Madras High Court
Nuclear Fuel Complex vs M/S.Urc Constructions Private Ltd on 10 January, 2020
Author: M.Sundar
Bench: M.Sundar
O.P.No.266 of 2016
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 20.12.2019
DATE OF DECISION : 10.01.2020
CORAM
THE HON'BLE Mr.JUSTICE M.SUNDAR
O.P.No.266 of 2016
Nuclear Fuel Complex,
Government of India,
Department of Atomic Energy,
Zirconium Complex,
Pazhayakayal Post,
Tuticorin-628 152. .. Petitioner
Vs.
1.M/s.URC Constructions Private Ltd.,
H-102, Periyar Nagar,
Erode-638 001.
2.Shri D.K.Jain,
Sole Hon'ble Arbitrator,
602, Sawan's Pride, CHS,
Plot No.10 and 11, Sector 18,
Kharghar,
Navi Mumbai-410 210. .. Respondents
This original petition is filed under Section 34 of the Arbitration and
Conciliation Act, 1996 read with Order XLIII Rule 1 of the High Court Original
Side Rules, 1956 seeking to set aside the award passed by the sole Arbitrator
dated 01.11.2015 and allow the counter claim made by the petitioner as
claimed with interest and costs and thus render justice.
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http://www.judis.nic.in
O.P.No.266 of 2016
For Petitioner : Mr.S.M.Deenadayalan
For Respondents : Mr.A.L.Somayaji, Senior counsel
for Mr.V.P.Sengottuvel for R-1
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ORDER
Instant 'Original Petition’ (hereinafter ‘OP’ for the sake of brevity) has been filed under Section 34 of ‘The Arbitration and Conciliation Act, 1996’ (hereinafter ‘A and C Act’ for brevity) assailing an 'arbitral award dated 01.11.2015' (hereinafter ‘impugned award’ for the sake of brevity, convenience and clarity) made by an ‘Arbitral Tribunal’ (hereinafter ‘AT’ for brevity) constituted by a sole arbitrator. Agreement between the parties, i.e., petitioner and first respondent, out of which the arbitral proceedings arose bears reference Agreement No.CE/NFC/NZOSP-852 of 2006-2007. This court is informed that this agreement is dated 31.05.2007 (hereinafter ‘said contract’ for the sake of brevity) for work described as 'Civil, structural and allied works for the construction of plant buildings, auxiliary buildings, utility buildings, tank farms, water storage tanks, roads and drains etc., for NZOSP at Palayakayal' (hereinafter ‘said work’ for brevity).
2 Prefatory Note :
(a) Section 34 of A and C Act captioned ‘Application for setting aside arbitral award’ provides for a party to take recourse to a Court against 2/27 http://www.judis.nic.in O.P.No.266 of 2016 an arbitral award by an ‘application’ for setting aside the arbitral award.
However, such applications are being given the nomenclature ‘Original Petition’ in this Court and therefore, instant petition before me is referred to as ‘OP’ for brevity as already mentioned supra.
(b) Instant OP is neither an appeal nor a revision / review qua impugned award (arbitral award dated 01.11.2015 made by second respondent who constituted AT as sole arbitrator). It is merely a challenge to impugned award within the contours and confines of Section 34 of A and C Act.
(c) Section 34 adumbrates what can be described as eight different pigeon holes qua challenge to an arbitral award and instant OP is predicated on two pigeon holes. This Court chooses to use the expression ‘Pigeon holes’ considering the limited scope of challenge to an arbitral award under section 34 of A and C Act.
(d) Instant OP was filed on 25.01.2016, i.e., after 23.10.2015. Therefore, in the light of the authoritative and instructive pronouncement of Hon’ble Supreme Court in Hindustan Construction Company Limited Vs. Union of India reported in 2019 SCC OnLine SC 1520, section 34 as it stood post amendment on 23.10.2015 is the basis on which instant OP was argued before this Court.
3/27 http://www.judis.nic.in O.P.No.266 of 2016 3 Trajectory :
(a) Three proceedings of this court dated 12.03.2019, 29.04.2019 and 25.07.2019 give the trajectory of instant OP in a nutshell and the same read as follows :
“Proceedings dated 12.03.2019 :
On a perusal of the case file, I find that the Registry has put up a note before the then Hon'ble Chief Justice owing to recusal by one of the Hon'ble Brother Judges (Hon'ble Mr.Justice M.M.Sundresh). In this note put up by the Registry, the then Hon'ble Chief Justice vide order dated 19.02.2018 has assigned this O.P. to another Hon'ble Judge (Hon'ble Dr.Justice Anita Sumanth), by name.
