was to provide manpower, which as per the document Ex. CW1/5 had been provided by it and admitted by WAPCOS. Thus, it had performed its basic duty, which was in its control. The progress in construction work was not the part of its duty and the fact that the construction work stopped or was not in progress midway of the contract on account of inaction on the part of EPC Contractor does not come to the rescue of WAPCOS. The reading of the contract Ex. CW1/2 suggests that C & C was not only to provide the requisite manpower but also to assist WAPCOS in the supervision work. It cannot be said that on account of inaction on the part of EPC Contractor, C & C has not paid salary/remuneration to its manpower. When it is not at fault and the progress of construction was not in its control and it had provided the requisite manpower as per the requirement of WAPCOS for the contract period, it is entitled to receive the balance payment of Rs. 69,87,815/ for the contract period for which, the requisite manpower was supplied by it to WAPCOS.
51. In this case as evident, while passing the impugned award, Ld. Arbitrator in interpreting the contract had applied his mind, discussed the issues in detail and given a reasonable, meaningful, appropriate and effective interpretation of the contract after detailed discussions, noting the submissions of the parties, which cannot be interfered with. I agree with the submissions of Ld. Counsel for C & C that discussions on the merits of the case and reappreciation of evidence is impermissible in the proceedings under Section 34 of the OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 42 of Pages 58 Act. There is nothing on record to show that WAPCOS at any time during the contract period had asked C & C not to provide the requisite manpower as provided in the contract owing to delay in the construction activities by EPC Contractor. WAPCOS has also not disputed about the deployment of the manpower as per the document Ex. CW1/5 during the contract period. The sheet submitted with the agreement/contract shows that the mandays were taken as the basis for assessing the contract value. The document Ex. CW1/AT would show that WAPCOS had taken extension of time and completed the work alone and received the payment from EWSA after C & C withdrew the manpower.
It was observed by the Arbitrator that there was no privity of contract between C & C and EWSA or EPC Contractor. The contract was between WAPCOS and EWSA and therefore, C & C could not knock the door of EWSA for redressal of its grievances on account of delay on the part of EPC Contractor. During the contract period, no action was taken by WAPCOS against C & C nor made any grievance against it as to the performance of the part of contract by it. The main requirement from C & C was to provide manpower, which was duly provided as admitted by WAPCOS, thus, it performed its basic duty, which was in its control. It had also paid remuneration to its manpower, so on account of inaction on the part of EPC Contractor, it cannot be denied payment as it was not at fault nor the progress was under its control.
52. I am in agreement with the contention of Ld. Counsel for C & OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 43 of Pages 58 C that the grounds taken in the objections are the grounds for appeal, which are not envisaged under Section 34 of the Act. It was held in the case of State Trading Corporation of India Ltd Vs. Teopfer International Asia PTE Ltd FAO (OS) 242/2014 that Section 34 proceeding which in essence is the remedy of annulment, cannot be used by one party to convert the same into a remedy of appeal. Finality of the award is very important. An interpretation placed on a contract is a matter within the jurisdiction of the Arbitral Tribunal and even if an error exists, this is an error of fact within jurisdiction which cannot be reappreciated by the Court under Section 34 of the Act. Legal position is no more res integra that the Arbitrator having been made the final Arbiter of resolution of dispute between the parties, the award is not open to challenge on the ground that Arbitrator has reached at a wrong conclusion. If we were to start analyzing the contract between the parties and interpreting the terms and conditions thereof and which will necessarily have to be in the light of the contemporaneous conduct of the parties, it will be nothing else than sitting in appeal over the arbitral award and which is not permissible.
53. It is thus clear that the section 34 does not envisage every award to be challenged but limits the challenge to only those awards which are against the public policy of India or are patently illegal. The expansive scope of challenge to an award under the ground of patent illegality as held in "ONGC v. Saw Pipes Ltd" (supra) is further reduced by the Supreme court in the recent judgment titled OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 44 of Pages 58 Ssyangyong Engineering v. NHAI (supra).
54. In Mc Dermott International Inc v. Burn Standard Co. Ltd and Ors, CA No. 4492 of 1998, the Supreme Court has observed as under:
"It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement, is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot, be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law."
