NATIONAL HIGHWAY AUTHORITY OF INDIA vs M S SSANGYONG ENGINEERING AND CONSTRUCTION CO. LIMITED
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Reserved on : 10th January, 2024
Pronounced on: 8th April, 2024
+ O.M.P. (COMM) 340/2021 & I.A. 14705/2021
NATIONAL HIGHWAY AUTHORITY OF INDIA ….. Petitioner
Through: Mr. Ankur Mittal and Mr. Raushal Kumar, Advocates.
versus
M S SSANGYONG ENGINEERING AND CONSTRUCTION CO. LIMITED ….. Respondent
Through: Mr.Navin Kumar, Ms.Rashmeet Kaur, Ms.Aarti Mahto and Ms.Bhagya Ajith, Advocates
CORAM:
HONBLE MR. JUSTICE CHANDRA DHARI SINGH
J U D G M E N T
CHANDRA DHARI SINGH, J.
FACTUAL HISTORY
1. The petitioner namely National Highway Authority of India (NHAI hereinafter) is an undertaking of the Government of India entrusted for construction of National Highways throughout the country. As a set practice, the petitioner invites bids for construction of various portions of the said Highways by the private contractors.
2. In the year 2005, the petitioner invited bids for construction of Sagar By-Pass between 211 kms to 255 kms of National Highway-26 in the State of Madhya Pradesh for a total contract value of Rs.1,88,45,07,303/-.
3. The respondent, namely, Ssangyong Engineering & Construction Co. Ltd. (respondent Company hereinafter), a company registered under the laws of Republic of Korea having its head office at Seoul, Korea and operational office at Gurugram, Haryana, submitted its bid for the said contract and was awarded the same vide letter dated 30th December, 2005.
4. Pursuant to completion of the tender process, various contracts were entered into between the parties. Since the impugned award has been passed in the contract package ADC-II/(C-6) dated 12th April, 2006 (the Contract hereinafter), the same is relevant for adjudication of the present petition, whereby, various terms and conditions were agreed upon by the parties with respect to the said contract package.
5. In order to supervise the contract performance, an Independent Engineer firm was appointed by the parties. As per the agreement, the said Engineer, a third party working independently was empowered to give decisions, opinions or consent, express his satisfaction or approval, or take action which may affect the rights and obligations of the employer or the contractor in terms of the Contract.
6. As per Clause 67 of the COPA, the parties had agreed to refer to resolve the disputes pertaining to decisions, opinions, determination, certification etc. through arbitration.
7. After completion of the work by the respondent Company, a Defect Liability Certificate dated 4th April, 2014 was issued by the Engineer recommending payment of Rs.10,73,36,988/- accrued against the Statement of Completion submitted by the respondent Company on 28th May, 2013. Thereafter, on 16th June, 2014, the petitioner released 90% of the amount against the statement issued by the Engineer.
8. As per the agreement, the respondent company was required to submit a draft final statement showing value of all the work done in accordance with the Contract along with the amount which the company considers is due to them under the Contract within a period of 56 days. In furtherance of the said obligation, vide letter dated 24th June, 2014, the respondent company submitted the alleged final draft statement claiming the amount of Rs.160,71,89,930/- and USD $5,845,604.72.
9. Thereafter, numerous disputes arose between the parties regarding the completion of work and due payments, and the same were referred for arbitration. In the meanwhile, the Engineer issued a payment certificate dated 31st August, 2014 for a net value of Rs.14,24,50,311/-and USD $446,650.86.
10. Subsequent to issuance of the abovesaid certificate, the petitioner raised various grievances regarding completion of work vide letter dated 15th October, 2014 and sought reply from the respondent and the Engineer. In response to the questions raised by the petitioner, the respondent wrote several letters assuring compliance of the observations made by the petitioner.
11. It is stated that during the pendency of the said disputes/issues, in terms of Clause 67 of the COPA, the respondent Company invoked arbitration on 7th November, 2016 and accordingly, an Arbitral Tribunal was constituted for adjudication of the disputes wherein, the petitioner preferred a counter claim regarding recovery of excess payments made to the respondent Company.
12. Pursuant to completion of the proceedings, the learned Tribunal passed an award dated 26th June, 2021 (impugned award hereinafter), thereby, holding that the Payment Certificate dated 31st August, 2014 shall be considered as Final Statement and therefore, directed the petitioner to make remaining payments to the respondent Company.
13. Aggrieved by the same, the petitioner has preferred the present petition.
PLEADINGS BEFORE THIS COURT
14. The petitioner has filed a synopsis briefly summarizing the grounds taken in its pleadings. The relevant extracts of the same reads as under:
4. GROUNDS OF CHALLENGE
A. DEFENCE OF NHAI/PETITIONER WAS COMPLETELY IGNORED AND NOT CONSIDERED
i. Entire defence of NHAI was ignored and not looked into by AT, by wrongly recording that the payment certificate dated 31-08-2014 has not been challenged by either party. NHAI filed 19 volumes of documents and pleadings running to hundreds of pages explaining endless discrepancies in the certificate dated 31-08-2014, which were completely ignored by AT. Impugn Award Para 26(xxxiv) page 69
ii. NHAI has taken a specific defence that the alleged payment certificate dated 31-08- 2014 had various discrepancies which are duly noted by AT in para 21 page 41-44 but the AT has not dealt it with anywhere, no finding whatsoever has been rendered, effectively amounting to no adjudication at all.
iii. Alleged payment certificate dt 31.08.2014 made by the engineer had calculations of various BOQ items/Variation Orders at page 841-896. The petitioner in its amended SOD at page 5791-5847 has pointed out various discrepancies in various items certified by Engineer
iv. The AT completed ignored that the NHAI has pointed out discrepancies in various quantities/variation items and further submitted that the claims filed by the respondent were theoretical in nature based on as built drawings and not based on actual measurements at site. NHAI in support of the same, also filed 19 volumes of documents on 09-06-2018 in support of its calculations, running into almost 4000 pages @ pg. 1497-5066 of Petition, which has been given a complete goby by the AT.
v. In the impugned award, the AT ignored the detailed written submissions made by the NHAI on page 9093-9140, wherein, each item and discrepancy in the earlier certification was separately pointed out and revised calculation were also provided.