2 Thereafter an order dated 01.03.2018 has been passed in O.S.A.No.337 of 2017 (arising out of A.No.1855 of 2016 being interlocutory application in instant OP) by a Hon'ble Division Bench presided over by then Hon'ble Chief Justice.
Most relevant portion of this order is paragraph 4 and the same reads as follows :
“4.Since the application is ripe for final hearing, we dispose of the appeal, without going into the question of maintainability, by directing that the application under Section 34 of the 1996 Act be listed before the Hon'ble Mr.Justice M.Sundar. The learned Judge is requested to take up and decide the application expeditiously. No costs.
Consequently, connected C.M.P.No.21855 of 2017 is closed.” (Underlining made by this Court for ease of reference) 3 Though aforesaid order of Hon'ble Division Bench of this Court was passed on 01.03.2018, instant O.P., i.e., 4/27 http://www.judis.nic.in O.P.No.266 of 2016 O.P.No.266 of 2016 was first listed before me only on 5.2.2019 and the aforesaid order of Hon'ble Division Bench was thereafter brought to my notice. It is made clear that in the interregnum, neither the Registry nor the counsel concerned have brought the aforesaid order dated 01.03.2018 to my notice.
4 From a reading of aforesaid orders of Hon'ble Division Bench, it appears that the aforesaid allocation of instant OP to one Hon'ble Judge by name was not brought to the notice of Hon'ble Division Bench.
5 It is now brought to my notice that a contempt petition being Cont.P.No.1774 of 2017 (arising out of alleged violation of the order in aforesaid A.No.1855 of 2016 in instant O.P) came up before the Hon'ble Judge who made the order, i.e., Hon'ble Dr. Justice Anita Sumanth and on 27.03.2018, the following order was made :
“List the matter along with O.P.No.266 of 2016.
2. On 19.02.2018, the Hon'ble the Chief Justice has directed listing of matter before the undersigned as a specially ordered matter. However order dated 01.03.2018 passed in O.S.A.No.337 of 2017 directs listing of the O.P before Mr.Justice M.Sundar.
3. Thus, the matter may be placed before the Chief Justice for appropriate orders.” (Underlining made for ease of reference) 6 From the case file placed before me, it is not clear as to whether Registry has placed the matter before Hon'ble Chief Justice as per aforesaid direction dated 27.03.2018.
7 Be that as it may, though the Portfolio of hearing the instant O.P, which is under Section 34 of the Arbitration and 5/27 http://www.judis.nic.in O.P.No.266 of 2016 Conciliation Act, 1996 has now been allocated to me by Hon'ble Chief Justice (as per roster made by Hon'ble Chief Justice which is now operating), owing to the aforesaid order of the then Hon'ble Chief Justice allocating this O.P to one Hon'ble Judge by name (Hon'ble Dr. Justice Anita Sumanth) and the order dated 27.03.2018 made by another Hon'ble Judge wherein instant O.P also has been directed to be listed along with contempt petition, Registry is directed to place this matter before Hon'ble Chief Justice for suitable orders.
8 In the interregnum, parties before me undertake to approach Hon'ble Supreme Court for suitable orders regarding proceeding with instant main O.P, as both sides submit that Special Leave Petitions arising out of an interim order in the instant O.P and another order in the contempt petition are now pending in Hon'ble Supreme Court. “ Proceedings dated 29.04.2019 :
Mr.S.M.Deenadayalan, learned counsel on record for sole petitioner and Mr.K.R.Nishanth representing Mr.V.P.Sengottuvel, learned counsel on record for contesting first respondent are before this Court.
2. Read this in conjunction with and in continuation of earlier proceedings of this Court dated 12.03.2019. Most relevant paragraph is paragraph 8 and the same reads as follows:
'8. In the interregnum, parties before me undertake to approach Hon'ble Supreme Court for suitable orders regarding proceeding with instant main O.P, as both sides submit that Special Leave Petitions arising out of an interim order in the instant O.P and another order in the contempt petition are now pending in Hon'ble Supreme Court.'
3. Adverting to the aforesaid paragraph 8, 6/27 http://www.judis.nic.in O.P.No.266 of 2016 Mr.K.R.Nishanth representing Mr.V.P.Sengottuvel, learned counsel on record for first respondent submits that suitable application has been moved in the Hon'ble Supreme Court and learned counsel seeks time to pursue the same.
At request of first respondent, list this matter after summer vacation.
Proceedings dated 25.07.2019 :
Read this in conjunction with and in continuation of earlier proceedings of this Court dated 29.4.2019.
2. This Court is informed today that Special Leave Petitions (SLP (C) Nos.021266 to 021267 of 2018) in the Supreme Court are likely to be listed on 26.8.2019.
3. It is open to both the learned counsel to mention before this Court for listing of this case after and obviously subject to orders of Hon'ble Supreme Court.
