Madras High Court
Ongc vs M/S Steel & Grip on 27 September, 2021
Author: Abdul Quddhose
Bench: Abdul Quddhose
C.M.A.No.336 of 2020
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON: 20.09.2021
PRONOUNCED ON : 27.09.2021
CORAM
THE HONOURABLE MR. JUSTICE ABDUL QUDDHOSE
C.M.A.No.336 of 2020 &
CMP.Nos.2237 of 2020 & 5356 of 2021
ONGC, Cauvery Asset,
MM Department,
Neravy Complex,
Neravy,
Karaikal ... Appellant
..Vs..
M/s Steel & Grip,
Represented by its Proprietor,
Mr.Mukut Phukan,
A.T.Road Chabua P.O.,
Dibrugarh,
Assam - 786184 ...Respondent
Prayer: Civil Miscellaneous Appeal filed under Section 37(1)(c) of
Arbitration and Conciliation Act, 1996 to set aside the order dated
03.06.2019 passed by Court of District Judge at Karaikal in O.P.No.1 of
2014 partially confirming the Award dated 05.05.2014 of the sole
Arbitrator.
For Appellant : Mr.P.V.S.Giridhar
For Respondent : Mr.Anirudh Krishnan
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C.M.A.No.336 of 2020
JUDGMENT
This appeal has been filed under section 37 of the Arbitration and Conciliation Act, challenging the order dated 03.06.2019 passed by the learned District Judge, Karaikal under section 34 of the Arbitration and Conciliation Act in A.O.P.No.1 of 2014 allowing the application filed by the Appellant in part by modifying the Arbitral Award both in favour of the Appellant as well as the respondent under the Arbitral award dated 05.05.2014.
2. The respondent was a successful bidder in a tender floated by the Appellant for the construction of 34 bunk houses at the Appellant's rig site. The Appellant executed a letter of award (LOA) dated 23.07.2009 in favour of the respondent awarding the tender to the respondent and thereafter, purchase order dated 24.09.2009 was also issued in favour of the respondent. Under the letter of award dated 23.07.2009, there is a condition which stipulates that 34 bunk houses will have to be constructed by the respondent and delivered to the Appellant within 120 days from the date of the said letter of award. The Appellant levied liquidated damages of Rs.10,22,631/- upon the respondent as according to the Appellant, the respondent delivered the bunk houses 2/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 after a delay of 414 days from 23.07.2009 being the date of the letter of award.
3. However, it is the case of the respondent that the delay at various stages was only due to the Appellant as the approval of drawings and inspections by the Appellant was done belatedly.
4. There arose disputes between the parties and hence, the respondent initiated arbitration before the Arbitral Tribunal as according to them, the Appellant has illegally deducted a sum of Rs.10,22,631.17/- from the total value of the purchase order and paid only Rs.1,95,18,677/- and without any justification also invoked the Performance Bank Guarantee submitted by them to the Appellant to the tune of Rs.15,40,600/-. The respondent has also claimed compensation for the losses suffered by them which includes the supplies/fund blockage loss, stock circulation loss, man power and workspace loss. According to the respondent, as per the contract, 34 bunk houses will have to be constructed and delivered by them to the Appellant only from the date of approval of drawings by the Appellant. According to the respondent, 3/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 since the drawings were approved by the Appellant only on 13.11.2009, delivery of 34 bunk houses by the respondent to the Appellant is well within the period of 120 days.