Each discrepancy had a financial impact on the certificate. However, the AT still has not given any finding on the said calculations or detailed submissions made by NHAI. The AT has kept silent on the same and did not consider or dealt with the detailed submissions made in the pleadings and arguments.
vi. AT has virtually abandoned its fundamental duty to adjudicate and has wrongly recorded that there is no dispute in respect of amounts certified under the alleged payment certificate dated 31-08-2014, thus vitiating the entire award.
vii. The Broad nature of Discrepancies in the payment certificate are as under:
a. Variation Orders SOD- para 30-31- @ 1238 – Written submissions at pg [9078]
b. Foreign Indices clause 70.3 COPA – Written submissions at pg [9086]
c. Base Index for foreign component of work- Written submissions at pg. 9089- 9091
d. Discrepancies in quantities and calculations- Written submissions at pg. 9093-9140
viii. This Honble Court in Campos Brothers Farms Vs. MatruBhumi Supply Chain Pvt. Limited and Ors. 261 (2019) DLT 201, held that once it is found that the AT ignored the submission of a party in totality whatever be the merits of submission, the award cannot be enforced being in violation of the principles of natural justice. The said judgment was also noted with approval in para 83 & 88 of Vijay Karia and others vsPrysmianCavieSistemi SRL and Others (2020) 11 SCC 1
ix. Honble Supreme Court in numerous judgments has held that award passed in an International Commercial Arbitration must not be contrary to public policy of India, i.e.,
a. Failure to decide a material issue which goes to the root of the matter or failure to decide a claim or counter claim in its entirety
– Vijay Karia and others vsPrysmianCavieSistemi SRL and Others (2020) 11 SCC 1 para 80-83, 88 Pg. 266-273
– Renusagar Power Co. Ld. Vs General Electric Co. 1994 (1) SCC 644 para 65, 66 pg. 152-153 and 85 pg. 160
– Associate builder vs DDA (2015) 3 SCC 49- para 27 -28 pg. 95
– Gemini Bay Transcription Pvt v. Integrated Sales Service Ltd. [2021 SCC OnLine SC 572]-Para 40-43 pg. 300-304
– SsangYong Engineering and Construction vs NHAI (2019) 15 SCC 131- para 34 and 35 pg. 39-40
b. Award being in contravention of fundamental policy of Indian law- para 34 of Ssangyong, read with Para 30 of Associate Builders Pg. 97
c. Award being in violation of principles of natural justice. Section 18 and 34(2)(a)(ii) of the Act- para 34 of Ssangyong, read with Para 30 of Associate Builders Pg. 97
d. Award is in conflict with justice or morality- most basic notions of morality or justice- para 35-36 of Ssangyongand para 36 to 39 of Associate Builders Pg. 99-101
B. MEASURMENTS TO BE TAKEN AT SITE
i. The AT, despite holding that measurements are to be taken at SITE, as recorded in measurement books, turned a blind eye to the case setup by the respondent that the so called payment certificate dated 31-08-2014 is prepared on the basis of as-built drawings, which in itself was sufficient to reject the entire claim of the respondent.-para 26(i) to (xiii)- (page 55- 59) and 26 (xxxiii) at page 68
ii. If measurements were to be based upon actual measurements at site from time to time, the statement dated 31-08-2014 which admittedly is based upon as-built drawings and not on actual measurements is discrepant and cannot be accepted. AT contradicted itself by giving finding in para 26 (i)- (xiii) at page 55-59 and para 26 (xxxiii) pg 68.
iii. Specific case of NHAI during arguments was that measurements are to be taken at site, and on the basis of work executed from time to time. However, the same was ignored by the AT. The followings were submissions of the NHAI before AT which has been ignored.
NHAI submissions
a. Para v, at page 56 of award
b. Written submissions of NHAI page 8955 8965
c. Importance of entries made in measurement books page 8965 8970
d. Purpose of as-built drawings page 8970
e. E.g. of entries in MBs page 6162 @ 6164
f.E.g. of sheets pasted in MBs based on ABD page 1069
g. SOD- page 1225 onwards para 12, 15, 24, 26, 27-28 para 24 @ 1235
h. Amended SOD @ 5760 @ 5791 – theoretical calculations by claimant
Claimant/Respondent submissions
a. SOC Para 24 page 588 @ 598 – As built drawings is the basis for calculating quantities
b. Rejoinder- para 24-page 1265
c. Supplementary rejoinder para 49 (i) page 5227 based on as-built drawings
d. Para 3.17 of written submissions of claimant page 9195- 9196
e. Certificate dated 31-08-2014- page 823 our quantities are taken as per as built drawings
iv. Despite noting that measurements were to be taken at site in accordance with Measurement Books and not as projected by the respondent i.e., As-Build Drawings. Therefore, the AT has modified the contractual terms which is not permissible and the same is contrary to public policy of India and can be set-aside while exercising jurisdiction under Section 34 of Arbitration Act.
C. NO FINDING ON NATURE OF CERTIFICATE DATED 31.08.2014 IN ACCORDANCE WITH TERMS OF CONTRACT
i. The core material issue which was to be adjudicated by the AT was the nature of payment certificate dated 31.08.2014 viz. Whether it is Interim Payment Certificate or Final Payment Certificate?
ii. Nobody pleaded or argued that the document dated 31-08-2014 is final statement or not. The claimant argued that it is a FINAL PAYMENT CERTIFICATE, while NHAI argued that it is an INTERIM PAYMENT CERTIFICATE and can be modified. The AT innovated, and deliberately maintained silence on the nature of certificate, despite coming to a conclusion that it is not a final payment certificate and held it to be Final Statement. Para 26(xxxi) and Para 26(xxxii) page 67-68
iii. The AT despite recording a finding that certificate dated 31.08.2014 is not a Final Payment Certificate, the AT deliberately did not hold that the certificate, therefore, is nothing but an Interim Payment Certificate instead formulated a new term i.e., Final Statement
iv. The AT ignored that there is no clause in entire contract which provides for payment of Final Statement, and as per terms of contract, payment can only be of IPC or FPC (Clause 60.8), not of any final statement.
v. AT deliberately maintained silence if the certificate is not an FPC, then what is it? Any payment certificate has to be either FPC or IPC. There is no provision in the entire contract providing for payment of Final Statement.
vi. Specific case set up by NHAI was that the certificate is an IPC. No finding has been rendered on this material issue by AT, thereby denying adjudication of material issue.
vii. Since, no one argued or pleaded that 31-08-2014 is/is not a final statement, therefore, there was no occasion for parties to have made any submission on this count or for NHAI to respond to it. In addition, the other material issue as above was not even gone into by the AT, and payment has been directed without even looking into the provisions of the Contract Agreement.
viii. The ATs silence clearly appears to be deliberate, if the AT would have decided the nature of certificate, then it would have resulted into covering the limitation of counter claims filed by petitioner as well, under clause 60.9 COPA.
ix. AT ignored the contractual provisions and language of clause 60.11 COPA if engineer disagrees or cannot verify any part of the draft final statement,
it becomes evident that a dispute exists
.., the Engineer shall issue to the Employer an interim payment certificate for those parts of the draft final statement which are not in dispute
The Final statement shall be agreed upon settlement of Dispute
x. Express language of the contract has been given a complete goby the AT.
xi. As a matter of fact, clause 60.8 COPA categorically points towards payment obligation of NHAI, and it does not come into being merely there being a final statement in place.
