Madras High Court
Bharat Heavy Electricals Limited vs M/S.P & R Infraprojects Ltd on 13 July, 2022
Author: M.Sundar
Bench: M.Sundar
Arb.O.P (Com.Div) No.292 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Dated : 13.07.2022
Coram
THE HONOURABLE MR. JUSTICE M.SUNDAR
Arb.O.P (Com.Div) No.292 of 2022
Bharat Heavy Electricals Limited
690, Anna Salai, EVR Periyar Building
Nandanam, Chennai - 600 035
Rep. by its Executive Director Mr.G.Murali ... Applicant
vs.
M/s.P & R Infraprojects Ltd.,
1st and 2nd Floor, Sector - 35A
Chandigarh - 160 036 ... Respondent
Petitioner filed under Section 34 of Arbitration and Conciliation
Act, 1996 to set aside the award dated 24.12.2021 to the extent that it
allows claim Nos.2 and 7 and rejects counter claim Nos.1, 2 and the
partial rejection of counter claim No.3 and for costs.
For Petitioner : Mr.Krishna Srinivasan
assisted by Ms.Geethi Ara
along with
Mr.Karthik Ram Mohan
Mr.Chitra Srinivasan
Ms.V.Nithyashree
of M/s.S.Ramasubramaniam &
Associates
https://www.mhc.tn.gov.in/judis
1/25
Arb.O.P (Com.Div) No.292 of 2022
ORDER
Captioned 'Arbitration Original Petition' ('Arb.OP' for the sake of brevity) has been presented in this Court on 06.06.2022 under Section 34 of 'The Arbitration and Conciliation Act, 1996 (Act No.26 of 1996)', which shall hereinafter be referred to as 'A and C Act' for the sake of brevity, assailing an arbitral award dated 24.12.2021 made by an 'Arbitral Tribunal' ['AT' for the sake of brevity] constituted by a sole Arbitrator. This arbitral award dated 24.12.2021 shall henceforth be referred to as 'impugned award' (in this order) for the sake of brevity, convenience and clarity.
2. Mr.Krishna Srinivasan, assisted by Ms.Geethi Ara along with Mr.Karthik Ram Mohan, Ms.Chitra Srinivasan and Ms.V.Nithiyashree of M/s.S.Ramasubramaniam & Associates (Law Firm) is before this Court on behalf of protagonist of captioned Arb. OP i.e., 'Bharat Heavy Electricals Limited' [hereinafter 'BHEL' for the sake of convenience and clarity].
3. As the matter on hand is a Section 34 legal drill in the admission Board, short facts shorn of elaboration will suffice. Factual matrix in a nutshell is that BHEL awarded a contract for 'Fabrication and erection of structural steel in power house, bunker bay, pipe rack & other https://www.mhc.tn.gov.in/judis 2/25 Arb.O.P (Com.Div) No.292 of 2022 miscellaneous structures for 2x500 MW unit 2 at NTPL Tuticorin TPP, Tuticorin, Tamilnadu' [hereinafter 'said work' for the sake of brevity, convenience and clarity] in and by a 'contract agreement dated 03.05.2011 bearing reference Agreement No.BHEL:PSSR:SCT:1371(2)' [hereinafter 'said contract' for the sake of brevity, convenience and clarity]; that the contractor had to complete said work qua said contract within 18 months from the second 'Letter of Intent' ['LOI' for brevity] with a further grace period of four months; that this time period elapsed in January of 2012; that the contractor did not complete said work within this time frame; that the contractor completed only 40% of said work resulting in de -scoping and completion of the balance work by BHEL by deploying another contractor; that this led to arbitrable disputes; that there is an arbitration clause qua said contract is beyond any pale of disputation; that arbitration clause was triggered and a former Hon'ble Judge of this Court was appointed as sole Arbitrator; that the 'Arbitral Tribunal' ('AT' for the sake of brevity) was thus constituted; that before the AT contractor was the claimant and BHEL was the respondent; that before AT contractor made claims under 10 heads and BHEL made counter claims under 4 heads; that as regards 10 heads of claims made by the contractor, 8 were rejected; that out of the remaining two heads of https://www.mhc.tn.gov.in/judis 3/25 Arb.O.P (Com.Div) No.292 of 2022 claims, one head of claim pertaining to compensation qua hire charges for withholding plant, equipment and machinery was partly allowed [Rs.40,07,916/- with interest at the rate of 15% per annum claimed and this was allowed albeit without interest]. With regard to the other head of claim namely Claim No.7 where a sum of Rs.69.35 lakhs was claimed towards return of Bank Guarantee, the claim was acceded to in its entirety; that regarding 4 heads of counter claim made by BHEL, three were rejected and one head of counter claim, namely counter claim No.3 regarding recovery of materials i.e., steel given to the contractor by BHEL was allowed in part [Rs.5,30,34,168/- claimed but Rs.1,60,62,500/- was awarded]; that this Court is informed that the contractor has not preferred any separate Section 34 petition qua impugned award to the knowledge of BHEL; that BHEL has come to this Court assailing the impugned award in and by captioned Arb.OP.
