Himachal Pradesh High Court
Himachal Pradesh Power Corporation Ltd vs M/S Ksr Infra Structure Pvt. Ltd on 13 June, 2023
Author: Satyen Vaidya
Bench: Satyen Vaidya
IN THE HIGH COURT OF HIMACHAL PRADESH,
SHIMLA
Arb. Case No. 4040 of 2013
.
Reserved on 29.5.2023
Date of decision : 13.6.2023.
Himachal Pradesh Power Corporation Ltd. ...Petitioner.
Versus
M/s KSR Infra Structure Pvt. Ltd. ...Respondent
Coram:
The Hon'ble Mr. Justice Satyen Vaidya, Judge.
Whether approved for reporting?1Yes.
For the petitioners : Mr. J. S. Bhogal, Sr.
Advocate with Ms. Srishti
Verma and Ms. Swati
Verma, Advocates.
For the respondents : Mr. Bimal Gupta, Sr.
Advocate with Ms. Kusum
Chaudhary, Advocate.
Satyen Vaidya, Judge:
Award dated 9.7.2013, passed by learned Arbitrator in the matter of arbitration arising out of Contract Agreement No. SKHEP-51/2007 Dt. 28.3.2008 1 Whether reporters of Local Papers may be allowed to see the judgment?
::: Downloaded on - 13/06/2023 20:32:03 :::CIS -2-between the parties in respect of Sawra Kuddu HEP (111MW) located in District Shimla, H.P., is the subject .
matter of present proceedings. Petitioner has taken exception to aforesaid award by filing objections under Section 34 of the Arbitration and Conciliation Act, 1996 (for short, 'the A&C Act).
2. The work involved was construction of Main Access Tunnel (MAT) Size 7.50M (Finished) D- shaped 172 Meter Long for underground power house at Snail, Tehsil Jubbal, District Shimla.
3. The claimant (respondent herein) was the successful bidder. The estimated cost of the work was 4,19,38,829/-. Letter of Intent (LOI) was issued in favour of claimant on 29.9.2007. Formal agreement was drawn between the parties on 28.3.2008. The Parwati Valley Power Corporation Ltd. was the owner/employer of the work. However, the Parwati Valley Power Corporation Ltd.
was succeeded by Himachal Pradesh Power Corporation Ltd. (petitioner herein) during the course of time.
::: Downloaded on - 13/06/2023 20:32:03 :::CIS -3-4. Certain dates relevant to the adjudication of instant petition are as under:-
.
i) Period stipulated for completion of work was four months to be reckoned w.e.f.
31.10.2007.
ii) The petitioner postponed the date to 30.11.2007 for the purpose of commencement of work.
iii)
iv)
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Site was handed over to the respondent on 31.3.2008.
The Work had actually commenced on 18.4.2008 after another agency employed by petitioner for carrying out the work at portal had completed its job on 17.4.2008.
v) Construction power was made available to the respondent on 5.6.2008.
vi) Work was completed on 6.1.2009.
The request of respondent for extension of time was approved by petitioner in April, 2010.
5. Learned Arbitrator entered into reference on five claims, as under:-
"1. Claim No.1: Release of Rs. 5 lacs wrongly withheld with interest= Rs. 7,12,500/-
2. Claim No.2: De-watering Abnormal increase in quantum provided in BOQ= Rs. 6,80,373/-::: Downloaded on - 13/06/2023 20:32:03 :::CIS -4-
3. Claim No.3: Demand Charges- Excess recovered-
Refund of Rs. 1,49,906/-.
4. Claim No.4: Compensation towards Price Variation .
Adjustment= Rs. 67,72,534/-.
5. Claim No.5: compensation towards idle and/or under utilization of resources =Rs. 1,37,57,998/-."
6. All the above claims were raised by the respondent. Petitioner simply contested the claims of respondent. No counter claim was submitted on behalf of the petitioner.
7. Learned Arbitrator has allowed Claims No. (1), (3) and (5) of the respondent, whereas Claim No. (2) and (4) have been rejected. Against Claim No.1, the learned Arbitrator has held as under:
"Arbitral Tribunal therefore decides and awards Claim No.1 of SOC in favour of Claimants for refund of Rs. 5 lac subject to adjustment of any amount if already paid over and above the deducted amount of liquidated damages which is the matter of reconciliation of record, otherwise full with held amount of Rs. 5 lac be refunded. A simple interest @ 12% per annum from the date of amount of Rs. 5.00 lac was withheld, as per record of measurement book, till actual date of payment within 90 days, and after 90 days of receipt of Award to the actual date of payment on awarded amount @ 15% per annum, is also awarded in favour of the claimant."::: Downloaded on - 13/06/2023 20:32:03 :::CIS -5-
8. Claim No.3 has been allowed in the manner and to the extent as under:-
.
"Arbitral Tribunal therefore concludes that there is no substance to support defence and there is enough evidence in support of Claim No.3 of the claimant and accordingly Arbitral Tribunal decides and awards in favour of claimant for refund of amount of Rs. 1,49,906/- charged in excess of demand charges of 125 KVA required for the work of MAT by the Claimant.