5. Before the Arbitral Tribunal, the respondent has made 20 claims against the Appellant.
6. The Appellant has disputed the claims made by the respondent before the Arbitral Tribunal by filing a reply statement. It is their contention that as per the letter of award dated 23.07.2009, the respondent ought to have delivered 34 bunk houses within a period of 120 days from 23.07.2009 i.e., the date of letter of award and since the same was not delivered on time, they are entitled for counter claim against the respondent. The Appellant has made a counter claim towards cost of four bunk houses which were damaged and unusable, expenses incurred towards damage of other bunk houses and interest at 18% per annum and also for cost aggregating to a sum of Rs.47,75,483.27/-. According to the Appellant, time is the essence of the contract and therefore, they are entitled for the losses mentioned in the counter claim. 4/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020
7. The Arbitral Tribunal passed an Arbitral Award dated 05.05.2014 in favour of the respondent in respect of certain claims against the Appellant by holding that the period of 120 days for delivery of 34 bunk houses specified in the letter of award dated 23.07.2009 would commence, not from the date of the said letter of award, but from 13.11.2009 when the plans were approved by the Appellant. Under the Arbitral Award, the counter claim made by the Appellant against the respondent was rejected by the Arbitral Tribunal. Aggrieved by the Arbitral Award dated 05.05.2014, the Appellant filed an application under section 34 of the Arbitration and Conciliation Act, 1996 before the learned District Judge, Karaikal in A.O.P.No.1 of 2014 challenging the Arbitral Award dated 05.05.2014 passed in favour of the respondent.
8. By order dated 03.06.2019 in A.O.P.No.1 of 2014, the learned District Judge, Karaikal allowed the application filed by the Appellant under section 34 of the Arbitration and Conciliation Act, 1996 in part and modified the award of the Arbitral Tribunal in respect of certain claims and confirmed the award of the Arbitral Tribunal in respect of 5/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 certain other claims Aggrieved by the same, the Appellant has preferred this appeal under section 37 of the Arbitration and Conciliation Act, 1996.
9. Heard Mr.PVS.Giridhar, learned counsel for the Appellant and Mr.Anirudh Krishnan, learned counsel for the respondent.
10. Mr.P.V.S.Giridhar, learned counsel for the Appellant would at the outset submit that under the letter of award dated 23.07.2009 as well as under the purchase order dated 24.09.2009, time is the essence of the contract. He drew the attention of this Court to the tender document dated 26.12.2008 and in particular, he referred to the following clauses contained therein namely, (a) clause 12 - Failure and termination clause/liquidated damages clause; (b) clause 13 – Levy of liquidated damages (LD due to delay in supplies) and (c) clause 13.3 – Extension in delivery period due to delay on the part of the Appellant (ONGC). After referring to the aforementioned clauses, Mr.P.V.S.Giridhar, would submit that time is the essence of the contract and in case of delay on the part of the respondent, they are liable to pay the liquidated damages to 6/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 the Appellant and in case of delay on the part of the Appellant, extension of time for performance of the contract can be granted to the respondent.
11. Mr.P.V.S.Giridhar would submit that the construction of 34 bunk houses by the respondent under the letter of award dated 23.07.2009 is for the Appellant's rig site and without those bunk houses, staff and labourers of the Appellant at the rig site will not be able to perform their work in the off-shore rig.
12. Mr.P.V.S.Giridhar, learned counsel for the Appellant then drew the attention of this Court to the letter of award dated 23.07.2009 and in particular, he drew the attention of this Court to clause (BB) and clause (DD) and would submit that under the letter of award, the respondent will have to complete the delivery of 34 bunk houses within 120 days from 23.07.2009, being the date of letter of award.
13. Mr.P.V.S.Giridhar, learned counsel for the Appellant drew the attention of this Court to the purchase order dated 24.09.2009 placed by the Appellant on the respondent and would submit that it clearly 7/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 stipulates that the delivery of the bunk houses will have to be made by the respondent on or before 22.11.2009. Learned counsel for the Appellant would then submit that the bunk houses were delivered to the Appellant by the respondent on 09.09.2010 and there was 411 days delay on the part of the respondent in delivering the bunk houses.
14. Mr.P.V.S.Giridhar, learned counsel for the Appellant then drew the attention of this Court to the Arbitral Award dated 05.05.2014 passed in favour of the respondent against the Appellant and in particular, he referred to the first issue framed by the Arbitral Tribunal namely “whether the time period of 120 days as stipulated in the contract work shall commence from the date of issuing of the LOA (Letter of Award) ” and would submit that there was no necessity for the Arbitral Tribunal to frame such an issue as the letter of award specifically makes it clear that that contract will have to be completed by the respondent within a period of 120 days from the date of letter of award.