4. Notwithstanding very many averments and several grounds that have been raised in the captioned Arb.OP, learned counsel for BHEL submitted that he would raise three points in his campaign against the impugned award and broadly stated they are as follows:
a) While Claim Nos.1 and 7 of the contractor have been dealt with by applying different yardsticks as the same pertain https://www.mhc.tn.gov.in/judis 4/25 Arb.O.P (Com.Div) No.292 of 2022 to Security Deposit one part of which was given by Bank Guarantee and another part of it was by deduction qua running bills;
b) As regards Claim No.2 of the Contractor pertaining to hire charges for alleged withholding, the onus has been erroneously shifted on BHEL;
c) As regards the counter claim of BHEL regarding steel that was given by BHEL to the Contractor for said work every ounce of steel ought to have been accounted for and AT erred in resorting to approximation approach.
5. Furthering his argument on the aforementioned three points qua campaign against the impugned award, learned counsel submitted that the above would fit into the pigeon hole of patent illegality i.e., Section 34(2A) of A and C Act besides Section 28(3) of A and C Act as according to him impugned award is contrary to the terms of said contract. It was also argued that the question of giving benefit of doubt does not arise.
6. Before considering the points that have been raised by the protagonist of captioned Section 34 petition, this Court deems it appropriate to set out the scope of a legal drill under Section 34 of A and https://www.mhc.tn.gov.in/judis 5/25 Arb.O.P (Com.Div) No.292 of 2022 C Act. A legal drill under Section 34 of A and C Act has to perambulate within the statutory perimeter sketched by A and C Act which has been elucidatively explained in a long line of authorities, more particularly in oft-quoted Associate Builders case [Associate Builders Vs. Delhi Development Authority reported in (2015) 3 SCC 49] , which was further explained by Hon'ble Supreme Court in Ssangyong case law [Ssangyong Engineering and Construction Company Limited Vs. National Highways Authority of India reported in (2019) 15 SCC 131]. The principle qua a legal drill under Section 34, set out in a nutshell is, it is neither an appeal nor a revision. It is not even a full-fledged judicial review. It is a mere challenge to an award within the pigeon holes adumbrated under Section 34. If a protagonist of a Section 34 is able to demonstrate to the Court that his claim fits into, nay fits snugly into one or more of the pigeon holes, the protagonist will be entitled to have the arbiral award dislodged. If that not be so, the Court will not venture into disturbing the arbitral award by judicial intervention. This in effect is a fine and delicate balance between minimum judicial intervention principle ingrained in Section 5 read with sanctity of finality of arbitral award ingrained in Section 35 on one side and default provision i.e., https://www.mhc.tn.gov.in/judis 6/25 Arb.O.P (Com.Div) No.292 of 2022 Section 34 predicated on judicial review which is an essential ingredient of Rule of Law on the other.
7. To put it differently, this Court is not sitting in appeal qua the impugned award. This Court reminds itself that it is a Section 34 Court and the legal drill has to perambulate within the statutory perimeter sketched by A and C Act as elucidatively explained by Hon'ble Supreme Court in the aforementioned case laws which are instructive.