55. As regards challenge to the impugned award on the ground of patent illegality due to non appreciation of evidence, the Supreme Court has curtailed the scope of the ground of patent illegality in Ssyangyong Engineering v. NHAI (supra). The threshold of such patent illegality is that re-appreciation of evidence cannot be undertaken to urge and decide patent illegality.
56. As regards the contention that the Arbitrator has interpreted the contract which interpretation is not in line with the terms of the contract and is contrary to the law of land, I am of the view that this was the possible interpretation made by the Arbitrator, which does OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 45 of Pages 58 not require any interference from the Court in terms of Section 34 of the Act. In this case, Ld. Arbitrator had discussed the terms and conditions of the contract and dealt with the submissions and passed the impugned award. It is not the case that the Arbitrator was bias or had not given opportunities to the parties to present their case or file the documents or lead the evidences. All the contentions were discussed in detail and thereafter, the impugned award was passed, which is supported with reasons.
57. As to the limitation, it was observed that the claim was filed within three years, thus not barred by limitation. In the instant case, the contract Ex. CW1/2 executed between the parties expired on 20.04.2014. The arbitration was invoked by C & C vide its letter dated 17.02.2017 Ex. CW1/17, thus within limitation.
58. As to the limitation qua the counter claims, it was held in the case of State of Goa Vs. Praveen Enterprises, (2012) 12 SCC 581 that as per Section 3 (2) (b) of the Limitation Act, 1963, the limitation will start from the day on which, the counter claim is made, which is also applicable to arbitrations. While deciding the issue no. 5, it was observed that the counter claim no. I had never been raised by WAPCOS against C & C in the prearbitration period during discussions or in the correspondences and it was raised for the first time on 23.11.2013 leading to the irresistible conclusion that the counter claim is barred by time.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 46 of Pages 58
59. In the instant case, there is nothing on record to show that the impugned award on the face of it is against the public policy or the Arbitrator acted arbitrarily or lacked in judicial approach or the award is against the fundamental policy of India. All the relevant provisions of the contract were considered. I am of the view that the interpretation of the contract as provided by the Arbitrator was reasonable and cannot be said to be perverse that no reasonable person could have reached the same conclusion. It is well settled law that the construction of the terms of a contract is primarily for an Arbitrator to decide unless the Arbitrator construes the contract in a manner that no fair minded or a reasonable person would; in short that the Arbitrator's view is not even a possible view to take. Further WAPCOS has failed to explain how the approach adopted by the Arbitrator was false within the disqualifications of Section 34 (2) (a)
(iv) of the Act.
60. It is also important to mention that during the arguments, Ld. Counsel for WAPCOS conceded the claim and the award amounting to Rs. 69,87,815/ + prearbitration interest passed in favour of C & C.
61. Now coming to claim no. II i.e. payment towards additional mandays provided by C & C, it is true that there is no bar on partial setting aside of an arbitral award, if the offending portion can be severed from the rest of award but in the instant case, it is not in dispute that the agreement between WAPCOS and C & C for OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 47 of Pages 58 supervising and providing the work force was for a period of 15 months from 21.01.2013 to 20.04.2014. It is also not in dispute that owing to the delay on the part of EPC Contractor, only 50% work could be executed during the contract period. According to C & C, it had written a letter dated 17.03.2014 Ex. CW1/7 to WAPCOS that it would need additional mandays over & above the number/contract value to enable it to fully discharge the obligations towards EWSA, who in response told it that it would be able to secure an extension/renewal/amendment to the contract from ESWA and assured it that it would not only pay for such additional mandays but also extend the contract. WAPCOS categorically denied having received the letter Ex. CW1/7 from C & C or giving assurance to secure the extension and pay to C & C for the additional mandays. In the instant case, C & C did not file any proof as to the receipt of the letter or the assurance by WAPCOS. C & C has also failed to place on record any document that WAPCOS had extended the contract/agreement Ex. CW1/2 for a period of six months. Nevertheless, it is not in dispute that C & C continued with the deployment of the manpower and provided 76 additional mandays upto August 2014.