The merits/ demerits of this material issue have not been gone into, and no opportunity was given to NHAI to present its case on this count, thus, violating Section 18, Section 34(2)(a)(iii) of the Arbitration Act.
xii. AT despite noting that Final Payment Certificate could not have issued by Engineer until the written discharge (not waived by NHAI) is taken in accordance with Cl. 60.12 of COPA. The AT deliberately did not decide the nature of certificate and termed it as Final Statement.
xiii. Since the alleged payment certificate was only an IPC and not final Statement, therefore under clause 60.9 of the contract agreement the engineer had the power to revise modify it and accordingly it was revised on 13.07.2017 & 31.12.2017. The said clause also does not place any restriction of time for modification or revision of the interim payment certificate.
xiv. Certificate dated 31-08-2014 could have been termed as a final statement, as admittedly, there were number of disputes (Para 13 page 19 of the award- disputes exist) pending as on that date. (Clause 60.11 COPA)- para 26 (xxxiii) and (xxxiv) at page 68- 69.
xv. AT ignored that that there were numerous disputes pending between parties, (Refer- Application pg. 6086 6091 Table of disputes pending & WS- Pg 8970). Even Respondent admitted that there were disputes pending (Refer- Pendency of various disputes para 8, 22 SOC page 591, 597, Payment statement @ pg. 715-716 notice of claims under clause 53.1. for INR 172,58,82,833/-, Rejoinder to amendment para 69-70 pg. 5420 & WS- Para e- 9188).
D. WHETHER COUNTER CLAIMS OF PETITIONER WERE BARRED BY LIMITATION
i. That the AT ignored that counter claims were on account of mistakes of engineer and claimant/respondent in calculations and could only have been filed, once the mistake was discovered and computation of accounts running into 8 years from 2006 to 2014 was done based on MBs, and RFIs, thus, the counter claim was not barred by limitation.-Para 28 (iv) and (vi) page 81-82
ii. Despite holding that certificate dated 31-08-2014 is not an FPC in para 26(xxxii) at page 68, the AT has referred to the said certificate as FPC to hold claim of NHAI as time barred.
iii. The observation of the AT from page 83-86 are wrong and perverse that the NHAI discovered the mistake on 15.10.2014. It is submitted that on 15.10.2014, the NHAI issued observation and further sought comments of the claimant and engineer on the same. Therefore, NHAI would not have known as on 15.10.2014 that there were discrepancies in the alleged payment certificate dated 31.08.2014 as the NHAI as on that date did not know whether any recovery has to be made from the respondent. In fact, the respondent replied to the observations of NHAI only on 01-02-2015. Even if 3 years are counted from 01-02-2015, the counter claims are well within the period of limitation.
iv. Since the Claim was filed on 08-12-2017, and once the revised certificate was revised in 2017 and the arbitration was invoked only in 2016, therefore, the counter claims were well within the limitation period.
v. In various judgments, Honble courts have held that period of limitation will not run until mistake has been discovered and that the period of limitation will run from the date of the knowledge of the mistakes which were only discovered on issuance of revised certificate in 2017. Therefore, the counter claims of the petitioner were within limitation.
a) Confer Da Confraria De sam Miguel E Santas Almas of church of VarcavsFilomenafernandes (2016) SCC OnLineBom 5399 – Para 5 pg. 355
b) Food Corporation of India vs Municipal Committee (2018) SCC OnLine P&H 1161- Para 14, 15, 16 and 17 pg. 359-360
c) Sri Balaji Agro Industries vs Managing Director (2017) SCC OnLineKar 4430 – Para 17 pg. 398, para 19- para 22 pg. 399-402 and para 24 pg. 403
d) Ajmer Vidyut Nigam Ltd vsRahamatullah khan (2020) SCC OnLine SC 206 Para 5 pg. 349, para 7 pg. 351 and para 9 pg. 352
vi. AT failed to ignored that petitioner need not have to invoke arbitration clause to raise its counter claims. Once the claimant has already invoked arbitration clause, the petitioner can certainly raise its counter claims to avoid multiplicity of proceedings. Further Counter Claims can be raised in on-going arbitration (State of Goa Vs Praveen Enterprises, (2012) 12 SCC 581 para 25-33 & 41 and Chennai Water Desalination Ltd, Vs Chennai Metropolitan Water Supply & Sewage Board, Manu/TN/5922/2022 para 17-21)
E. CONFLICTING FINDINGS IN OTHER ARBITRATION PRCOCEEDINGS
i. AT has given conflicting findings in two arbitrations which are on similar facts and circumstance. It is pertinent to note that two common arbitrators were same in both arbitration proceedings, wherein, by the majority award in another arbitration award (C-5 package) it was held that payment certificate 14.08.2014 was not a Final Payment Certificate but an Interim Payment Certificate. – para 36(iv) pg. 124, 36 (xii) pg. 127, (xiii) pg. 127 of additional documents filed by petitioner on 11.11.2021.
ii. The AT in another arbitration further held that counter claims of the petitioner were not time barred. (Para 32 pg. 118)
iii. The Award passed in C-5 Package is also subject matter of challenge before this Honble Court in OMP (Comm) No. 510/2020 & 515/2020.
iv. If there are two conflicting interpretations of clauses of the contract terms, then the same can interpreted in particular way to maintain uniformity and to avoid conflicting interpretations (Refer- NHAI Vs Progressive-MVR (JV), (2018) 14 SCC 688 & M/s GMR Pochanpalli Expressway Lrd. Vs NHAI, OMP (COMM) No. 433/2020 & 449/2020, para 4-6, 112-134 & 144)
In view of the above submissions, the petition filed by the petitioner may be allowed.
15. In response to the above said, the respondent Company has also filed a brief summary of the arguments taken in its pleadings which reads as under:
Case of the parties in arbitration and Findings by the Arbitral Tribunal
11. The Respondent-SSY raised a preliminary objection that the said Counter-Claim as raised by the Petitioner-NHAI is barred by limitation. The Arbitral Tribunal holds that as per the agreed mechanism of dispute resolution contained in the Contract between the parties and in view of Clause 2.6 of GCC read with Clause 67 of COPA (Pages 274 & 335-339 of the paper-book), if the Petitioner-NHAI was aggrieved of any certification of the Engineer and wanted to seek correction or revision as envisaged under Clause 2.6 of GCC, it ought to have invoked arbitration in terms of Clause 67 of COPA within the statutory period of 3 years from the date of the said certification i.e. 31.08.2014. Since, the Petitioner- NHAI failed to do so, the Counter-Claims filed on 08.12.2017 is barred by limitation.
12. In this regard the Arbitral Tribunal in Para 28 vi (Page 82 of the Paperbook) holds as under:
Therefore, if the Respondent subsequently considers that the amounts have been wrongly agreed to between the Engineer and the Claimant, in the Final Statement or have been wrongly certified by the Engineer, it has the option to take action under Clause 2.6 of GCC. In any case, the Engineer has no authority under this Contract, to unilaterally revisit the Final Statement agreed to between the Engineer and the Claimant or the Final Certificate issued by the Engineer and revise either of them.