15. Mr.P.V.S.Giridhar, learned counsel for the Appellant then drew the attention of this Court to the finding of the Arbitrator under the 8/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 Arbitral Award pertaining to the delay on the part of the Appellant at 183 days is an incorrect assessment and further he would submit that when the letter of award dated 23.07.2009 makes it clear that the contract will have to be completed by the respondent within a period of 120 days from the letter of award, the delays mentioned in the arbitral award on the part of the Appellant amounting to 183 days is incorrect. According to him, the Arbitral Tribunal has re-written the contract dated 23.07.2009 (letter of award) by excluding the days of inspections as well as the approval of the plans by the Appellant for the purpose of calculating the number of days delay in completion of the project by the respondent. He would submit that though the scope of section 34 of the Arbitration and Conciliation Act, 1996 is limited, the Arbitral Tribunal having re-written the contract, the award passed against the Appellant has to be set aside as re-writing the contract by the Arbitral Tribunal is a valid ground under section 34 of the Act to set aside the Arbitral Award. He would also submit that even assuming without admitting that there was a delay of 183 days on the part of the Appellant as assessed by the Arbitral Tribunal, there would still be a delay of more than 100 days on the part of the respondent in completing the contract. According to him, there is 9/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 an unexplained delay of 111 days by the respondent and therefore, the liquidated damages claimed by the Appellant from the respondent is just and is only in terms of the contract.
16. According to the learned counsel for the Appellant, there is patent illegality on the face of the Arbitral Award as the Arbitral Tribunal has re-written the contract by fixing the date of completion of the contract to be 120 days from 13.11.2009 being the date of approval of plans by the Appellant and not from 23.07.2009 being the date of letter of award which the parties have agreed upon.
17. Learned counsel for the Appellant then drew the attention of this Court to the impugned order dated 03.06.2019 passed by the learned District Judge, Karaikal in A.O.P.No.1 of 2014 and would submit that under the impugned order, the learned District Judge without independently analysing and examining the Arbitral Award has mechanically accepted the findings of the Arbitral Tribunal and has erroneously rejected the counter claim made by the Appellant under section 34 of the Arbitration and Conciliation Act. According to him, the 10/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 learned District Judge, Karaikal ought to have set aside the Arbitral Award on the ground that the Arbitral Tribunal has re-written the contract by changing the date from which the period of completion should be calculated.
18. Per contra Mr.Anirudh Krishnan, learned counsel for the respondent would submit that without drawings being approved by the Appellant, it is not possible for the respondent to commence work. According to him, the drawings were approved by the Appellant only on 13.09.2009 and therefore, the period of 120 days for the completion of the contract must be calculated only from 13.09.2009 and not from 23.07.2009 being the date of letter of award.
19. Mr.Anirudh Krishnan, learned counsel then drew the attention of this Court to Sections 51 to 54 of the Indian Contract Act dealing with performance of reciprocal promises. According to him, the reciprocal promise of approving the drawings by the Appellant was not given and therefore, the contract awarded to the respondent cannot commence on the date of LOA. He drew the attention of this Court to the reasons given 11/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 by the Arbitral Tribunal for fixing the date from which the period of 120 days for completion of the contract will have to be calculated and would submit that the Arbitral Tribunal has rightly given a finding that the respondent would not be in a position to begin the work under the contract from the date of letter of award i.e, from 23.07.2009, but would be able to commence the work only from the date of approval of the drawings by the Appellant. Hence, he would submit that the Arbitral Tribunal has not re-written the contract by changing the commencing date but has only in terms of sections 51 to 54 of the Contract Act has held that the respondent will be able to commence the work only from the date when the drawings were approved by the Appellant. After drawing attention to the findings of the Arbitral Tribunal, he would further submit that the delay is entirely attributable to the Appellant and not to the respondent and further, he would submit that the letter of award dated 23.07.2009 is only a skeleton order which cannot be acted upon without other approvals from the Appellant.
20. Mr.Anirudh Krishnan also drew the attention of this Court to the findings given by the Tribunal on the claim made by the Appellant 12/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 against the respondent towards levy of liquidated damages (LD due to delay in supplies) and would submit that the Tribunal has rightly rejected the said claim on the ground that without approval of drawings by the Appellant, the respondent could not commence the manufacturing operation. Therefore, he would submit that the learned District Judge, Karaikal under the impugned order has rightly rejected the application filed under section 34 of the Arbitration and Conciliation Act by the Appellant in part on the ground that he cannot re-appreciate the evidence before the Tribunal and the Arbitral Award does not suffer from any patent illegality shocking the conscience of the Court. Therefore, he would submit that there is no merit in this Appeal.