Question arises, why C & C deployed the work force after the contract period in the absence of any request from the side of WAPCOS or extension of contract. It was contended by Ld. Counsel for C & C that extension of contract can by implied from the conduct. Ld. Counsel referred the case of Bharat Petroleum Co. Ltd (supra), Keshavlal Lallubhai Patel (supra) and Finolex Cables Ltd OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 48 of Pages 58 (supra) to contend that from the evidence of the parties, it is clear that the parties by their conduct had extended the contract.
Perusal of record would show that neither there was consent of WAPCOS when C & C decided to continue with the services after the contract period nor there was consent of WAPCOS, when C & C withdrew the manpower in August 2014. It is to be noted that when C & C withdrew the manpower in August 2014, the work of power plant had not been completed and was in progress. It was WAPCOS, who alone did the supervision work, completed it and received the payment from EWSA as evident from the document Ex. CW1/AT.
62. Had there been implied consent on the part of WAPCOS as to the extension of contract as alleged, what made C & C withdraw the manpower midway in August 2014. It assumes significance because by that time the project had not been completed and it was WAPCOS alone, who provided the services after August 2014 to EPSA, Rwanda. This very fact gives strength to the observations of Ld. Arbitrator that WAPCOS had not granted extension of time. Further, it cannot be interpreted from the contract that the obligation of C & C was only to provide the mandays irrespective of fact whether the progress has been achieved or not or the work has been completed or not. The decision to provide additional mandays was of C & C and there was no request or approval by WAPCOS. Ld. Arbitrator took note of all these facts and held that in the absence of extension of time of contract period, C & C is not entitled to claim OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 49 of Pages 58 any amount beyond the contract period. According to WAPCOS, since the work had not been completed, it was under the impression that C & C would continue giving the services since the payment was dependent on the milestone not the mandays. In the instant case, there is nothing on record to indicate that because of the additional mandays provided by C & C, WAPCOS could secure the additional contract. It is true that C & C had raised invoices for the additional mandays but WAPCOS always denied its liability to pay for the same.
63. During arguments, Ld. Counsel for C & C referred the mails Ex. CW1/8A to Ex. CW1/8N, statement of account of C & C Ex. CW1/9, letter dated 04.03.2015 Ex. CW1/10 and payroll and duty chart Ex. CW1/11 and submitted that even after the expiry of the contract period, WAPCOS had arranged the air tickets for the manpower provided by C & C. This shows that WAPCOS had impliedly agreed for the extension of time. In the statement of defense, WAPCOS in Para 20 has categorically stated that the additional agreement between WAPCOS and EWSA was to provide additional manpower by WAPCOS to EWSA as C & C abandoned the site and failed to complete the work. C & C was not associated with this and therefore has no claims on the additional agreement.
64. On a perusal of the emails and the records, I find that WAPCOS after the expiry of contract period never asked C & C to withdraw the work force nor there is any correspondence to show OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 50 of Pages 58 that it had agreed to pay for the additional manpower to be provided after the contract period. WAPCOS had paid the travel charges of the manpower deployed by C & C after the contract period taking C & C as the Associate of WAPCOS. It was only when, C & C withdrew the manpower from the project, which had not been completed, WAPCOS completed the remaining work to make the plant functional. Ld. Arbitrator thus held that since there was no extension of contract by WAPCOS, C & C is not entitled to the sum claimed for the additional mandays after the contract period.
65. I may also add that the submissions made by the Ld. Counsel for C & C that the Court cannot examine the merits of the impugned award under the guise of a challenge under Section 34 of the Act and the construction of the terms of a contract is primarily for an Arbitrator to decide is equally applicable to the objections filed by it qua the claim of additional mandays denied by the Ld. Arbitrator. In the instant case, while deciding the aforesaid claim, Ld Arbitrator has discussed the scope of the contract, terms & conditions and the documents and thereafter, arrived at the conclusion, which in no way can be said to be patently illegal, irrational, arbitrary, rendering it infirm nor it can be said that the Ld. Arbitrator violated the basic principle of quantum meruit. It is not for this Court to sit in appraisal of the material led before the Arbitrator and this Court will not open itself to the task of being a judge on the material placed before the Arbitrator which was subject matter of dispute. The Arbitrator has decided upon the issues under reference which were within his OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 51 of Pages 58 competence and as per the agreement entered into between the parties.
