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Nuclear Fuel Complex Government of India, Deparment of Atomic Energy, Tuticorin v/s M/s. URC Constructions Private Ltd. & Another

    O.S.A. No. 78 of 2021 & C.M.P. No. 2950 of 2021

    Decided On, 01 August 2022

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE M. DURAISWAMY & THE HONOURABLE MR. JUSTICE SUNDER MOHAN

    For the Petitioner: R. Sankaranarayanan, Additional Solicitor General of India Assisted by K. Srinivasa Murthy, Advocate. For the Respondent: R1, A.L. Somayaji, Senior Counsel, V.P. Sengottuvel, Advocate.



Judgment Text

(Prayer: Original Side Appeal filed under Clause XV of Madras High Court Letters Patent read with Order XXXVI Rule 9 (1) (c) of the Madras High Court Original Side Rules and Section 37 of the Arbitration and Conciliation Act, 1996, to set aside the Fair and Decreetal Order dated 10.01.2020 in O.P.No.266 of 2016 and consequently set aside the award dated 01.11.2015.)

Sunder Mohan, J.

1. The above Appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996, challenging the order of the learned Single Judge dismissing the O.P.No.266 of 2016, dated 10.01.2020 filed by the Appellant under Section 34 of the said Act.

2. A dispute arose between the Appellant and the 1st Respondent with regard to the terms of the contract entered into between them for the work described as Civil Structure and allied works for construction of plants, buildings, etc., for New Zirconium Oxide & Sponge in the year 2005 at Tuticorin, Tamil Nadu. The dispute was referred to the learned Arbitrator appointed by the Appellant under Clause 25 of the said contract. The Arbitrator, after conducting several hearings over a period of six years, passed an Award allowing two sub claims in claim No.13 and allowing the claims under ten other heads in favour of the first respondent and negativing the claims under two heads. The counter claim of the Appellant under eight heads were negatived by the learned Arbitrator. Thus, the learned Arbitrator passed an Award directing the payment of Rs.9,40,96,317/- (Rupees Nine Crores Forty Lakhs Ninety Six Thousand Three Hundred and Seventeen Only) along with interest upto the date of Award, by the Appellant to the 1st respondent. In the Award it was further directed that if the payments were not made before 31.12.2015, the Award shall carry a Simple Interest of 15% from the date of publishing the Award till the date of payment.

3. The Award was challenged before this Court in O.P.No.266 of 2016 on various grounds. However, realizing the limited grounds available for challenging an Award under Section 34 of Arbitration and Conciliation Act, 1996, the learned counsel for the Appellant restricted his challenge on two grounds before the learned Single Judge. The first ground was that the Award was liable to be set aside because it dealt with disputes not falling within the terms of submissions to Arbitration and it contained decisions on matters beyond the scope of submissions to Arbitration. The second ground raised was that the learned Arbitrator had raised bills, which were very high and which were in conflict with basic notions of morality and justice. The Appellant also submitted that the Respondent had paid enhanced fee claimed by the Arbitrator and this tantamounts to inducement, resulting in the Award being vitiated by fraud and corruption.

4. The learned Single Judge considered the submissions elaborately and found that as per the Clause 25 of the Contract, which contained the Arbitral Agreement, the Arbitrator can adjudicate disputes referred to the Arbitrator by the Appointing Authority. The learned Single Judge found that, by the Proceedings dated 04.11.2008 bearing reference No.13/1 (3)/2002-I&M (NFC)/1441 of the Secretary to the Government of India, it was clear that the Appointing Authority had not made any restrictions with regard to the disputes which could be decided by the learned Arbitrator. The learned Single Judge, therefore, found that the learned Arbitrator did not decide disputes beyond the scope of the Arbitration Agreement. The learned Single Judge negatived the said contention also on the ground that this issue was not raised before the learned Arbitrator. As regards, the ground relating to fraud and corruption, the learned Single Judge found that the learned Arbitrator had charged a fee less than Rs.30,00,000/- (Rupees Thirty Lakhs Only) which is the ceiling for claims above Rs.20,00,00,000/-(Rupees Twenty Crores only). In any event, the learned Single Judge found that enhancement of fee even otherwise would not tantamount to corruption militating against the basic notions of morality. The learned Judge also found that since the Original Petition before this Court was filed on 25.01.2006, the Amended Section 34 of the Arbitration and the Conciliation Act 1996 was applicable to the instant proceedings.

5. Heard Mr.Sankaranarayanan, learned Additional Solicitor General of India, for Mr.K.Srinivasamurthy, learned counsel for the Appellant and Mr.A.L.Somayaji, learned Senior Counsel for Mr.V.P.Sengottuvel learned counsel for the 1st respondent.