4. Adjourned sine die.”
(b) Thereafter, parties moved Hon’ble Supreme Court and Hon’ble Supreme Court vide order dated 18.11.2019 requested this Court to take up the instant OP and dispose of the same within a time frame of eight weeks.
4 Brief facts and rival submissions :
(a) Considering the nature of the challenge to arbitral award in instant OP, it is not necessary to dilate much on facts. Suffice to say that arbitral disputes arose between the petitioner and first respondent in instant OP qua said contract which led to constitution of an Arbitral Tribunal (constituted by the second respondent as sole arbitrator) wherein claims 7/27 http://www.judis.nic.in O.P.No.266 of 2016 under as many as 14 heads and counter claims under as many as eight heads were made.
(b) After detailed arbitration for over a period of 6 years from 07.01.2009 to 28.09.2014, impugned award came to be passed. The details of hearings as can be culled out from the case file reads as follows :
1st Arbitration meeting Dated on 7th Jan.2009. 2nd Arbitration meeting Dated on 27th Jul, 2012. 3rd Arbitration meeting Dated on 23rd to 25th March 2013. 4th Arbitration meeting Dated on 21st and 22nd April 2013. 5th Arbitration meeting Dated on 4th May 2013. 6th Arbitration meeting Dated on 22nd and 23rd July 2013. 7th Arbitration meeting Dated on 10th and 11th August 2013. 8th Arbitration meeting Dated on 4th and 5th September 2013. 9th Arbitration meeting Dated on 24th October 2013. 10th Arbitration meeting Dated on 21st and 22nd February 2014. 11th Arbitration meeting Dated on 5th and 6th April 2014. 12th Arbitration meeting Dated on 8th and 9th May 2014. 13th Arbitration meeting Dated on 11th and 12th June 2014. 14th Arbitration meeting Dated on 18th and 19th July 2014. 15th Arbitration meeting Dated on 22nd and 23rd August 2014. 16th Arbitration meeting Dated on 28th September 2014.
(c) Vide impugned award, dated 01.11.2015, two sub-claims in claim No.13 were fully allowed, 10 heads of claims were partly allowed and 2 heads of claims were negatived. All eight heads of counter claims were negatived. The summary in this regard as can be culled out from the impugned award reads as follows :8/27
http://www.judis.nic.in O.P.No.266 of 2016 SUMMARY OF AWARD.
Claims of Claimant.
Claim Short Claim Description Amount Claimed Amount Awarded
No. (Rs.) (Rs.)
Balance Lead of 13 Kms and to 3,03,43,598.00 74,63,280.00
1 pay @ Rs.9.00 for full 41 Km.
Escalation under CI 10CA till 3,21,01,756.00 2,37,91,702.00
2 completion
Compensation for Labor and 3,21,50,742.00 55,65,850.00
other materials not covered
3 under CI.10CA
4 Formwork for Portal 77,04,973.00 32,15,722.00
5 Casting of Portal Cleats. 13,63,136.00 Nil
6 Shifting project site by 1.1 km. 1,57,35,611.00 24,24,278.00
Shifting of sand deposited in 10,67,467.00 1,07,950.00
7 footings
Overrun Charges beyond 1,40,14,485.00 25,06,000.00
8 contract period.
9 Past interest on Claim no.1 to 8 15% p.a. @10%*
Payment of quantity in excess of 2,21,51,191.00 86,71,670.00
10 variation limit of (+/-) 25%
10(a) Interest on (10) above 18% p.a. @10%*
11 Bitumen sand mix below tank. 28,59,264.00 13,78,056.00
11(a) Interest on (11) above 18% p.a. @10%*
Market rate for asphalt concrete 1,09,85,099.00 Nil
12 /seal coat
12(a) Interest on (12) above 18% p.a. Nil
13(a) Payment of final bill. 72,76,876.00 72,76,876.00
13(b) Interest on 13(a) @18% pa @10% pa*
13(c) Refund of FDR against S.D. 2,60,51,639.00 2,60,51,639.00
13(d) Interest on 13(c) @18% pa @02%pa*
13(e) BG Ext. charge for PG 43,21,579.00 33,91,055.00
13(f) Interest on 13(e) @18% pa @10% pa*
14 Cost of Arbitration 88,00,448.00 23,00,000.00
TOTAL 9,40,96,317.00
*The interest shall be paid at the rate as mentioned above on the amount awarded 9/27 http://www.judis.nic.in O.P.No.266 of 2016 against the respective claims. The period of interest shall be as mentioned below.
1.Claim no.9,10(a), 11(a) and 13(b)--- From 08.12.2010 to the date of Award.
2.Claim no.13(d) -------- From 08.12.2011 to the date of Award.