A simple interest @ 12% per annum on the awarded amount of Rs. 1,49,906/- from the date such amount was deducted, as per record of M.B. till actual date of payment within 90 days, and after 90 days of receipt of award to the actual date of payment @ 15% per annum, is also awarded in favour of the claimants."
9. Lastly, Claim No.5 has been allowed as under:-
"The Arbitral Tribunal decides and awards the total amount of Rs. 41,13,725/- (Rupees forty one lac thirteen thousand seven hundred and twenty five in favour of the claimants towards Claim No.5 of their SOC. Arbitral Tribunal also awards a simple interest @ 12% per annum from 90 days after receipt of award by the respondents till the actual date of payment."
10. Aggrieved against the award, petitioner has filed objections primarily on the following grounds:
(a) The award is in conflict with public policy of India;::: Downloaded on - 13/06/2023 20:32:03 :::CIS -6-
(b) The findings recorded by learned Arbitrator while deciding Claim No.1 are contrary to the .
terms of the contract. On one hand learned Arbitrator has attributed a part of the delay in execution of project to the respondent, on the other the respondent has been let free without levy of penalty in terms of the agreement between the parties;
(c) The award is based on no evidence.
Learned Arbitrator had wrongly assumed admission of certain facts by petitioner;
11. Further, the findings of learned Arbitrator to the effect that respondent had applied for extension of time four times, has also been challenged to be against the material on record. According to the petitioner, there was only one application for extension of time. It has further been alleged that while awarding damages against Claim No.5, the learned Arbitrator has simply placed reliance on the rates claimed by the respondent, whereas on record, there was no evidence to support such claim.
::: Downloaded on - 13/06/2023 20:32:03 :::CIS -7-12. The respondent on the other hand has supported the award being strictly in terms of contract .
between the parties. It is submitted that there is no illegality much less patent illegality or perversity in the award. As per respondent, the award has been passed by learned Arbitrator by basing its findings on the available material and also on reasonable interpretation of the terms of contract. r
13. I have heard the learned counsel for the parties and have also gone through the record carefully.
14. The scope of interference with arbitral award in proceedings under Section 34 of A & C Act is rather restricted. The contravention with fundamental policy of Indian law as also patent illegality should emerge on the face of the award itself. It is impermissible for the court to sit in appeal or review over the findings recorded by the arbitral tribunal. A reference to following precedents will be gainful to review the contours of jurisdiction vested in the courts under Section 34 of A & C Act:-
::: Downloaded on - 13/06/2023 20:32:03 :::CIS -8-i) In Associate Builders vs. Delhi Development Authority, 2015 (3) SCC 49, it .
was held as under:-
42. In the 1996 Act, this principle is substituted by the 'patent illegality' principle which, in turn, contains three sub heads -
42.1 (a) A contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and r cannot be of a trivial nature. This again is a really a contravention of Section 28(1)(a) of the Act, which reads as under:
"28. Rules applicable to substance of dispute.-(1) Where the place of arbitration is situated in India,-
(a) in an arbitration other than an international commercial arbitration, the arbitral tribunal shall decide the dispute submitted to arbitration in accordance with the substantive law for the time being in force in India;"
42.2 (b) A contravention of the Arbitration Act itself would be regarded as a patent illegality- for example if an arbitrator gives no reasons for an award in contravention of section 31(3) of the Act, such award will be liable to be set aside.
::: Downloaded on - 13/06/2023 20:32:03 :::CIS -9-42.3 (c) Equally, the third sub-head of patent illegality is really a contravention of Section 28 (3) of the Arbitration Act, which reads as under:
.
"28. Rules applicable to substance of dispute.-
(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."
This last contravention must be understood with a caveat. An arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair minded or reasonable person could do."
ii) In Ssangyong Engineering and Construction Company Limited vs. National Highways Authority of India (NHAI) reported in 2019 (15) SCC 131, it was held as under:-
"37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment ::: Downloaded on - 13/06/2023 20:32:03 :::CIS -10- Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the .
matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within "the fundamental policy of Indian law", namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality.
38. Secondly, it is also made clear that re-
appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award.
39. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders (supra), however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award.
40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paragraphs 42.3 to 45 in Associate Builders (supra), namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, ::: Downloaded on - 13/06/2023 20:32:03 :::CIS -11- unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator's view is not .
even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2A).
41. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being a ground for challenge under "public r 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.
Additionally, 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 perverse".
iii) In, Delhi Airport Metro Express Private Limited vs. Delhi metro Rail Corporation Limited reported in 2022 (1) SCC 131, it has been held as under:-
::: Downloaded on - 13/06/2023 20:32:03 :::CIS -12-"26. A cumulative reading of the UNCITRAL Model Law and Rules, the legislative intent with which the 1996 Act is made, Section 5 and Section 34 of the .