6. Mr.Sankaranarayananan, the learned Additional Solicitor General of India submitted that he was conscious of the limited scope in an Appeal under Section 37 of the Arbitration and Conciliation Act and hence, restricted his submission on two points. The learned Additional Solicitor General of India submitted that the Arbitrator ought not to have rejected the counter claim of the Appellant under eight heads on the ground that it was barred by limitation and for the reason that the Superintending Engineer was the competent person to levy the compensation for delay and not the Project Director. The Additional Solicitor General of India submitted that the learned Arbitrator had wrongly reckoned the starting point of limitation as 31.05.2007 which was the date on which the work was supposed to have been completed, and that the learned Arbitrator should have reckoned the starting point of limitation as 30.09.2009 which was the actual date of completion of the project . If the date is reckoned as 30.09.2009, the Appellant's action of levying compensation on 20.10.2011 was well within the limitation. As regards, the other reason given by the learned Arbitrator for rejecting the counter claim, namely, the Project Director was not the competent Authority to levy compensation, the learned Additional Solicitor General of India submitted that there was a delegation of the powers of the Chief Engineer to the Project Director and hence, the levy of compensation by the Project Director was in accordance with law. The learned Additional Solicitor General of India took us through the proceedings by which the Project Director was delegated with the powers of the Chief Engineer. The learned Additional Solicitor General of India further submitted that the claimant/1st respondent was responsible for the delay in completion of the work, and read to us certain communications in which according to him were not considered by the Arbitrator.

7. Mr.A.L.Somayaji, learned senior counsel for the 1st respondent would submit that the Arbitrator had held nearly 56 meetings over a period of six years and had considered elaborately the rival claims and passed a balanced Award. The learned senior counsel submitted that the appellant had restricted their submissions before the learned Single Judge on two main grounds which were rightly negatived by the learned Single Judge. The learned senior counsel submitted that the submissions raised by the learned Additional Solicitor General of India with regard to the correctness of the decision of the learned Arbitrator in rejecting the counter claim is a new ground raised in this appeal. The learned senior counsel submitted that in view of the limited scope, the Appellant cannot raise any new plea in this Appeal. The learned senior counsel submitted that since this plea was not taken before the learned Single Judge, the Appellant is precluded from raising such a plea in this Appeal on the principle of waiver. The learned senior counsel relied upon a decision of the Hon'ble Apex Court in Union of India vs Susaka Private Limited and others reported in 2018 (2) SCC 182 in support of his submission. The learned senior counsel also relied upon a judgement of the Hon'ble Apex Court in UHL Power Company Limited vs. State of Himachal Pradesh reported in (2022) 4 SCC 116 and the Judgement of the Hon'ble Supreme Court in Haryana Tourism Limited vs Kandhari Beverages Limited reported in (2022) 3 SCC 237 in support of his submissions that the Jurisdiction of this Court under Section 37 of the Arbitration Act is circumscribed and is narrower than the jurisdiction conferred on the Court under Section 34 of the Arbitration Act. The learned senior counsel also submitted that the award is of the year 2015, and that the respondent could not only enjoy the fruits of the Award, but because of the pendency of the Appeal, the Appellant have not released the Bank guarantee executed by the Respondent.

8. We have given our anxious consideration to the rival submissions made by the learned Senior Counsels on either side. Admittedly, the Appellant had not raised the grounds now raised in this Appeal before the learned Single Judge. The learned Additional Solicitor General of India in his reply, made a faint attempt to convince us that the above ground was raised in the grounds of challenge to the Award made in the Section 34 petition before the learned Single Judge and the Appellant cannot be victimized for the fault of their counsel. We are unable to accept this submission of the learned Additional Solicitor General of India. If that was the case, the proper course would have been to seek leave of the learned Single Judge to raise further grounds. We also find that the learned Additional Solicitor General of India did not assail the order of the learned Single Judge with regard to the two grounds raised by the Appellant before the learned Single Judge, during his submissions before us. As submitted by the learned senior counsel for the respondents, this Court, in an Appeal under Section 37 of the Arbitration and Conciliation Act, cannot entertain new grounds in view of the limited and circumscribed jurisdiction conferred on it. In this regard, we refer to the observation of the Hon'ble Supreme Court made in UHL Power Company Limited vs. State of Himachal Pradesh reported in (2022) 4 SCC 116, which is as follows:-

“… 16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the Jurisdiction of an appellate court in examine an order, setting aside or refusing to set aside an award, is all the more circumscribed. In MMTC Ltd.v.Vedanta Ltd., the reasons for vesting such a limited jurisdiction on the High Court in exercise of powers under Section 34 of the Arbitration Act have been explained in the following words

“11. As far as section 34 is concerned, the position is well settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34 (2) (b) (ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015 a violation of Indian public policy in turn includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality and the existence of patent illegality in the arbitral award. Additionally, the concept of the fundamental policy of Indian law” would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice and wednesbury reasonableness. Furthermore, “patent illegality” itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract."