3.Claim no.13(f) -------- From 01.12.2009 to the date of Award.
Counter-claims of Respondent.
C.C. Counter-Claim description Amount Claimed Amount Awarded
(Rs.) (Rs.)
No.
Compensation for Loss of 49,81,68,431.00 Nil
1 production
Claim for 110 kV HT power 1,86,20,150.00 Nil
2 supply bills
3 Saving in transport of labor 3,09,98,250.00 Nil
Claim for appointment of 1,89,54,017.00 Nil
4 consultant
Claim for Expenditure on Nil Nil
5 arbitration
Claim for Interest on above 18% pa Nil
6 counter-claims
Difference in cost for non- 1,56,32,550.00 Nil
execution of buildings &
7 structures
Claim for compensation under 5,21,03,279.00 Nil
8 Clause 2
TOTAL Nil
Now, therefore, on consideration of claims of the claimant and the counter-claims of the respondent and based on my findings above, I, D.K.JAIN, Sole Arbitrator, do hereby make this award that an amount of Rs.9,40,96,317.00 (Rupees Nine Crores, Forty Lakhs, Ninety Six Thousand, Three Hundred and Seventy only) along with the interest upto the date of award as mentioned above, shall be paid by the respondent (M/s.Nuclear Fuel Complex) to the claimant (M/s.URC Construction Private Limited) on or before 31.12.2015, in full and final settlement of all the claims and counter- claims referred to me for Arbitration. If the payment is not made within this period, the award shall carry a simple interest of 15% from the date of publishing the award till the actual date of payment.
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(d) This takes us to rival submissions. Though there were verbose and voluminous pleadings, both sides restricted their submissions to two points.
(e) Learned counsel for petitioner predicated his challenge to impugned award on two of the eight pigeon holes adumbrated in section 34 of A and C Act and they are Section 34(2)(a)(iv) and section 34(2)(b)(ii) read with clauses (i) and (iii) of Explanation 1 of A and C Act.
(f) With regard to the first point predicated on section 34(2)(a)(iv), learned counsel for petitioner submitted that the impugned award deals with disputes not falling within the terms of submission to arbitration and that it contains decisions on matters beyond the scope of submission to arbitration. According to learned counsel for petitioner, portions in impugned award which travel beyond the terms of submission to arbitration and which contains decisions on matters beyond the scope of submission are as follows :
Compensation under clause 2 (delay in completion of work):
(i)The Claimant / first respondent's request dated 16.11.2010 could not be considered as there is no dispute on the issue of levying penalty under clause 2 and the decision of the Superintending Engineer is final and binding on the parties and out of the purview of the arbitration clause.
(ii)Clause 2 of the agreement is not coming within the purview of the arbitration clause.
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(g) With regard to the second point, it is submitted that the AT has raised bills towards fee, i.e., costs of arbitration, which is very high. This according to learned counsel for petitioner is in conflict with most basic notions of morality / justice. Furthering his submission in this direction, learned counsel for petitioner submitted that the enhanced fee claimed by AT was paid by first respondent claimant and this according to learned counsel for petitioner tantamounts to inducement resulting in impugned award being vitiated by fraud / corruption.
(h) Responding to the aforesaid submissions, learned Senior Counsel for first respondent drew the attention of this Court to clause 25 of said agreement which is the arbitration clause and in effect the arbitration agreement between the parties within the meaning of section 7 of A and C Act and submitted that it is so wide that it cannot be gainsaid that impugned award has travelled beyond the terms of submission or beyond the scope of submission to arbitration agreement.
(i) It was submitted that the sole arbitrator was nominated by the petitioner and that appointment made vide communication dated 04.11.2008 (signed on 03.11.2008) bearing reference No.13/11(3)/2008-I&M(NFC)/02 makes it clear that differences, disputes within the meaning of clause 25 supra have been referred to AT.
(j) With regard to the second point, referring to the appointment of arbitrator made by the petitioner, more particularly appointment made by the Secretary to Government of India on behalf of the petitioner, it was pointed 12/27 http://www.judis.nic.in O.P.No.266 of 2016 out that the appointment was strictly in accordance with clause 25 which includes fees also. Adverting to clause 25, it was submitted that the cost of reference and of the award including fees shall be at the discretion of the arbitrator.
(k) For the sake of convenience, entire clause 25 is extracted and reproduced infra:
“CLAUSE 25 Settlement of Disputes & Arbitration.