21. In support of his submissions, learned counsel for the respondent drew the attention of this Court to the following authorities:
(a) Associate Builders v. Delhi Development Authority reported in (2015) 3 SCC 49;
(b) MMTC vs. Vedanta Limited reported in (2019) 4 SCC 163;
(c) Ssangyong Engineering and Construction Company Limited vs. National Highways Authority Limited (NHAI) reported in (2019) 15 SCC 131;13/34
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(d) Sporty Solutionz Pvt. Ltd., vs. Badminton Association of India and Others reported in 2020 (2) Arb LR 35 (Delhi);
(e) DLF Home Developers Ltd and Others vs. Martin George and Others reported in 2021 (3) KHC 590;
(f) Yarlagadda China Rattayya and Another vs. Donepudi Venkatramayya and Others reported in AIR 1959 AP 551;
(g) Gambhirmull Mahabiprasad vs. The Indian Bank Ltd., reported in AIR 1963 Cal 163;
(h) State of kerala vs. K Bhaskaran reported in AIR 1985 Ker 49;
(i) Union of India vs. Indian Proofing & General Inds., reported in 1998 (suppl.) Arb LR 181 (Delhi);
(j) Maharashtra State Electricity Distribution vs. DSL Enterprises Pvt. Ltd., reported in (2009) 3 Arb LR 422;
(k) Dyna Technologies Private Limited. vs. Crompton Greaves Limited reported in (2019) 20 SCC 1;
(l) Saradamani Kandappan vs. S.Rajalakshmi and Others reported in (2011) 12 SCC 18.
14/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 Discussion:
22. The dispute between the parties revolves upon the interpretation of the letter of award dated 23.07.2009 issued by the Appellant in favour of the respondent by which the respondent was awarded contract by the Appellant for construction of 34 bunk houses at ONGC (Appellant) site. The letter of award dated 23.07.2009 specifies that the work will have to be completed by the respondent within a period of 120 days from the date of letter of award. But however, it is impossible for the respondent to commence the work immediately on the date of letter of award i.e., on 23.07.2009 itself, since as per the purchase order dated 24.09.2009, only after the inspection and approval of the building plans by the Appellant, the respondent will be in a position to commence its work.
23. Under the purchase order dated 24.09.2009 issued by the Appellant, there are reciprocal promises between the parties to the contract. The purchase order dated 24.09.2009 issued by the Appellant contains the terms and conditions of the contract. As seen from the 15/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 special instructions given under the purchase order and as per serial No.11, the drawings will have to be submitted to the Appellant by the respondent and only after their approval, they can commence the work in the project site. The relevant clause in the purchase order reads as follows:
“ Special Instructions
1..
2...
3...
4...
5...
6...
7...
8...
9...
10...
11. The supplier shall make final drawings of the Bunk house with illustrating important sections and bill of materials corresponding to respective IS specification wherever applicable to meet ONGC's specifications/requirements and shall submit the same for ONGC's approval within 07 days from the date of placement of firm order.16/34
https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 ONGC will communicate the approval along with any changes/modification, if required and the Bunk house shall be constructed as per approved drawing.”
24. Admittedly only by letter dated 13.11.2009, the drawings submitted by the respondent were approved by the Appellant and the operative portion of the said letter is extracted hereunder:
“Sub: Your request for drawing approval.
With reference to the above, please find enclosed herewith the comments given by Indentor and their approval for the drawings.
Kindly acknowledge the receipt of the same.”
25. After the letter of award dated 23.07.2009 issued by the Appellant and as per the contract, the respondent will have to furnish the Performance Bank Guarantee for a sum of Rs.15,40,600/- which was also furnished by the respondent in favour of the Appellant.