13. The Petitioner-NHAI in this regard contended that the certification dated 31.08.2014 was not final and was only interim in nature and thus, was open to correction and revision by the Engineer in terms of Clause 60.9 of COPA and therefore, the cause of action for seeking recoveries from the Respondent-SSY arose when the Engineer communicated the revised Final Bills on 13.07.2017 and 1.12.2017 which is a case covered by the provisions of Section 17 of the Limitation Act, 1963 being discovery of mistake.
14. The Respondent argued before the Arbitral Tribunal that there is no term of the Contract which authorises NHAI or even the Engineer to revise or re-open a Certificate, on its own, after having certified amounts and making part payments upon the agreement Final Statement. Further, the Engineer has the right to make correction in an Interim Payment Certificate only by subsequent Interim Payment Certificate in terms of Sub-Clause 60.9 of COPA, there is no authority to the Engineer to revise a Final Bill once issued upon agreement with the Engineer and the contractor- Respondent herein.
15. The Petitioners contention that the mistake in the Final Payment Certificate was discovered only on 13.07.2017 or 31.12.2017, was never pleaded nor the same is factually correct. However, Respondent pointed out to the Arbitral Tribunal that even assuming the same to be correct for the sake of argument, the said alleged discovery of mistake was made bythe Petitioner or could have been made by the Petitioner:
i. on 31.08.2014, when the Respondent became aware of the contents of the said Certificate;
ii. thereafter, on 03.09.2014, when the Respondent released part payment towards Certificate dated 31.08.2014; and
iii. and finally, on 15.10.2014, when it recorded its reservations/observations in relation to the Certificate dated 31.08.2014, which were nothing but the Counter Claims preferred by the NHAI.
16.The above issue of limitation has been decided in favour of the Respondent by the Arbitral Tribunal in Paras 28 (x to xix) while holding that as per Petitioners letter dated 15.10.2014, Petitioner-NHAI was in knowledge and had discovered the alleged discrepancies in the Certificate on 10.10.2014 or at least on 15.10.2014. Thus, the Arbitral Tribunal holds that even as per Section 17 of the Limitation Act, the Counter Claims could not have been filed by NHAI beyond 15.10.2017, which were filed for the first time on 08.12.2017 and amended on 13.07.2018 and 20.03.2019. The Arbitral Tribunal in Para 28 xix (Page 86 of the Paperbook) holds as under:
xix. Therefore, even after considering the plea of the Respondent under Section 17(1)(c) of the Limitation Act 1963, that the period of limitation shall not begin till the Respondent discovered a mistake, it is held that the Counterclaim had to be filed on or before 15.10.2017. As such, the plea for its Counterclaims filed by it on 08.12.2017 is held to be filed after the prescribed period of limitation and is barred by Limitation.
17.The Arbitral Tribunal has allowed the claim for balance payment under Engineers certification dated 13.08.2014 based on agreed Final Statement and the Counter-claim of the Petitioner-NHAI has been rejected as being time barred as discussed by the Arbitral Tribunal in Paras 26 and 28 of the Award (Page 55 to 88 of the Paper-book).
18. The Arbitral Tribunal in Para 26, xxxiii and xxxiv (Pages 68 to 69 of the Paper-book) concludes that:
(i) the certification issued by the Engineer on 31.08.2014, is a Final Statement agreed between the Contractor-Respondent herein and the Engineer under Sub-clause 60.11 of COPA and;
(ii) since the same has not been challenged by any party as per the agreed mechanism under clause 2.6 of the contract, the said certification dated 31.08.2014 has attained finality on 31.08.2014 and is to be implemented.
The relevant portion of the Award in this regard is reproduced hereunder for ready reference:
xxxiii.
…. Actually, this document which is signed by both the Engineer and the Claimant was Part (a) of the Final Statement agreed between the Claimant and the Engineer, under Sub-Clause 60.11 of COPA and accordingly it attained finality on 31.08.2014.
xxxiv. Since this part of Final Statement has not been challenged by any Party under Clause 67 of COPA as per requirements laid down under Clause 2.6 of the Contract, it has become absolute and has to be implemented.
19. In Para 26(ii) (Page 55 of the Paper-book) the Tribunal finds that in order to examine the root cause of the dispute, the steps that were required to be taken by the parties for raising the bills and for releasing the payments in accordance with the Contract were relevant and discusses the same in Paras iii to xiv.
20. The Arbitral Tribunal further records that at no stage during the execution of the Contract, the Engineer has revised any previously certified IPC in terms of Sub-Clause 60.9 as alleged by the Petitioner-NHAI and thus, this could not have been done at the final stage.
21. Petitioner- NHAI had contended that the certification dated 31.08.2014 is subject to correction under Sub-clause 60.9 by the Engineer, however, the Tribunal in Para 26 xv (Page 60 of the Paper-book) rejects the same as under:
the submission of the Respondent that under Sub-clause 60.9 of COPA, the Engineer could make corrections and modifications in Final Statement agreed to between the Engineer and the Claimant under Sub-clause 60.11 is not correct. Sub-clause 60.9 of COPA is limited to IPCs alone.
22. In Paras 26 xxii to xxiii of the Award, the Arbitral Tribunal rejects the contention of the Petitioner-NHAI that the certification dated 31.08.2014 is not final but interim in nature and interprets Sub-clause 60.11 of COPA. The Arbitral Tribunal also relies on the Petitioners own pleadings before it wherein the certificate dated 31.08.2014 has been referred to as the final bill by the Petitioner as several places.
23. The Arbitral Tribunal holds that in terms of Clause 60.11 of COPA, it is the Engineer and the Contractor i.e. the Respondent-SSY herein, who have to agree on the Draft Final Statement submitted by the Contractor and a Final Statement is to be issued which represents the value of work done in accordance with the Contract. The Arbitral Tribunal also rejects that the contention of the Respondent that since disputes existed between the parties, Final Statement could not be issued. Accordingly, the Tribunal makes a factual finding in Para 26 xxiii as under:
In the instant case, the Claimant has agreed to all changes suggested by the Engineer and so there is no dispute between the Engineer and the Claimant on the Draft Final Statement and so the Final Statement agreed between the Engineer and the Claimant becomes final.
24. In Para 26 xxi, the Arbitral Tribunal finds that the Final Bill was submitted by the Respondent on 24.06.2014 along with all supporting documents, on the basis of which, the Engineer issued its Certificate dated 31.08.2014 determining the total amount due to the Claimant. The Arbitral Tribunal has held this Certificate to be a Final Statement and has directed the Petitioner-NHAI to pay balance amounts under the same to the Respondent after interpretation of the contract and appreciation of evidence on record. It is a settled law that such findings of the Arbitral Tribunal cannot be interfered with by the court under Section 34 of the Act.