Except where otherwise provided in the contract all questions and disputes relating to the meaning of the specifications, design, drawings and instructions here-in before mentioned and as to the quality of workmanship or materials used on the work or as to any other question, claim, right, matter or thing whatsoever in any way arising out of or relating to the contract, designs, drawings, specifications, estimates, instructions, orders or these conditions or otherwise concerning the works or the execution or failure to execute the same whether arising during the progress of the work or after the cancellation, termination, completion or abandonment thereof shall be dealt with as mentioned hereinafter:
i) If the contractor considers any work demanded of him to be outside the requirements of the contract, or disputes any drawings, record or decision given in writing by the Engineer-
in-Charge on any matter in connection with or arising out of the contract or carrying out of the work, to be unacceptable, he shall promptly within 15 days request the Chief Engineer, CED in writing for written instruction or decision. Thereupon, the Chief Engineer, CED shall give his written instructions or decision within a period of one month from the receipt of the 13/27 http://www.judis.nic.in O.P.No.266 of 2016 contractor's letter.
If the Chief Engineer, CED fails to give his instructions or decision in writing within the aforesaid period or if the contractor is dissatisfied with the instructions or decision of the Chief Engineer, CED, the contractor may, within 15 days of the receipt of Chief Engineer's decision, appeal to the Chief Executive who shall afford an opportunity to the contractor to be heard, if the latter so desires, and to offer evidence in support of his appeal.
The Chief Executive shall give his decision within 30 days of receipt of contractor's appeal. If the contractor is dissatisfied with this decision, the contractor shall within a period of 30 days from receipt of the decision, give notice to the Chief Executive for appointment of arbitrator failing which the said decision shall be final binding and conclusive and not referable to adjudication by the arbitrator.
(ii) Except where the decision has become final, binding and conclusive in terms of Sub Para (i) above disputes or difference shall be referred for adjudication through arbitration by a sole arbitrator appointed by the Chief Executive, NFC in respect of contract approved by any subordinate authority under him. However, in respect of contracts approved by Chief Executive, NFC or higher authority, the arbitrator shall be appointed by Department of Atomic Energy. If the arbitrator so appointed is unable or unwilling to act or resigns his appointment or vacates his office due to any reason whatsoever another sole arbitrator shall be appointed in the manner aforesaid. Such person shall be entitled to proceed with the reference from the stage at which it was left by his predecessor.
It is a term of this contract that the party invoking arbitration shall give a list of disputes with amounts claimed in respect of each such dispute along with the notice for 14/27 http://www.judis.nic.in O.P.No.266 of 2016 appointment of arbitrator and giving reference to the rejection by the Chief Engineer of the appeal.
It is also a term of this contract that no person other than a person appointed by such Chief Executive, NFC or DAE, as aforesaid should act as arbitrator and if for any reason that is not possible, the matter shall not be referred to arbitration at all.
It is also a term of this contract that if the contractor does not make any demand for appointment of arbitrator in respect of any claims in writing as aforesaid within 120 days of receiving the intimation from the Engineer-in-Charge that the final bill is ready for payment, the claim of the contractor shall be deemed to have been waived and absolutely barred and the Government shall be discharged and released of all liabilities under the contract in respect of these claims.
The arbitration shall be conducted in accordance with the provisions of the Arbitration and Conciliation Act, 1996 (26 of 96) or any statutory modifications or re-enactment thereof and the rules made there under and for the time being in force shall apply to the arbitration proceeding under this clause.
It is also a term of this contract that the arbitrator shall adjudicate on only such disputes as are referred to him by the appointing authority and give separate award against each dispute and claim referred to him and in all cases where the total amount of the claims by any party exceeds Rs.1,00,000/- the arbitrator shall give reasons for the award.
It is also a term of the contract that if any fees are payable to the arbitrator these shall be paid equally by both the parties.
It is also a term of the contract that the arbitrator shall be deemed to have entered on the reference on the date he issues notice to both the parties calling them to submit their statement of claims and counter statement of claims. The 15/27 http://www.judis.nic.in O.P.No.266 of 2016 venue of the arbitration shall be such place as may be fixed by the arbitrator in his sole discretion. The fees, if any, of the arbitrator shall, if required to be paid before the award is made and published, be paid half and half by each of the parties. The cost of the reference and of the award (including the fees, if any, of the arbitrator) shall be in the discretion of the arbitrator who may direct to any by whom and in what manner, such costs or any part thereof shall be paid and fix or settle the amount of costs to be so paid.” (Underlining made by this Court to supply emphasis and highlight)
(l) With regard to the enhanced fee being paid by the first respondent, according to learned Senior Counsel for first respondent, sub- section (2) and more particularly first proviso to sub-section (2) of section 38 is a complete answer. First proviso to section 38(2) of A and C Act makes provision for one party to pay the other party’s share when the other party fails to pay his share of fee is his say.