1996 Act would make it clear that judicial interference with the arbitral awards is limited to the grounds in Section 34. While deciding applications filed under Section 34 of the Act, Courts are mandated to strictly act in accordance with and within the confines of Section 34, refraining from appreciation or re-appreciation of matters of fact as well as law. (See Uttarakhand Purv SainikKalyan Nigam Ltd. v. Northern Coal Field Ltd. [Uttarakhand Purv Sainik Kalyan Nigam Ltd. v. Northern Coal Field Ltd., (2020) 2 SCC 455 :
(2020) 1 SCC (Civ) 570] , Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd. [Bhaven Construction v. Sardar Sarovar Narmada Nigam Ltd., (2022) 1 SCC 75] and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran [Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306] .)
15. Reverting to the facts of case in hand, one of the objections by petitioner to the award is that the same is against the provisions of contract. Reference has been made to Clauses 2 and 22 of the contract, which reads as under:-
"2. The time allowed for carrying out the work as entered in the tender shall be strictly observed by the ::: Downloaded on - 13/06/2023 20:32:03 :::CIS -13- contractor and shall be deemed to be essence of contract on the part of the contractor and shall be reckoned from the fifteenth day after the date on which the order to .
commence the work is issued to the contractor. The work shall throughout the stipulated period of the contract be proceeded with all due diligence and the contractor shall pay as compensation an amount equal to one percent or such smaller amount as the Superintending Engineer (whose decision in waiting shall be final) may decide on the amount of the estimated cost of whole work as shown in tender, for everyday that the work remains uncommenced/unfinished after the proper date And further to ensure good progress during the execution of the work the contractor shall be bound in all cases in which the time allowed for any work exceeds one month (save for special jobs) to complete one-eighth of the whole of the work before one fourth of the whole time allowed under the contract has elapsed; three eight of the work before one-half of such time has elapsed, and three-fourth of work. Before three-fourth of such time has elapsed. However for special jobs if a time-scheduled has been submitted by the contractor, and the same has been accepted by the Engineer- in-charge, the contractor shall comply with said time schedule. In the event of the contractor Tailing to comply with this condition he shall be liable to pay as compensation an amount equal to one percent or such smaller amount as the Superintending Engineer (whose decision in writing shall be final) may decide on the said estimated cost of the whole work for every day the quantity of work remains incomplete provided always that the entire amount of compensation to be paid under the provisions of this clause shall not ::: Downloaded on - 13/06/2023 20:32:03 :::CIS -14- exceed ten percent on the estimated cost of the work as in the tender.
22. All some payable by way of compensation under .
any of these conditions shall be considered as reasonable from compensation to be applied to the use of Board without reference to the actual loss or damage sustained and whether or not any damage shall have been sustained."
16. On the strength of aforesaid clauses of the contract, learned Senior Counsel for contended that once learned Arbitrator had attributed a r the petitioner part of delay in execution of project to the respondent, nothing more was required to be proved for imposition of damages against the respondent.
17. The impugned award reveals that the petitioner has been held liable for delay in execution of the work from 1.11.2007 till 17.4.2008 and therefore, the time for execution of the project is held to have been set at large by the petitioner. Learned Arbitrator has, thus, interpreted the construction of the terms of contract in light of above background. Such exercise by the learned Arbitrator cannot be said to be without jurisdiction. As noticed above, this Court while deciding objections under Section ::: Downloaded on - 13/06/2023 20:32:03 :::CIS -15- 34 of A & C Act will not review the exercise conduct by learned Arbitrator on merits, once it is not found to be .
without jurisdiction.
18. It was next contended by Sh. J. S. Bhogal, learned Senior Counsel for the petitioner that there was no evidence on record to prove the deployment of men and machinery by respondent immediately after issuance of LOI. As per him, it is preposterous to believe that respondent would have deployed men and machinery even without having been handed over the site. It was further submitted that the damages have further been assessed while deciding Claim No.5, on pure hypothesis. Neither respondent had led any evidence nor had proved the basis for claiming damages.
19. It is evident from the contents of award that the learned Arbitrator has rendered reasons for allowing Claim No.5 in favour of respondent. According to learned Arbitrator, respondent had been able to prove its claim by placing on record relevant material. The documents placed on record on behalf of the parties have been taken into ::: Downloaded on - 13/06/2023 20:32:03 :::CIS -16- consideration. On assessment of material on record such finding cannot be said to be perverse. Petitioner has not .
been able to show that it has insisted for strict proof of documents relied upon by the respondent.
20. In MMTC Ltd. vs. Vendanta Ltd. Reported in (2019) 4 SCC 163, it has been held that the proceeding under Section 34 is not an appeal. Thus, this Court will not re-appreciate and revaluate the material relied upon by learned Arbitrator for arriving at his findings.
21. Similarly the findings that four applications by respondent for extension of time remained unattended at the end of petitioner cannot be said to be unwarranted.
Learned Senior Counsel representing the respondent during the course of hearing had referred to relevant documents evidencing existence of such fact.
22. In view of the restrictive scope for interference in the Arbitral Award, this Court has not found any material so as to conclude that the award was patently illegal.
::: Downloaded on - 13/06/2023 20:32:03 :::CIS -17-23. In light of above discussion, petition is dismissed. Pending applications, if any, also stand .
disposed of.
(Satyen Vaidya)
13th June, 2023 Judge
(kck)
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