8. This Court also reminds itself that a Section 34 legal drill is a summary procedure. This principle was laid down by Hon'ble Supreme Court in oft-quoted Fiza Developers case law [Fiza Developers and Inter-Trade Private Limited Vs. AMCI (India) Private Limited reported in (2009) 17 SCC 796]. Fiza Developers principle was held to be a step in the right direction by Hon'ble Supreme Court in Emkay Global case being Emkay Global Financial Services Ltd., v. Girdhar Sondhi reported in (2018) 9 SCC 49. Drawing inspiration from Fiza Developers and Emkay Global principles, this Court in exercise of powers under Section 82 of A and C Act has made Rules captioned 'The Madras High Court (Arbitration) Rules, 2020' [hereinafter 'MHC Arb. Rules' for the sake of convenience and clarity] and most relevant clause https://www.mhc.tn.gov.in/judis 7/25 Arb.O.P (Com.Div) No.292 of 2022 is clause 8.5 of Practice Directions thereat, which reads as follows:
'8.Challenge to an award under Section 34 of the Act:
8.1 .....
8.2 .....
8.3 .....
8.4 .....
8.5 Proceedings under Section 34 of the Act shall be disposed of by a summary procedure.'
9. Clause 8.5 of Practice Directions which forms part of MHC Arbitration Rules will make it clear that the case on hand has to be disposed of by adopting a summary procedure. Before that it has to pass muster qua admission as Rule 8 of MHC Arb. Rules reads as follows:
'8. Procedure in relation to petitions under Section 34 of the Act:
(i) Every petition under Section 34 shall be posted for admission before the Court. On hearing a petition under Section 34 for admission, the Court may-
(a) admit and order notice to the respondent, or
(b) direct the petitioner to issue notice along with the petition and documents to the respondent before the matter is heard for admission; or
(c) dismiss the petition, with or without costs.
(ii) Where the court orders notice on admission, the Court shall endeavour to decide the admission within three months from the date of first hearing.
https://www.mhc.tn.gov.in/judis 8/25 Arb.O.P (Com.Div) No.292 of 2022
(iii) When notice is issued under sub-rule (i), the records of the Arbitral Tribunal:
(a) shall be requisitioned where the admission is on one or more grounds under Section 34 (2) (a); and
(b) may be requisitioned in other cases.
(iv) Notwithstanding the above, the arbitral tribunal shall preserve the records of such arbitral proceedings for a period of two years from the date of the award.
(v) The Court may, at any stage of the proceedings before it, at the request of any party or suo motu, call for all or any part of the records of the arbitral tribunal.
(vi) Where notice is ordered under sub rule (i), the Respondent shall not fi le any counter statement or counter affi davit, unless (a) the Court directs otherwise or (b) the petition alleges that the making of the Award was induced or effected by fraud or corruption. The petition shall be decided on the grounds of challenge and the records of the arbitral tribunal in cases where the same is requisitioned under sub rules (iii) and
(v).'
10. This Court having set out the Rules of the game (if one may say so) now proceeds to consider the three points of challenge qua impugned award.
11. As regards Claims 1 and 7 running into each other, learned counsel drew the attention of this Court to Clause 4.2 of said contract and Clause 4.3.7 of 'General Conditions of Contract' ['GCC' for the sake of https://www.mhc.tn.gov.in/judis 9/25 Arb.O.P (Com.Div) No.292 of 2022 convenience], which forms part of said contract, which read as follows:
' 4.0. SECURITY DEPOSIT 4.1 .................................. 4.2 Security Deposit (SD) can also be recovered @ 10% from the running bills. However, in such cases, at least 50% of the SD, i.e. Rs.69,35,000/-
should be deposited before start of work in any form as prescribed under Clause 4.3.7 of General & Special Conditions of Contract (Volume I) and the balance 50% shall be recovered from the running bills, i.e., Rs.69,35,000/-, @ 10% from each running bill.' ' 4.3. SECURITY DEPOSIT :
4.3.1 .................................... 4.3.2 .................................... 4.3.3 .................................... 4.3.4 .................................... 4.3.5 .................................... 4.3.6 ................................... 4.3.7 Security Deposit may be furnished in any one of the following forms:
i) Cash (as permissible under the Income Tax Act)
ii) Pay orders, Demand Draft in favour of BHEL.
iii) Local cheques of scheduled banks, subject to realization.
iv) Securities available from Post Offices such as National Savings Certificates, Kisan Vikas Patras, etc. (Certificates should be held in the name of contractor furnishing the security and duly pledged in favour of BHEL and discharged on the bank).
v) Bank Guarantee from Scheduled Banks/Public Financial Institutions as defined in the Companies' Act. The bank guarantee format shall be in the prescribed proforma should be kept valid by proper renewal till contractual completion.
https://www.mhc.tn.gov.in/judis 10/25 Arb.O.P (Com.Div) No.292 of 2022
vi) Fixed Deposit Receipt issued by Schedules Banks/ Public Financial Institutions as defined in the Companies' Act. The FDR should be in the name of the Contractor, A/c BHEL, duly discharged on the back.
vii) Security Deposit can also be recovered @ 10% from the Running Bills. However, in such cases, at least 50% of the Security Deposit should be deposited before start of work in any form as prescribed under this clause and the balance 50% shall be recovered from the running bills @ 10% from each running bill.