5 Discussion and dispositive reasoning :
(a) This court in the prefatory note had chosen to refer to the adumbration of 8 grounds of challenge to an arbitral award in section 34 as pigeon holes, as challenge to an arbitral award under section 34 of A and C Act is neither an appeal nor a revision /review. These 8 pigeon holes define the contours and confines of section 34 or in other words, the perimeter within which instant OP should perambulate. To put it differently, challenge to 16/27 http://www.judis.nic.in O.P.No.266 of 2016 arbitral award under section 34 of A and C Act should perambulate within the perimeter of section 34 and the perimeter of section 34 can be discerned from the eight pigeon holes. If eight grounds of challenge adumbrated in section 34 can be aptly referred to as pigeon holes, the two points on which instant OP is predicated can be more ideally referred to as pinholes owing to the factual matrix qua case on hand.
(b) Though several citations and case laws were filed by way of compilation by both sides, both learned counsel very fairly submitted that they would press into service only some of them by restricting case laws to one or two per proposition.
(c) With regard to point regarding fees, it was argued that the arbitrator is not entitled to fees under Fourth Schedule to A and C Act, as the date of commencement of arbitration is prior to 23.10.2015. In support of this proposition, judgment of Hon’ble Supreme Court in National Highways Authority of India Vs. Gayatri Jhansi Roadways Limited reported in 2019 SCC OnLine SC 906 was pressed into service.
(d) With regard to arbitral fee enhancement, it may not be necessary to dilate in great detail about the numbers. Suffice to say that there was enhancement owing to number of hearings, details of which have already been extracted and reproduced supra. The petitioner vide email dated 13.10.2015 did not say that they disagree with enhancement, but merely stated that clearance from higher authorities is required and a revised 17/27 http://www.judis.nic.in O.P.No.266 of 2016 proposal has been sent for approval. There is no disputation that ultimately the petitioner did not revert one way or the other about clearance from higher authorities. Therefore, there is no doubt or disputation that the petitioner did not deny, disagree or refuse to pay the enhanced fee, but did not pay.
Therefore, in the light of proviso to section 38(2), petitioner’s portion of fee also was paid by first respondent. In this regard, arbitration agreement between parties within the meaning of section 7 of A and C Act, which is in the form of a covenant, i.e., clause 25 of said contract makes it clear that fee is a matter of discretion of the arbitrator. The submission on demurrer that even though Fourth schedule is not applicable, even if quantum of fee is tested by applying the same, fee paid is lesser than the model fee ceiling and this has weighed with this Court to come to the conclusion that it is not exorbitant or incommensurate. More importantly, the submission that the enhancement of fee leaves the impugned award vitiated by conflict with most basic notion of morality or justice is clearly not acceptable. Equally, the submission that this enhancement of fees owing to number of hearings and payment of same by first respondent leaves the impugned order vitiated by fraud or corruption is also not acceptable. The reason why these points are unacceptable is these arguments are predicated on clauses (i) and (iii) of Explanation 1 to section 34(2)(b) . This Explanation 1 to section 34(2)(b) was substituted on and from 23.10.2015 by explaining public policy which until then was not statutorily explained.
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(e) Adverting to public policy, Hon’ble Supreme Court in the celebrated Associate Builders case being Associate Builders Vs. Delhi Development Authority reported in (2015) 3 SCC 49 drawing inspiration from ONGC Ltd. v. Western Geco International Ltd., reported in 2014 (9) SCC 263 held that three distinct juristic principles can be culled out qua public policy. They are (a) judicial approach, (b) natural justice principle and (c) irrationality / perversity. Besides culling out these three distinct juristic principles, Hon’ble Supreme Court in these two celebrated judgments also set out the manner to test these three juristic principles. With regard to judicial approach, it has been laid down that the test is fidelity of judicial approach qua award under challenge. With regard to 'natural justice principle' (‘NJP’ for brevity), it was held that it should be tested on the touchstone of time honoured audi alteram partem principle and with regard to third juristic principle, namely irrationality / perversity, Hon’ble Supreme Court had held that it has to be tested on Wednesbury principle of reasonableness.
(f) To be noted, Western Geco and Associate Builders cases rendered by Hon’ble Supreme Court are prior to 23.10.2015, but these principles were reiterated by Hon’ble Supreme Court subsequently in Centrotrade Minerals and Metal Inc. Vs. Hindustan Copper Limited reported in (2017) 2 SCC 228, which is post 23.10.2015.
(g) In this view of the matter, this court is unable to accept the submission that explanation of public policy can be pressed into service on the factual matrix of this case with regard to the point which pertains to 19/27 http://www.judis.nic.in O.P.No.266 of 2016 enhancement of fee and payment of same by one of the parties. In any event, enhancement of fee is not beyond the scope of arbitration agreement as the arbitration agreement makes it clear that it is the discretion of AT. More importantly, payment of enhanced fee by one of the parties is clearly permissible in the light of first proviso to section 38(2). Therefore, this court has no difficulty in coming to the conclusion that this point of attack qua impugned award fails.