Though, there are objections that the arbitrator went beyond the terms of the contract/reference but on a perusal of the arbitration proceedings as well as the award, I find that the award was not only within the confines of terms of reference but also was based on the terms and conditions of admitted contract/agreement. The Arbitrator has duly explained the reasons for arriving at his decisions and the objectors before this Court has failed to bring its case within the contours of Section 34(2) of the Arbitration and Conciliation Act, 1996.
66. Now coming to the interest part, it was contended by Ld. Counsel for WAPCOS that an exorbitant interest on the claims has been granted without any reasoning. Ld. Counsel contended that the interest rate awarded by the Arbitrator does not reflect the prevailing economic condition nor it is rational nor is commercially prudent from an economic standpoint. Ld. Counsel for C & C per contra submitted that under Section 31 (7) (a) & (b) of the Act, the Arbitrator has discretion to include interest at such rate as he may deem to be reasonable. Ld. Counsel submitted that the case of Vedanta Limted (supra) relates to an international award while the instant case relates to domestic award and in view of the judgment in the case of Bhandari Foils & Tubes Vs. Mawana Sugars Ltd 2019 SCC OnLine Del 8008, Pel Industries Ltd VS. S. E. Investment Ltd, 2018 SCC OnLine Del 8746 and Subhash Verma Vs. Darshan Singh, OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 52 of Pages 58 2019 SCC OnLine Del 7169, where the High Court has upheld the grant of 18% interest per annum in the cases of commercial nature, the pendent lite and future interest @ 18% per annum granted by the Ld. Arbitrator is a reasonable one, since, the present case also relates to commercial transaction. Ld. Counsel contended that in the case of Vedanta Limited (supra), it was held that the Court may reduce the interest rate, if it does not reflect the prevailing economic condition but since, in the instant case, the transaction is commercial in nature and that WAPCOS had also claimed commercial rate of interest @ 18% per annum in respect of counter claims, the interest rate @ 18% per annum awarded by the Arbitrator is reasonable.
67. I have considered the submissions.
68. Section 31 (7) of the Act provides that the Arbitrator is competent to award interest for the period commencing with the date of award or the date of realization, whichever is earlier. In terms of Section 3 of the Interest Act, 1978 also, the Arbitrator is competent to award interest at the rates prevailing in the banking transactions. In the case of MSK Projects (I) (JV) Ltd v/s State of Rajasthan & anr, 2011 (8) JT 37 (SC), it was held that Arbitrator is competent to award interest for the period commencing with the date of award or the date of decree or date of realization, which ever is earlier. While the amount of interest is a matter of substantive law, the grant of interest for the part award period is a matter of procedure.
In the instant case, Ld. Arbitrator has recorded the reason for OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 53 of Pages 58 awarding such a rate of interest and held that the transaction between the parties was commercial in nature and C & C is entitled to interest @ 18% per annum. He has exercised the discretion by giving reasons, therefore, the reasons cannot be said to unreasonable or perverse. It is to be noted that in the counter claims filed by WAPCOS, it had also claimed interest @ 18% per annum being the commercial transaction. It is not understood now on what basis WAPCOS is claiming that the interest awarded by the Arbitrator @ 18% per annum is arbitrary or unreasonable. It was also held in the case of Hiedelberg Cement India Limited (surpa) that grant of interest is in the discretion of Arbitrator. In the case of Vedanta (supra) it was observed that the imposition of a high rate of interest @ 15% post 120 days is exorbitant from an economic standpoint, and has no corelation with the prevailing contemporary international rates of Interest. In the instant case, the prevailing contemporary domestic rate of interest in commercial transaction is around 18% per annum. In the case of Bhandari Foils & Tubes (supra), Pel Industries Ltd (supra), and Subhash Verma Vs. Darshan Singh (supra), the High Court has also upheld the grant of 18% interest per annum in the cases of commercial nature.