25. The Arbitral Tribunal also notes that the Respondent has failed to point out any term of the Contract which empowers the Respondent to get the agreed Final Statement re-opened and finalised unilaterally by the Engineer, without the consent of the Claimant (Respondent herein). (Para 26 xxvii at Page 66 of the Paper-book).
26. The Arbitral Tribunal also notes that the Certification dated 31.08.2014 is a Certification under Clause 2.6 of GCC and could only be challenged in terms of Clause 67 of COPA, and in the absence of such challenge by any party to the Contract, the said certification became absolute and implementable.
27. Even on merits the Counter Claims of the Petitioner cannot be awarded as the same are untenable and unsubstantiated. The Counter-Claim of the Petitioner before the Arbitral Tribunal in respect of application of linking factor at the time of calculating Price Adjustment is completely frivolous. The same issue/dispute between the parties has already been decided in an arbitration proceeding arising out of this very contract and the said Award has become final and the awarded amount has been paid. Further, this issue has also been settled between the same parties in a similar contract wherein the Hon’ble Supreme Court in Ssangyong Engineering & Construction Co. Ltd. vs. National Highway Authority of India, 2019 (3) Arb. LR. 152 (SC) – (filed as CJ-16 before the Arbitral Tribunal) held the Indices used in Sub-Clause 70.3 cannot be unilaterally
modified and no linking factor can be applied. (See page 9147-Written Submission of the Respondent before the Arbitral Tribunal at Para 3.26)
Settled law:
28. The Arbitral Award contains factual findings as well as interpretation of the terms of the contract keeping in view of the conduct of the parties. Thus, such findings passed after appreciation of the evidence before the Arbitral Tribunal cannot be interfered with by this Honble Court in the respectful submissions of the Respondent. The Petitioner is seeking re-appreciation of factual findings and is asking this Honble Court to substitute the interpretation of the contract given before the Arbitral Tribunal with another view which is suitable to the petitioner. This Honble Court cannot be called upon to sit in Appeal over an Arbitral Award.
29. The Petitioner has failed to make out a case under the limited scope of Section 34 of the Arbitration and Conciliation Act. In view of the law settled by the Honble Supreme Court in the case of Ssangyong Engineering & Construction Co. Ltd. v. NHAI; 2019 (3) Arb. LR 152 SC and various other subsequent Judgments of the Apex Court as well as Honble High Courts, it is respectfully submitted this Court cannot interfere with the findings of the Arbitral Tribunal which are based on appreciation of facts and evidence before it and makes a plausible interpretation of the Contract between the parties.
30. While the Award is not opposed to the Public Policy of India, even otherwise, under the ground of public policy, this Court cannot re-open or review the merits of the case in hand. In Para 23 of the Ssangyong (supra), the Honble Supreme Court holds that the ground of fundamental policy of India would be relegated to the understanding of this expression contained in the case of Renusagar Power Co. ltd vs. General Electric co. 1994(1) SCC 644 and thus, a narrow approach would have to be adopted in such cases.
31. Further, the present Award is in terms of the contract between the parties and the interpretation given by the Arbitral Tribunal is fair and reasonable, even otherwise, after the amendment of Section 28 of the Arbitration and Conciliation Act, 1996 in 2015, the setting aside of the award merely on the ground that the same contrary to the contract is no longer available under the limited scope of Section 34 of the Act.
32. It is wrong to even suggest that the Arbitral Tribunal has violated the principles of natural justice or to contend that Arbitral Tribunal has given a go-by to the defence set up by the Petitioner in the facts of this case. A reading of the Award would show that all contentions of the Petitioner. NHAI have been specifically dealt with by the Tribunal in Paras 26 to 28 of the Award in question and as has been detailed herein above. It is further submitted that once the Arbitral Tribunal holds that Counter claims before it are barred in time, the Arbitral Tribunal is not permitted to decide the said claims on merits. Thus, this ground of challenge raised by the Petitioner is highly misconceived and thus, not tenable.
33. The discussion of the Arbitral Tribunal in relation to the issue of limitation is also comprehensive and has been made after appreciating the facts and evidence placed on record, which cannot be interfered with by this Honble Court under Section 34 of the Act, 1996. Also, the Arbitral Tribunal has decided the contention of the Petitioner regarding Section 17 of the Limitation Act and has righty rejected the counter claims. The Petitioner has not been able to point out any ground for assailing such a finding.
Thus, the Award dated 26.06.2021 cannot be set aside and the present Petition isliable to be dismissed with costs.
SUBMISSIONS
On behalf of the petitioner
16. Learned counsel appearing on behalf of the petitioner NHAI submitted that the findings arrived at by the learned Tribunal are contradictory, vague, devoid of any logic and violative of the fundamental policy of the Indian law and therefore, liable to be set aside.
17. It is submitted that the learned Tribunal erred in envisaging the Payment Certificate dated 31st August, 2014 as the final statement as the Contract does not provide for any such term and the same is limited to either Final Payment Certificate or Interim Payment Certificate.
18. It is submitted that Clause 60.11 of the Contract categorically provides for final statement only after settlement of the disputes, however, despite pendency of several disputes between the parties, the learned Tribunal erroneously construed the above said Payment Certificate as final.
19. It is submitted that Clause 60.12 of the COPA provides for issuance of the discharge certificate in case a final statement is agreed between the parties and issuance of the Final Payment Certificate can only happen subsequently, therefore, terming the Payment Certificate as Final Certificate has led to miscarriage of justice, and the same is not permitted under the law.
20. It is submitted that despite holding that the written discharge was not submitted to the Engineer, the learned Tribunal awarded the claim in favor of the respondent Company, thereby, leading to erroneous interpretation of the terms of the Contract.
21. It is submitted that the learned Tribunal failed to appreciate Clauses 60.11 to 60.13 of the Contract which deal with the procedure regarding preparation of final statement and subsequent issuance of Final Payment Certificate, and where disputes between the parties is pending, the Engineer is empowered to issue only an Interim Payment Certificate.
22. It is submitted that the learned Tribunal failed to appreciate that the factum of pendency of numerous disputes between the parties was admitted by the claimant/respondent Company itself in its statement of claim, therefore, the Certificate dated 31st August, 2014 could not be termed as a Final Payment Certificate.
23. It is submitted that during the course of proceedings before the learned Tribunal, the petitioner had apprised the members about the other disputes pending between the parties, however, the learned Tribunal still chose to ignore the same and erroneously adjudicated the issues in favour of the respondent Company.
24. It is submitted that the learned Tribunal erred in not appreciating that Clause 60.8 of the Contract provides for payment of dues by the NHAI only after issuance of a Final Statement and upon submission of written discharge to the Engineer, therefore, non-compliance of the same would automatically preclude any liability on the petitioner.