(h) This takes us to the other point on which the impugned award is assailed, i.e., point of attack regarding the award travelling beyond the terms of submission. A perusal of the arbitration agreement between parties more particularly the underlined portion of clause 25 reproduced supra makes it clear that the AT shall embark upon the exercise of adjudicating upon disputes referred to AT by appointing authority. This court has already referred to proceedings dated 04.11.2008 (signed on 03.11.2008) bearing reference No.13/11(3)/2008-I&M(NFC)/02 made by the Secretary to Government of India, wherein appointing authority has appointed AT and referred the dispute to him. For the sake of convenience and clarity, this court deems it appropriate to extract the entire order which reads as follows :
“ORDER WHEREAS Work Order No.NFC/CED/C-NZOSP-
3/347 dated 9.6.2006 with respect to civil, structural and allied works for the construction of plant buildings, auxiliary buildings, utility buildings, tank farms, water storage tanks, roads and drains etc., for NZOSP at Pazhayakayal, was issued by Nuclear Fuel Complex, 20/27 http://www.judis.nic.in O.P.No.266 of 2016 Hyderabad, to M/s.URC Constructions (P) Limited, Tamil Nadu.
AND WHEREAS, differences/disputes, within the meaning of Clause 25 of the Clauses of Contract have arisen and still subsist between the said parties.
AND WHEREAS, under the said Work Order there is an arbitration clause to get the difference/disputes settled/decided by referring the matter to the Sole Arbitrator.
NOW, therefore, the undersigned in the capacity of Secretary to the Government of India, Department of Atomic Energy, in exercise of the powers conferred on me, under Clause 25 of the Clauses of Contract, do hereby appoint Shri D.K.Jain, Chief Engineer (Civil), CMM Group, Nuclear Power Corporation of India Limited, Nabhikiya Urja Bhavan, Anushakti Nagar, Mumbai-400 094, as Sole Arbitrator to settle and decide the disputes and differences having arisen out of the said contract in accordance with law. The Sole Arbitrator shall consider both the claims and counter claims, if any, submitted by parties to the dispute.” (Underlining made by this Court to supply emphasis and highlight)
(i) A perusal of the aforesaid order of appointing authority appointing the AT and the underlined portions of the order of appointment makes it clear that there are no exceptions and it cannot be gainsaid now by the petitioner that the AT has traveled beyond the scope of submission to arbitration. As would be evident from the discussion thus far, a list of portions of impugned award which according to petitioner deals with disputes not 21/27 http://www.judis.nic.in O.P.No.266 of 2016 falling within the terms of submission does not find favour with this court as the petitioner has not been able to demonstrate that the appointing authority has restricted the disputes that were referred to AT. There is nothing to show in the records of AT that any such issue was raised before AT. Therefore, this ground also fails.
(j) As alluded to supra elsewhere in this order, learned counsel on both sides very fairly submitted that they would restrict themselves to one case law per proposition though several case laws have been compiled and placed before this Court. In this spirit, with regard to the point that the Arbitral Tribunal traveled / wandered beyond the matter referred to it, a judgment of Hon'ble Supreme Court in Harsha Constructions Vs. Union of India and others reported in (2014) 9 SCC 246 was pressed into service by the petitioner.
(k) In the considered view of this court, Harsha Constructions principle does not come to the aid of the petitioner as Harsha Constructions is a case where there is a specific excepted matters clause under the caption 'excepted matters' and that was clause 39 therein, whereas in the instant case, i.e., case on hand, the plea of AT having wandered and traveled beyond the matters referred to it is predicated on the ground that there is a clause in the contract, namely clause 2, which says that the decision taken by the Superintending Engineer is final and binding. In other words, this wandering and traveling beyond disputes point is predicated on the ground 22/27 http://www.judis.nic.in O.P.No.266 of 2016 that the contract stipulates that decision taken by the Superintending Engineer is final and binding. The arbitration clause also is in the form of a covenant in the same contract.
(l) A harmonious reading of these covenants makes it clear that it cannot be gainsaid by the petitioner that the dispute is beyond the scope of arbitration the moment the Superintending Engineer takes a decision. The reason is, law is well established by now that the arbitration agreement being arbitration agreement within the meaning of section 7 of A and C Act between the parties when made in the form of a covenant in a contract (not a separate arbitration agreement), the covenant in the contract will survive even termination of contract. Therefore, clause 2 can only mean that decision taken by the Superintending Engineer is final and binding to the extent that it cannot be disputed or sought to be varied without resorting to dispute resolution clause, namely arbitration.