26. The Arbitral Tribunal under the impugned award has attributed
(a) 68 days delay with regard to the first inspection, (b) 89 days delay 17/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 with regard to the second inspection, (c) 12 days delay with regard to the third inspection and (d) 14 days delay with regard to the fourth inspection to be carried out by the Appellant and in all, the Arbitral Tribunal has given a finding that there was 183 days delay on the part of the Appellant to carry out the inspection under various stages of the construction. The details are as follows:
Sl.No. Sequence of Events Timeline as Actual dates No. of days of per the terms of delay attibuted to of tender, occurrence Appellant LOA and according to the Purchase Arbitral Tribunal Order Inspection 1 1 Notice of inspection 01.09.2009 issued by the respondent 2 Receipt of notice of 05.09.2009 inspection by the Appellant 3 Inspection by the 19.11.2009 68 days of delay Appellant – date of attributable to inspection report. Appellant according to the Arbitral Tribunal Inspection 2 4 Notice of inspection 06.02.2010 issued by the respondent 5 Inspection by the 17.05.2010 89 days of delay Appellant – date of attributable to inspection report. Appellant according to the Arbitral Tribunal 18/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 Sl.No. Sequence of Events Timeline as Actual dates No. of days of per the terms of delay attibuted to of tender, occurrence Appellant LOA and according to the Purchase Arbitral Tribunal Order Inspection 3 6 Notice of inspection 08.07.2010 issued by the respondent 7 Inspection by the 03.08.2010 12 days of delay Appellant – date of attributable to inspection report. Appellant according to the Arbitral Tribunal Inspection 4 8 Notice of inspection 14.08.2010 issued by the respondent 9 Inspection by the 08.09.2010 14 days of delay Appellant – date of attributable to inspection report. Appellant according to the Arbitral Tribunal 10 Date of Delivery 19.11.2009 09.09.2010 i.e., 120 days from the date of Letter of Award 22.11.2009 i.e., as per the Purchase order 21.01.2010 i.e., 120 days from the date of Purchase Order.
12.03.2010
-120 days from the date of 19/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 Sl.No. Sequence of Events Timeline as Actual dates No. of days of per the terms of delay attibuted to of tender, occurrence Appellant LOA and according to the Purchase Arbitral Tribunal Order approval of drawings Total delay 183 days of attributable to Appellant according to the Arbitral Tribunal
27. As seen from the letter of award dated 23.07.2009 as well as the purchase order dated 24.09.2009, it is clear that the respondent will be able to commence the work, after approval of the drawings and clearing of the site by the Appellant. As seen from the purchase order, there are reciprocal promises to be performed by both the parties to the contract. Section 51 to section 56 of the Contract Act is applicable to the case on hand. Section 51 to Section 56 of the Contract Act reads as follows:
“51.Promisor not bound to perform, unless reciprocal promisee ready and willing to perform.— When a contract consists of reciprocal promises to be 20/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 simultaneously performed, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.
52. Order of performance of reciprocal promises.—Where the order in which reciprocal promises are to be performed is expressly fixed by the contract, they shall be performed in that order; and where the order is not expressly fixed by the contract, they shall be performed in that order which the nature of the transaction requires.
53. Liability of party preventing event on which the contract is to take effect.—When a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented; and he is entitled to compensation 1 from the other party for any loss which he may sustain in consequence of the nonperformance of the contract.
54. Effect of default as to that promise which should be first performed, in contract consisting of reciprocal promises.—When a contract consists of reciprocal promises, such that one of them cannot be performed, or that its performance cannot be claimed 21/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 till the other has been performed, and the promisor of the promise last mentioned fails to perform it, such promisor cannot claim the performance of the reciprocal promise, and must make compensation to the other party to the contract for any loss which such other party may sustain by the non-performance of the contract.
55. Effect of failure to perform at fixed time, in contract in which time is essential.—When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.
Effect of such failure when time is not essential.—If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.
22/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 Effect of acceptance of performance at time other than that agreed upon.—If, in case of a contract voidable on account of the promisor"s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non- performance of the promise at the time agreed, unless, at the time of such acceptance, he gives notice to the promisor of his intention to do so.
56. Agreement to do impossible act.—An agreement to do an act impossible in itself is void. Contract to do an act afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.