25. It is also submitted that the learned Tribunal failed to appreciate that the written discharge is aimed at bringing the entire Contract to the closure, and non-compliance of the same makes it evident that the said Contract was not completed, therefore, issuance of the Final Payment Certificate could not have been done by the Engineer as the same is against the terms of the Contract.
26. It is further submitted that in another contract package C-5, between the same parties, the learned Tribunal came to a categorical finding that the Draft Final Statement could not be termed as the Final Statement if dispute exists between the parties. Therefore, the Tribunal taking contradictory views in two different awards on the basis of same contract makes it evident that the impugned award warrants interference of this Court. Reliance has been placed upon the judgment laid down by the Honble Supreme Court in the case of National Highway Authority of India v. Progressive-MVR (jv)1 whereby, it was held that the contradictory opinions create a situation of anomaly and therefore, the same needs to be avoided.
27. It is submitted that the learned Tribunal arbitrarily held that the above said Certificate of Payment was not challenged by the petitioner, however, the material on record depicts the contrary, where the petitioner had filed numerous documents to show that the said Certificate is baseless and de hors the true facts.
28. The learned counsel also submitted that the learned Tribunal erred in appreciating that the above said Final Statement was revised by the Engineer by issuing subsequent certificates dated 13th July, 2017 and 31st July, 2017, therefore, the issue of limitation in filing counter claim does not arise, as the limitation period would be counted from the issuance of subsequent certificates and therefore, holding the question of limitation against the petitioner is bad in law.
29. In view of the foregoing submissions, the learned counsel for the petitioner submitted that the present petition be allowed and prayed that the impugned award be set aside by this Court.
(on behalf of the respondent)
30. Per Contra, the learned counsel appearing on behalf of the respondent Company vehemently opposed the present petition submitting to the effect that the learned Tribunal rightly appreciated the evidence on record and, therefore, decided the dispute in favor of the respondent Company.
31. It is submitted that pursuant to issuance of the Taking Over Certificate dated 6th April, 2013 as well as completion of the defect liability period on 4th April, 2014, the Engineer deemed it appropriate to issue the Final payment Certificate dated 31st August, 2014 and therefore, the same is in accordance with the terms of the Contract.
32. It is submitted that the petitioner NHAI released the payments regarding the work only after getting satisfied with the work done by the respondent Company and therefore, is barred from claiming any dispute at a later stage.
33. It is submitted that the learned Tribunal rightly held the Certificate dated 31st August, 2014, to be the Final Statement agreed between the parties as the said Certificate was not challenged by any of the parties and therefore, it attained finality.
34. It is submitted that Clause 60.11 of the Contract specifies that it is the Engineer and the Contractor, i.e., the respondent Company who need to agree to the Payment Certificate and since there was no dispute on the payment amount between Engineer and the Contractor, the said certificate attains finality.
35. It is also submitted that the petitioner failed to point out any terms in the Contract which empowers them to reopen the agreed Final Statement, therefore, the contention regarding reopening of the agreed Final Statement was rightly rejected by the learned Tribunal, deeming the above stated Certificate to be final.
36. It is further submitted that the learned Tribunal rightly held that any challenge to the aforementioned Certificate could have been made only as per the Contract, where the parties aggrieved by the said Certificate have to invoke arbitration. Therefore, failure of the petitioner to challenge the said Certificate amounts to acceptance of the amount due towards the respondent Company.
37. The learned counsel for the respondent Company submitted that Section 34 of the Act provides for limited interference to an arbitral award as the findings arrived at by an Arbitral Tribunal are based on appreciation of facts and evidence before it and on the plausible interpretation of the agreement executed between the parties. Reliance has been placed upon the judgment of the Honble Supreme Court in the case of Ssangyong Engineering & Construction Co. Ltd. v. NHAI2.
38. It is therefore submitted that this Court cannot act as a Court of appeal as it is precluded from re-opening or reviewing the merits of the case in hand and therefore, a narrow approach should be adopted in such cases.
39. In light of the foregoing submissions, the learned counsel appearing for the respondent Company submitted that the present petition being devoid of any merits is liable to be dismissed.
SCHEME OF THE ACT
40. Arbitration in India has existed from antiquity where traces of the same can also be found in regulations drafted during the colonial times.3 The first consolidated act was the Indian Arbitration Act, 1899 where the arbitral award could have been set aside for various reasons. Subsequently, the Code of Civil Procedure, 1908 provided for arbitration4. In the said Code, the relevant provisions empowered the Courts to remand back the dispute to the Arbitral Tribunal for fresh adjudication.
41. The object of the Act has been discussed by the Honble Supreme Court as well as various High Courts in a catena of judgments. In BCCI v. Kochi Cricket (P) Ltd.5 the Honble Supreme Court analyzed the objectives of the Act and made the following observations:
76. The learned counsel for the appellants have painted a lurid picture of anomalies that would arise in case the Amendment Act were generally to be made retrospective in application. Since we have already held that the Amendment Act is only prospective in application, no such anomalies can possibly arise. It may also be noted that the choosing of Section 21 as being the date on which the Amendment Act would apply to arbitral proceedings that have been commenced could equally be stated to give rise to various anomalies. One such anomaly could be that the arbitration agreement itself may have been entered into years earlier, and disputes between the parties could have arisen many years after the said arbitration agreement. The argument on behalf of the appellants is that parties are entitled to proceed on the basis of the law as it exists on the date on which they entered into an agreement to refer disputes to arbitration. If this were to be the case, the starting point of the application of the Amendment Act being only when a notice to arbitrate has been received by the respondent, which as has been stated above, could be many years after the arbitration agreement has been entered into, would itself give rise to the anomaly that the amended law would apply even to arbitration proceedings years afterwards as and when a dispute arises and a notice to arbitrate has been issued under Section 21. In such a case, the parties, having entered into an arbitration agreement years earlier, could well turn around and say that they never bargained for the change in law that has taken place many years after, and which change will apply to them, since the notice, referred to in Section 21, has been issued after the Amendment Act has come into force. Cut-off dates, by their very nature, are bound to lead to certain anomalies, but that does not mean that the process of interpretation must be so twisted as to negate both the plain language as well as the object of the amending statute. On this ground also, we do not see how an emotive argument can be converted into a legal one, so as to interpret Section 26 in a manner that would be contrary to both its plain language and object
77. However, it is important to remember that the Amendment Act was enacted for the following reasons, as the Statement of Objects and Reasons for the Amendment Act states:
2. The Act was enacted to provide for speedy disposal of cases relating to arbitration with least court intervention. With the passage of time, some difficulties in the applicability of the Act have been noticed. Interpretation of the provisions of the Act by courts in some cases have resulted in delay of disposal of arbitration proceedings and increase in interference of courts in arbitration matters, which tend to defeat the object of the Act. With a view to overcome the difficulties, the matter was referred to the Law Commission of India, which examined the issue in detail and submitted its 176th Report. On the basis of the said Report, the Arbitration and Conciliation (Amendment) Bill, 2003 was introduced in the RajyaSabha on 22-12-2003. The said Bill was referred to the Department-related Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice for examination and report. The said Committee, submitted its Report to Parliament on 4-8-2005, wherein the Committee recommended that since many provisions of the said Bill were contentious, the Bill may be withdrawn and a fresh legislation may be brought after considering its recommendations. Accordingly, the said Bill was withdrawn from the RajyaSabha.