(Note: Acceptance of Security Deposit against Sl.No.(iv) and (vi) above will be subject to hypothecation or endorsement on the documents in favour of BHEL. However, BHEL will not be liable or responsible in any manner for the collection of interest or renewal of the documents or in any other matter connected therewith.)'
12. Adverting to aforesaid clauses, learned counsel submitted that security deposit can be provided in different forms. One of the forms which has been provided for in the GCC is Bank Guarantee and the remaining is by way of deduction from running bills. Therefore what applies to security deposit cannot be different depending on the mode in which the deposit has been furnished. In other words, sauce for the goose is sauce for the gander too is the specific argument of learned counsel. Though the age old adage of sauce for the goose is sauce for the gander too has clearly stood test of time, it does not come to the aid of the petitioner in the case on hand. The reason is, while dealing with https://www.mhc.tn.gov.in/judis 11/25 Arb.O.P (Com.Div) No.292 of 2022 Claim nos.1 and 7, which was rejected, AT has held as follows:
https://www.mhc.tn.gov.in/judis 12/25 Arb.O.P (Com.Div) No.292 of 2022 https://www.mhc.tn.gov.in/judis 13/25 Arb.O.P (Com.Div) No.292 of 2022 https://www.mhc.tn.gov.in/judis 14/25 Arb.O.P (Com.Div) No.292 of 2022 https://www.mhc.tn.gov.in/judis 15/25 Arb.O.P (Com.Div) No.292 of 2022 https://www.mhc.tn.gov.in/judis 16/25 Arb.O.P (Com.Div) No.292 of 2022 https://www.mhc.tn.gov.in/judis 17/25 Arb.O.P (Com.Div) No.292 of 2022 https://www.mhc.tn.gov.in/judis 18/25 Arb.O.P (Com.Div) No.292 of 2022
14. In this regard, it is also necessary to notice that before the AT, oral and documentary evidence were let in by both sides. One witness on behalf of contractor was examined [Shri.Paveljeet Singh] and that this Court is informed that he is the Managing Director of the contractor company. On behalf of BHEL, one Shri.Senthil Kumar was examined and this Court is informed that he is a technocrat i.e., technical personnel, who was incharge of the site. Besides this, on behalf of the claimant/contractor as many as 72 exhibits i.e., Exs.C1 to C72 which include certain series exhibits were marked and on behalf of BHEL, as many as 180 exhibits i.e., Exs.R1 to R180, which include certain series exhibits, were marked. This Court notices that in the paper book compilation i.e., typed-set Volume I, the last page of the impugned award, namely page 148 has not been photocopied. This is obviously an https://www.mhc.tn.gov.in/judis 19/25 Arb.O.P (Com.Div) No.292 of 2022 inadvertent secretarial error and therefore, this Court has to look into another copy of the award, which has been filed along with the captioned OP, which was placed before this Court as part of the case file. To be noted, there was also a petition under Section 33 filed by BHEL in February of 2022 and AT had rejected this in and by order dated 02.03.2022 (as already alluded to supra) holding that Section 33 plea does not fall within the gamut of computation of numerical or typographical errors and AT had become functus officio. To be noted, as already alluded to supra, this order dated 02.03.2022 made by AT has to be read as part of the impugned award. Therefore, there was a mass of oral evidence and documentary evidence which has been discussed by AT in the impugned award as part of discussion and dispositive reasoning. The proviso to Section 34(2A) which is one of the limbs on which captioned Section 34 is predicated forbids re-appreciation of evidence. It also forbids examination of the matter on merits. In any event, post Ssangyong, it is well settled that a review of an award on merits is impermissible in a Section 34 legal drill.