Compensation for loss through non-performance of act known to be impossible or unlawful.-- Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to 23/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 such promisee for any loss which such promisee sustains through the nonperformance of the promise.”
28. From the aforementioned sections, it is clear that when a contract consists of reciprocal promises like in the instant case, no promisor need perform his promise unless the promisee is ready and willing to perform his reciprocal promise.
29. In the case on hand, it is not in dispute that under the purchase order dated 24.09.2009, the drawings for the construction will have to be approved by the Appellant and only thereafter, the respondent could commence the work in the project site. Admittedly, the drawings were approved by the Appellant only on 13.11.2009. As on the date of letter of award i.e., on 23.07.2009 it would have been impossible for the respondent to commence the work as there are other formalities to be completed comply with under the terms and conditions of the contract which includes furnishing of Performance Bank Guarantee by the respondent in favour of the Appellant and approval of drawings by the Appellant.
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30. Section 56 of the Contract Act also makes it clear that an agreement to do an impossible act is void. Therefore, the date on which the timeline of 120 days to be calculated is only from the date when the Appellant had approved the drawings submitted by the respondent i.e., only from 13.11.2009 and not from 23.07.2009 when the date of letter of award was issued, on which date, it would have been impossible for the respondent to commence the work.
31. The Arbitral Tribunal under the impugned award has taken into consideration all these factors and only thereafter has passed the Arbitral Award in favour of the respondent on 05.05.2014. Even though, the Arbitral Tribunal has not specifically mentioned section 51 to section 56 of the Indian Contract Act, 1872 while passing the Arbitral Award in favour of the respondent, the principles involved in those sections have been followed by the Arbitral Tribunal as seen from the Arbitral Award. Only based on the evidence available on record, the Arbitral Award has been passed in favour of the respondent by allowing some of the claims and by rejecting the counter claim made by the Appellant. 25/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020
32. Eventhough the Arbitral Tribunal has passed a well-reasoned and well considered award, the learned District Judge, Karaikal under the impugned judgment and decree dated 03.06.2019 has modified the Arbitral Award by reducing the award amount which is not be legally permissible as it is settled law that the Arbitral Award cannot be modified under section 34 of the Arbitration and Conciliation Act 1996. Since no appeal has been filed by the respondent aggrieved by the findings of the learned District Judge, Karaikal under the impugned Judgement and Decree modifing the Arbitral Award, this Court is not inferring with the judgment and decree passed by the learned District Judge, Karaikal dated 03.06.2019 in A.O.P.No.1 of 2014.
33. The law as regards the scope of interference of an Arbitral Award is now well settled by the Hon'ble Supreme Court in the case of Associate Builders v. Delhi Development Authority reported in (2015) 3 SCC 49 in which the Hon'ble Supreme Court held among other things that the merits of the Award can be examined only under the broad 26/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 umbrella of public policy. The Hon'ble Supreme Court relied on previous judgments such as Renusagar, Saw Pipes, McDermott International and ONGC and set out what would constitute the fundamental policy of India. The Hon'ble Supreme Court held that this term fundamental policy of India includes factors such as:
(a) disregarding orders of superior courts;
(b) judicial approach, which is the antithesis to arbitrary approach;
and
(c) the principles of natural justice.
With reference to the ground of perversity, the Hon'ble Supreme Court held that an award will be perverse if:
(i) it is based on no evidence;
(ii) the arbitral tribunal took into account something irrelevant to the decision at which it arrived; or
(ii) the arbitral tribunal ignored vital evidence in arriving at its decision.
34. Thereafter in the case of Ssangyong Engineering and Construction Company Limited vs. National Highways Authority 27/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 Limited (NHAI) reported in (2019) 15 SCC 131 the Hon'ble Supreme Court while interpreting section 34 of the Arbitration and Conciliation Act held as follows:
(a) The interpretation of the term 'public policy of India' was narrowed by the 2015 amendment and the amendments to Section 34 of the 1996 Act, especially the removal of the wide interpretation of the term, were substantive in nature. Thus, the post-amendment position does not apply to applications relating to Section 34 which were instituted before the 2015 amendment, unless otherwise agreed by the parties.