3. On a reference made again in pursuance of the above, the Law Commission examined and submitted its 246th Report on Amendments to the Arbitration and Conciliation Act, 1996 in August 2014 and recommended various amendments in the Act. The proposed amendments to the Act would facilitate and encourage Alternative Dispute Mechanism, especially arbitration, for settlement of disputes in a more user-friendly, cost-effective and expeditious disposal of cases since India is committed to improve its legal framework to obviate in disposal of cases.
4. As India has been ranked at 178 out of 189 nations in the world in contract enforcement, it is high time that urgent steps are taken to facilitate quick enforcement of contracts, easy recovery of monetary claims and award of just compensation for damages suffered and reduce the pendency of cases in courts and hasten the process of dispute resolution through arbitration, so as to encourage investment and economic activity.
5. As Parliament was not in session and immediate steps were required to be taken to make necessary amendments to the Arbitration and Conciliation Act, 1996 to attract foreign investment by projecting India as an investor friendly country having a sound legal framework, the President was pleased to promulgate the Arbitration and Conciliation (Amendment) Ordinance, 2015.
6. It is proposed to introduce the Arbitration and Conciliation (Amendment) Bill, 2015, to replace the Arbitration and Conciliation (Amendment) Ordinance, 2015, which inter alia, provides for the following, namely
(i) to amend the definition of Court to provide that in the case of international commercial arbitrations, the Court should be the High Court;
(ii) to ensure that an Indian court can exercise jurisdiction to grant interim measures, etc., even where the seat of the arbitration is outside India;
(iii) an application for appointment of an arbitrator shall be disposed of by the High Court or Supreme Court, as the case may be, as expeditiously as possible and an endeavour should be made to dispose of the matter within a period of sixty days;
(iv) to provide that while considering any application for appointment of arbitrator, the High Court or the Supreme Court shall examine the existence of a prima facie arbitration agreement and not other issues;
(v) to provide that the Arbitral Tribunal shall make its award within a period of twelve months from the date it enters upon the reference and that the parties may, however, extend such period up to six months, beyond which period any extension can only be granted by the Court, on sufficient cause;
(vi) to provide for a model fee schedule on the basis of which High Courts may frame rules for the purpose of determination of fees of Arbitral Tribunal, where a High Court appoints arbitrator in terms of Section 11 of the Act;
(vii) to provide that the parties to dispute may at any stage agree in writing that their dispute be resolved through fast-track procedure and the award in such cases shall be made within a period of six months;
(viii) to provide for neutrality of arbitrators, when a person is approached in connection with possible appointment as an arbitrator;
(ix) to provide that application to challenge the award is to be disposed of by the Court within one year.
7. The amendments proposed in the Bill will ensure that arbitration process becomes more user-friendly, cost-effective and lead to expeditious disposal of cases.
78. The Government will be well-advised in keeping the aforesaid Statement of Objects and Reasons in the forefront, if it proposes to enact Section 87 on the lines indicated in the Government’s Press Release dated 7-3-2018. The immediate effect of the proposed Section 87 would be to put all the important amendments made by the Amendment Act on a back-burner, such as the important amendments made to Sections 28 and 34 in particular, which, as has been stated by the Statement of Objects and Reasons,
have resulted in delay of disposal of arbitration proceedings and increase in interference of courts in arbitration matters, which tend to defeat the object of the Act, and will now not be applicable to Section 34 petitions filed after 23-10-2015, but will be applicable to Section 34 petitions filed in cases where arbitration proceedings have themselves commenced only after 23-10-2015. This would mean that in all matters which are in the pipeline, despite the fact that Section 34 proceedings have been initiated only after 23-10-2015, yet, the old law would continue to apply resulting in delay of disposal of arbitration proceedings by increased interference of courts, which ultimately defeats the object of the 1996 Act. [ These amendments have the effect, as stated in HRD Corpn. v. GAIL (India) Ltd., (2018) 12 SCC 471 of limiting the grounds of challenge to awards as follows: (SCC p. 493, para 18)18. In fact, the same Law Commission Report has amended Sections 28 and 34 so as to narrow grounds of challenge available under the Act. The judgment in ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705 has been expressly done away with. So has the judgment in ONGC Ltd. v. Western Geco International Ltd., (2014) 9 SCC 263. Both Sections 34 and 48 have been brought back to the position of law contained in Renusagar Power Plant Co. Ltd. v. General Electric Company, 1994 Supp (1) SCC 644, where public policy will now include only two of the three things set out therein viz. fundamental policy of Indian law and justice or morality. The ground relating to the interest of India no longer obtains. Fundamental policy of Indian law is now to be understood as laid down in Renusagar, 1994 Supp (1) SCC 644. Justice or morality has been tightened and is now to be understood as meaning only basic notions of justice and morality i.e. such notions as would shock the conscience of the Court as understood in Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204. Section 28(3) has also been amended to bring it in line with the judgment of this Court in Associate Builders, (2015) 3 SCC 49 : (2015) 2 SCC (Civ) 204, making it clear that the construction of the terms of the contract is primarily for the arbitrator to decide unless it is found that such a construction is not a possible one.] It would be important to remember that the 246th Law Commission Report has itself bifurcated proceedings into two parts, so that the Amendment Act can apply to court proceedings commenced on or after 23-10-2015. It is this basic scheme which is adhered to by Section 26 of the Amendment Act, which ought not to be displaced as the very object of the enactment of the Amendment Act would otherwise be defeated.
42. Upon perusal of the aforesaid judgment, it is evident that the primary objective of the Act is to effectively and expeditiously dispose of the disputes between the parties. In order to adhere to the legislative intent, it has been deemed necessary by the mandate of the Act and the Honble Supreme Court to limit interference in the process of arbitration, irrespective of the stage of the arbitration proceedings.
43. In the instant case, the petitioner has invoked Section 34 of the Act to challenge the impugned Award. Therefore, it becomes imperative to discuss the nature and scope of the aforesaid provision. The relevant portion of the said provision is reproduced hereunder:
34. Application for setting aside arbitral award. (1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub-section (2) and sub-section (3).