(m) With regard to the other point pertaining to enhancing of fee by the Arbitrator, learned counsel for petitioner pressed into service a judgment of Hon'ble Supreme Court in National Highways Authority of India Vs. Gayatri Jhansi Roadways Limited reported in 2019 SCC OnLine SC 906 dated 10.07.2019 made in Civil Appeal No.5383 of 2019. Attention of this court was drawn to paragraph 12 of the said judgment which reads as follows:
'12.We have heard learned counsel for the both the sides. In our view, Shri Narasimha, learned senior counsel, is right in stating that in the facts of this case, the fee schedule was, in fact, fixed by the agreement between the parties. This fee 23/27 http://www.judis.nic.in O.P.No.266 of 2016 schedule, being based on an earlier circular of 2004, was now liable to be amended from time to time in view of the long passage of time that has ensued between the date of the agreement and the date of the disputes that have arisen under the agreement. We, therefore, hold that the fee schedule that is contained in the Circular dated 01.06.2017, substituting the earlier fee schedule, will now operate and the arbitrators will be entitled to charge their fees in accordance with this schedule and not in accordance with the Fourth Schedule to the Arbitration Act. '
(n) In the considered view of this Court, this Gayatri Jhansi principle also does not come to the aid of the petitioner as this is not a case of Fourth Schedule breach. Learned senior counsel for first respondent very fairly submitted that he is not pitching himself on Fourth Schedule to A and C Act. It was pointed out that a perusal of clause 25 and more particularly the underlined portion extracted supra would reveal that fee is a matter of discretion of the arbitrator and therefore, it cannot be gainsaid that enhanced fee is in conflict with agreed terms. In this regard, it was submitted by learned senior counsel for first respondent merely as buttressing argument, on a demurrer, that even if the fee charged by the arbitrator is tested by applying Fourth Schedule, quantum is below the model fee prescribed in Fourth Schedule. It was pointed out that even according to model fee prescribed in Fourth Schedule, fee charged and paid to AT in instant case is lesser than Rs.30 lakhs ceiling for claims above Rs.20 Crores. Gayatri Jhansi principle in fact makes it clear that it is a far cry to say that sections 31(8) and 31-A of 24/27 http://www.judis.nic.in O.P.No.266 of 2016 A and C Act would govern the contract in which fee structure had already been laid down. This is articulated in one instructive paragraph in Gayatri Jhansi case which reads as follows :
'15.However, the learned Single Judge's conclusion that the change in language of section 31(8) read with Section 31A which deals only with the costs generally and not with arbitrator's fees is correct in law. It is true that the arbitrator's fees may be a component of costs to be paid but it is a far cry thereafter to state that section 31(8) and 31A would directly govern contracts in which a fee structure has already been laid down. To this extent, the learned Single Judge is correct. We may also state that the declaration of law by the learned Single Judge in Gayatri Jhansi Roadways Limited is not a correct view of the law.'
(o) In any event, this Court is unable to countenance the submission that enhancement of fee tantamounts to corruption militating against the basic notions of morality.
(p) On the side of first respondent, learned senior counsel drew the attention of this Court to only one judgment of Hon'ble Supreme Court and that is Hindustan Construction Company Limited Va. Union of India reported in 2019 SCC Online SC 1520. By pressing into service Hindustan Construction case, learned senior counsel submitted that BCCI judgment of Hon'ble Supreme Court will continue to apply and amendments to A and C Act which came into force on and from 23.10.2015 will apply to all court proceedings initiated after 23.10.2015. To be noted, reference to BCCI judgment is again a judgment of Hon'ble Supreme Court being Board of 25/27 http://www.judis.nic.in O.P.No.266 of 2016 Control for Cricket in India Vs. Kochi Cricket Private Limited reported in (2018) 6 SCC 287. In the case on hand, instant OP has been filed / presented in this Court on 25.01.2016 which is clearly after 23.10.2015. Therefore, section 34 of A and C Act as it stood post amendment on and from 23.10.2015 initially by Ordinance and subsequently by an Act has been applied to instant case.
(q) In the light of authoritative and instructive pronouncement of Hon'ble Supreme Court which is declaratory qua law in this regard, there can be no disputation on this aspect of the matter and to be fair to learned counsel for petitioner, he did not enter upon any controversy in this regard.
6 Conclusion :
As both grounds on which challenge to arbitral award has been laid / predicated fail, instant OP cannot, but be dismissed.
7 Result :
O.P. No.266 of 2016 is dismissed. There shall be no order as to costs.
10.01.2020 Speaking order Index : Yes vvk 26/27 http://www.judis.nic.in O.P.No.266 of 2016 M.SUNDAR, J.
vvk order in O.P.No.266 of 2016 10.01.2020 27/27 http://www.judis.nic.in