(b) 'Public policy of India' now means the 'fundamental policy of Indian law', as explained in Associate Builders case (ie, the Renusagar understanding of 'fundamental policy of Indian law' applies). This means that the law set out in ONGC vs. SAW PIPES by the Hon'ble Supreme Court no longer applies. However, the principles of natural justice, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 act, remain grounds on which an award can be challenged, in keeping with Associate Builders.28/34
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(c) 'Public policy of India' is now constricted to mean that a domestic award must be:
(i) contrary to the fundamental policy of Indian law, as understood in Associate Builders; or
(ii) against the basic notions of justice or morality, as understood in Associate Builders.
(d) Insofar as domestic awards are concerned, an additional ground is now available under Section 34(2A), under the 2015 amendment act.
For this ground to apply, there must be patent illegality appearing on the face of the award. Such illegality must go to the root of the matter and must not amount to mere erroneous application of the law. In short, the contravention of a statute which is not linked to public policy or public interest will not lead to the setting aside of an award on the ground of patent illegality.
(e) The Supreme Court explained the concept of patent illegality following the 2015 amendment and expanded its ambit through an interpretation of Section 28(3) of the 1996 act. If an arbitrator looks beyond the contract and deals with matters outside their jurisdiction, they will commit an error of jurisdiction.
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(f) Reappreciation of evidence, which falls under the appellate courts' jurisdiction, is not permitted under the ground of patent illegality.
(g) While no longer a ground for challenge with respect to the public policy of India, if a decision is perverse, it will amount to patent illegality. Thus, a finding based on no evidence or an award which ignores vital evidence will be perverse and liable to be set aside on the ground of patent illegality.
35. In the case on hand, none of the parameters laid down by the Hon'ble Supreme Court in the aforementioned decisions for setting aside the Arbitral Award has been satisfied by the Appellant. The contention of the Appellant that the Arbitral Tribunal has re-written the contract by giving an interpretation on its own, despite the letter of award dated 23.07.2009 making it clear that the respondent will have to complete the work within 120 days from that date has to be thrown to the wind for the simple reason that on the date of the letter of award, it would have been impossible for the respondent to commence the work as there are other contractual formalities to be complied with by both the parties and only thereafter, the actual work on the site could commence. The Arbitral 30/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 Tribunal under the impugned Award has rightly appreciated the evidence available on record and only thereafter, has passed the Arbitral Award dated 05.05.2014 in favour of the respondent against the Appellant.
36. In the case of Saradamani Kandappan vs. S.Rajalakshmi and Others reported in (2011) 12 SCC 18 referred to supra, the Hon'ble Supreme Court, after referring to section 51 to 56 of the Contract Act has held that the question whether the time is the essence for performance of the contract can be considered either with reference to the contract as a whole or with reference to a particular term or condition of contract which is breached. In the aforesaid decision also, there were reciprocal promises to be performed by the parties to the contract.
37. For the foregoing reasons, this Court is of the considered view that the Arbitrator has not re-written the contract as claimed by the Appellant but has only appreciated the evidence available on record in a right manner and only thereafter, has passed the Arbitral Award in favour of the respondent. While exercising powers under section 34 as well as 31/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 section 37 of the Arbitration and Conciliation Act, the scope for interference to an Arbitral Award is very limited and the parameters for such interference is well settled as laid down by the decisions of the Hon'ble Supreme Court referred to supra.
38. This Court cannot re-appreciate the evidence while dealing with matters under section 34 or section 37 of the Arbitration and Conciliation Act and cannot also have a different view from that of the Arbitral Tribunal, when the view of the Arbitral Tribunal is also a legally possible view.
39. In the result, there is no merit in this appeal. Accordingly, this Civil Miscellaneous Appeal is dismissed and the order passed in A.O.P.No.1 of 2014 by the learned District Judge, Karaikal is hereby confirmed. No costs. Consequently, connected miscellaneous petitions are closed.
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1. The District Judge, Karaikal 33/34 https://www.mhc.tn.gov.in/judis/ C.M.A.No.336 of 2020 ABDUL QUDDHOSE, J.
nl Pre-delivery Judgment in C.M.A.No.336 of 2020 27.09.2021 34/34 https://www.mhc.tn.gov.in/judis/