69. Looking into the nature of contract and the transaction being the commercial transaction and that WAPCOS had also claimed interest @ 18% per annum, I do not find any illegality or arbitrariness in the impugned award as to granting of pendent lite and future interest @ 18% per annum.
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 54 of Pages 58
70. Now coming to the additional claims of C & C, it was observed by the Arbitrator in para 90 of the award that since, the original bank guarantee dated 24.01.2013 and advance payment bank guarantee have been released to C & C and the claims have been satisfied, C & C has not pressed for the additional claims and preventive injunctions for the preservation of assets.
71. As regards the counter claims of WAPCOS, it was observed by Ld. Arbitrator that since, it was held that C & C is entitled to the unpaid balance contractual amount due to it, so there is no question of refund of 50% of the mobilization amount, which seems to have been adjusted by WAPCOS against the payment already admittedly due and paid to C & C and that C & C had duly carried out the mobilization as provided under the contract and there was no grievance expressed by WAPCOS, so there was no cause for invoking the performance bond. It was also held that since, C & C had fully provided the services under the contract, there was no cause for the WAPCOS for invoking the performance bond as per Article 10.4 of the contract.
Since the finding of the Arbitrator is based on reasoning after interpreting the Clauses of the agreement, I find no reason to interfere as the same does not come within the scope of Section 34 of the Act.
Conclusion:
OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 55 of Pages 58
72. Now to sum up in the instant case, most of the grounds raised by the parties to challenge the award are factual in nature which have been already considered and adjudicated in the impugned award. It is outside the scope of Section 34 of the Act to reappreciate the entire evidence and come to conclusion because such an approach would defeat the purpose of arbitration proceedings. It has been consistently held that when a court is applying the public policy test to an arbitration award, it does not act as a court of appeal and consequently, errors of facts cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quality and quantity of evidence to be relied upon when he delivers his arbitral award. Once, it is found that the arbitrator's approach is not arbitrary or capricious, then he is the last word on facts. (P.R Shah, Shares & Stock Brokers (P) Ltd v. B.H.H Securities (P) Ltd. [(2012) 1 SCC
594).
73. A perusal of the arbitral award shows that the arbitrator has examined all the relevant aspects of the agreement, the correspondences made by the parties, the terms of the contract and the conduct of the parties. He has remained inside the parameters of the contract and has construed the provisions of the contract. The parties have failed to establish that the arbitrator has travelled beyond the terms of the contract.
74. Having examined the various contentions of the parties on the OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 56 of Pages 58 touchstone of the parameters of interference as explicitly laid down by the Supreme Court in several judgments referred to above, I am of the view that the impugned Award does not suffer from any infirmity or error apparent on the face of record. It is not for this Court to sit in appraisal of the evidence led before the learned Arbitrator and this Court will not open itself to the task of being a judge on the evidence placed before the Arbitrator which was subject matter of dispute. In the present case, the Arbitrator has deliberated on the issues under reference which were within his competence and as per the agreement entered into between the parties. There are no allegations against the Arbitrator of misconduct nor of having misconducted the proceedings which have either been specifically alleged by the parties or established. The Arbitrator has duly explained the reasons for arriving at his decisions. There is nothing to indicate that award is in conflict with the basic notions of justice and the fair play or fundamental policy of Indian law or in contravention of the terms of the agreement or it lacks reasoning as pleaded in the objections.
75. For the aforesaid discussions, I am of the view that the impugned award does not call for interference. There is no merit in the petitions and the same are hereby dismissed with no orders as to costs.
76. The files be consigned to record room. Original copy of the judgment/order be kept in the petition bearing OMP Comm OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 57 of Pages 58 No. 167/2019 and the copy of the judgment/order be kept in the petition bearing OMP Comm No. 159/2019.
Announced in open court today i.e. 31st July, 2020 (Sanjiv Jain) District Judge (Commercial) - 03 Patiala House Courts, New Delhi OMP Nos. 167/2019 & OMP Nos. 159/2019 Page no. 58 of Pages 58