17. A similar view, as stated above, has been taken by this Court in K.Sugumar vs Hindustan Petroleum Corpn.Ltd wherein it has been observed as follows

“2. The contours of the power of the Court under Section 34 of the Act are too well established to require any reiteration. Even a bare reading of Section 34 of the Act indicates the highly constricted power of the Civil court to interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the Court should be restricted to the bare minimum. Interference will be justified only in cases of commission of misconduct by the arbitrator which can find manifestation in different forms including exercise of legal perversity by the arbitrator.”

To the same effect is the judgement of Hon'ble Supreme Court in Haryana Tourism limited vs. Kandhari Beverages Limited reported in (2022) 3 SCC 237. The relevant portions are extracted hereunder for facility:-

“… 9. As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to: (a) fundamental policy of India law ; or (b) the interest of India; or (c) justice or morality; (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the decided the apppel under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial Court. Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. The Impugned judgment and order passed by the High Court is hence not sustainable.”

9. We also find that the Appellant, by not raising the ground, which is raised in the instant Appeal before the learned Single Judge, is precluded from raising the plea in this Appeal on the principle of waiver. The relevant portions of the Judgment of the Hon'ble Apex Court in Union of India vs Susaka Private Limited reported in 2018 (2) SCC 182 is extracted hereunder:

“…

26. Everyone has a right to waive and to agree to waive the advantage of a law made solely for the benefit and protection of the individual in his private capacity, which may be dispensed with without infringing any public right or public policy.

27. If a plea is available, whether on facts or law, it has to be raised by the party at an appropriate stage in accordance with law. If not raised or and given up with consent, the party would be precluded from raising such plea at a later stage of the proceedings on the principle of waiver. If permitted to raise, it causes prejudice to other party. In our opinion, this principle applies to this case.”

28. In our opinion, the appellant is otherwise not entitled to raise the plea on yet another ground. It is not in dispute that the appellant's application filed under Section 34 of the Act was partly allowed by the Single Judge only to the extent of two claims regarding award of interest. In other words, the application suffered dismissal substantially on all other claims regarding award of interest. In other words, the Application suffered dismissal substantial on all other claims except two claims mentioned above. However, despite suffering substantial dismissal of their application.

29. In this view of the matter, in our view, the order of the Single Judge in sofar as it resulted in dismissal of the appellant's application became final and attained finality. In order to keep the issue alive, the appellant was under obligation to file regular appeal before the Division Bench against that part of the Single Judge's order by which their application under Section 34 of the Act in relation to all other claims had been dismissed. It was only then in the event of dismissal of the appeal, the issues raised there in could have been purused in appeal to this Court underArticle 136 of the Constitutional and that too only on the grounds raised there in and decided against the appellant. It was, however, not done by the appellant

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. 30. In our opinion, therefore, this is yet another infirmity which renders the appeal devoid of any merit. 31. In our considered view, the grant of award of interest on arbitrate claims by the Arbitral Tribunal is not inherently illegal or against any public policy or per se bad in law or beyond the powers of the Arbitral Tribunal. In other words, it is permissible to award interest in arbitrable claims by the Arbitral Tribunal.” 10. In view of the above settled position of law, we are unable to consider the new grounds raised by the appellant with regard to the alleged infirmity in the findings of the learned Arbitrator in rejecting the claim of the appellant. 11. For the foregoing reasons, we are of the view that the above Appeal deserves to be dismissed. We find that the Award was passed on 01.11.2015 and the first respondent had executed a Bank guarantee for a sum of Rs.2,60,51,639/- (Rupees Two Crores Sixty Lakhs Fifty One Thousand Six Hundred and Thirty Nine Only) guaranteeing performance of the work awarded under the contract and the same has not been released by the Appellant so far. The learned counsel for the first respondent submitted that they have also made security deposit to the tune of Rs.2,60,51,639/- (Rupees Two Crores Sixty Lakhs Fifty One Thousand Six Hundred and Thirty Nine Only). We, therefore, deem it necessary to issue a direction to the Appellant to release the Bank Guarantee executed, and the security deposit made, by the first respondent for the above said sum within a period of four weeks from the date of receipt of the copy of this order. 12. With the above direction, the Original Side Appeal is dismissed. Consequently, the connected miscellaneous petition is closed. No Costs.
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