(2) An arbitral award may be set aside by the Court only if
(a) the party making the application establishes on the basis of the record of the arbitral tribunal that
(i) a party was under some incapacity; or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or
(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or (iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration: Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or
(v) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Part from which the parties cannot derogate, or, failing such agreement, was not in accordance with this Part; or
(b) the Court finds that
(i) the subject-matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or
(ii) the arbitral award is in conflict with the public policy of India.
Explanation 1.For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India, only if,
(i) the making of the award was induced or affected by fraud or corruption or was in violation of section 75 or section 81; or
(ii) it is in contravention with the fundamental policy of Indian law; or
(iii) it is in conflict with the most basic notions of morality or justice.
Explanation 2.For the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.
44. Upon perusal of the aforesaid provision, it is clear that the intent of the legislature while enacting the Act, as well as while carrying out the amendments to the same, was that there should be limited intervention of the Courts in arbitral proceedings, especially after the conclusion of the proceedings. It is well settled that any claim brought before a Court of law under Section 34 of the Act shall be in accordance with the principle of the provisions laid down under the Act as well as interpreted by the Honble Supreme Court.
45. From the foregoing discussions, it is settled that Section 34 of the Act has a limited scope and the Courts can only intervene if the conditions mentioned in the said provision are fully met.
46. At this stage, this Court deems it apposite to discuss the role of an Arbitral Tribunal. An Arbitral Tribunal is constituted with the consent of both the parties when the arbitration clause is invoked by either of the parties to an agreement.
47. Upon constitution, the Tribunal conducts the inquiry and proceedings with the participation of the parties to the dispute. It is considered that while adjudicating a case, the Tribunal delves into the Statement of Claim, Statement of Defense presented by and on behalf of the parties and passes an award after due deliberations on issues in question. Therefore, as per the settled principle, an unfettered intervention in the Tribunals functioning would defeat the spirit and purpose of the Act.
48. The question of powers conferred to the Courts while examining the challenge made to an Arbitral Award is answered by the Honble Supreme Court in several cases and it is well settled that the Court need not examine the validity of findings or the reasoning behind the findings given by the Arbitrator. Therefore, the only question before the Courts while adjudicating an Arbitral Challenge is whether the conclusion drawn in the impugned Award is supported by the findings of the Arbitrator.
49. The said principle was reiterated by the Honble Supreme Court in Anand Brothers (P) Ltd. vs. Union of India &Ors.6 and it was held as under:
7. Before we examine whether the expression ”finding” appearing in Clause 70 would include reasons in support of the conclusion drawn by the arbitrator, we consider it appropriate to refer to the Constitution Bench decision of this Court in Raipur Development Authority v. Chokhamal Contractors wherein this Court was examining whether an award without giving reasons can be remitted or set aside by the Court in the absence of any stipulation in the arbitral agreement obliging the arbitrator to record his reasons. Answering the question in the negative, this Court held that a nonspeaking award cannot be set aside except in cases where the parties stipulate that the arbitrator shall furnish reasons for his award. This Court held: (SCC pp. 750-51, para 33) ?33 . … When the parties to the dispute insist upon reasons being given, the arbitrator is, as already observed earlier, under an obligation to give reasons. But there may be many arbitrations in which parties to the dispute may not relish the disclosure of the reasons for the awards. In the circumstances and particularly having regard to the various reasons given by the Indian Law Commission for not recommending to the Government to introduce an amendment in the Act requiring the arbitrators to give reasons for their awards we feel that it may not be appropriate to take the view that all awards which do not contain reasons should either be remitted or set aside.? Having said that, this Court declared that the Government and their instrumentalities should-as a matter of policy and public interest-if not as a compulsion of law, ensure that whenever they enter into an agreement for resolution of disputes by way of private arbitrations, the requirement of speaking awards is expressly stipulated and ensured. Any laxity in that behalf might lend itself to and, perhaps justify the legitimate criticism, that the Government failed to provide against possible prejudice to public interest.
8. The following passage is in this regard apposite: (Raipur Development Authority case, SCC pp. 752-53, para 37) ?
37. There is, however, one aspect of non-speaking awards in non-statutory arbitrations to which Government and governmental authorities are parties that compel attention. The trappings of a body which discharges judicial functions and is required to act in accordance with law with their concomitant obligations for reasoned decisions, are not attracted to a private adjudication of the nature of arbitration as the latter, as we have noticed earlier, is not supposed to exert the State’s sovereign judicial power. But arbitral awards in disputes to which the State and its instrumentalities are parties affect public interest and the matter of the manner in which Government and its instrumentalities allow their interest to be affected by such arbitral adjudications involve larger questions of policy and public interest. Government and its instrumentalities cannot simply allow large financial interests of the State to be prejudicially affected by non-reviewable—except in the limited way allowed by the statute-non-speaking arbitral awards. Indeed, this branch of the system of dispute resolution has, of late, acquired a certain degree of notoriety by the manner in which in many cases the financial interests of Government have come to suffer by awards which have raised eyebrows by doubts as to their rectitude and propriety. It will not be justifiable for Governments or their instrumentalities to enter into arbitration agreements which do not expressly stipulate the rendering of reasoned and speaking awards. Governments and their instrumentalities should, as a matter of policy and public interest-if not as a compulsion of law-ensure that wherever they enter into agreements for resolution of disputes by resort to private arbitrations, the requirement of speaking awards is expressly stipulated and ensured. It is for Governments and their instrumentalities to ensure in future this requirement as a matter of policy in the larger public interest. Any lapse in that behalf might lend itself to and perhaps justify, the legitimate criticism that Government failed to provide against possible prejudice to public interest.
9. Reference may also be made to the Arbitration and Conciliation Act, 1996 which has repealed the Arbitration Act, 1940 and which seeks to achieve the twin objectives of obliging the Arbitral Tribunal to give reasons for its arbitral award and reducing the supervisory role of courts in arbitration proceedings. Section 31(3) of the said Act obliges the Arbitral Tribunal to state the reasons upon which it is based unless the parties have agreed that no reasons be given or the arbitral award is based on consent of the parties. There is, therefore, a paradigm shift in the legal position under the new Act which prescribes a uniform requirement for the arbitrators to give reasons except in the two situations mentioned above. The change in the legal approach towards arbitration as an alternative dispute resolution mechanism is perceptible both in regard to the requirement of giving reasons and the scope of interference by the court with arbitral awards. While in regard to requirement of giving reasons the law has brought in dimensions not found under the old Act, the scope of interference appears to be shrinking in its amplitude, no matter judicial pronouncements at time appear to be heading towards a more expansive approach that may appear to some to be opening up areas for judicial review on newer grounds falling under the caption public policy appearing in Section 34 of the Act. We are referring to these developments for it is one of the well-known canons of interpretation of statutes that when an earlier enactment is truly ambiguous in that it is equally open to diverse meanings, the later enactment may in certain circumstances serve as the parliamentary exposition of the former.
xxx xxx xxx
14. It is