15. This takes us to as to the question as to whether the view taken by AT is an implausible view. In the light of the portions of impugned award which have been extracted and reproduced supra, this Section 34 https://www.mhc.tn.gov.in/judis 20/25 Arb.O.P (Com.Div) No.292 of 2022 Court, exercising jurisdiction under Section 34, is of the considered view that it is definitely a plausible view.
16. As regards preponderance of probabilities, after all that is the degree of proof in all civil cases. Even in this perspective, in and by Section 19 of A and C Act, both Evidence Act and 'The Code of Civil Procedure, 1908 (5 of 1908)' [hereinafter 'CPC' for the sake of brevity, convenience and clarity] do not apply to the proceedings before AT and therefore, this Court finds that there is no ground for judicial intervention under Section 34. This Court hastens to add that if the legal drill was under Section 96 of CPC, the scenario may well have been a little different but that is a completely forbidden area and therefore, this Section 34 Court refrains itself from going into that aspect of the matter.
Suffice to stop the discussion on this aspect of the matter on hand here.
17. This takes this Court to the argument of impugned award being contrary to the covenants of said contract. To put it in legal parlance, it is a Section 28(3) plea. Section 28(3) of A and C Act was amended from 23.10.2015. Amended Section 28(3) reads as follows:
'28(3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction.' https://www.mhc.tn.gov.in/judis 21/25 Arb.O.P (Com.Div) No.292 of 2022
18. A careful perusal of Clause 4.2 of said contract and Clause 4.3.7 of GCC (extracted and reproduced supra) would make it clear that it is a possible view to say that the two operate in two different realms as one talks about security deposit and the other talks about mode of providing security deposit. Therefore, if security deposit is agreed to be by way of deduction in running bills, that can operate in one realm and if security deposit is by way of furnishing bank guarantee that can certainly operate in another realm. Whether they should be put in different baskets or treated as one head is well within the discretion of AT and in the considered view of this Section 34 Court, the dispositive reasoning of AT is a plausible view and therefore, the Section 34 legal drill on hand does not permit judicial intervention.
19. As regards Counter Claim No. 3, this Court is of the considered view that even if settled principle of a civil trial is applied (if that be so and notwithstanding Section 19 of A and C Act) while burden does not shift, onus swings like a pendulum from one end of the lis to the other as the trial progresses. In this regard, this Court has made following observation in 14 Reels Entertainment Private Limited Vs.Eros International Media Limited, reported in AIROnline 2020 Mad 1447 https://www.mhc.tn.gov.in/judis 22/25 Arb.O.P (Com.Div) No.292 of 2022 (penned by me):
'29. Reverting to the case on hand, without stepping into the forbidden area of re-appreciation of evidence, even on first principles of Evidence Law, I am unable to sustain the submission of 14 Reels as though there can be no two opinions about the obtaining position of law that burden of proof does not shift, but the onus of proof shifts like a pendulum from one end of the lis to another, the principles that any amount of oral evidence cannot undo the pleadings and a party cannot be called upon to prove the negative are two other principles which are incontestable and stair at 14 Reels in the case on hand. In this view of the matter also I find no patent illegality in the impugned award. However, if I start applying these principles of Evidence Law to the award, that would tantamount to making forays into the forbidden area of re- appreciation of evidence. I have already opined and taken the view that this cannot be done by taking umbrage under the garb of ignoring binding precedent owing to the peculiar facts and circumstances of OP on hand.
Therefore, if AT has found that the onus is shifted, there is nothing perverse to demonstrate that this qualifies as offending public policy much less offending public policy within the meaning of Section 34(2)(b)(ii) Clauses (ii) or (i) of Explanation 1 thereat.
20. The sequitur of the discussion and dispositive reasoning thus far means, curtains are down on the captioned Arb.OP. To put it https://www.mhc.tn.gov.in/judis 23/25 Arb.O.P (Com.Div) No.292 of 2022 differently, captioned Arb.OP fails to pass the muster of Rule 8 of MHC Arbitration Rules and therefore the inevitable fate is a dismissal of captioned Arb.OP.
Captioned Arb.OP stands dismissed. There shall be no order as to costs.
13.07.2022 Speaking order: Yes/No Index: Yes/No gpa https://www.mhc.tn.gov.in/judis 24/25 Arb.O.P (Com.Div) No.292 of 2022 M.SUNDAR.J., gpa Arb.O.P (Com.Div) No.292 of 2022 13.07.2022 https://www.mhc.tn.gov.in/judis 25/25