The award passed by the Arbitral Tribunal can be interfered with in the proceedings
under Sections 34 and 37 of Arbitration Act only in a case where the finding is perverse and/or contrary to the evidence and/or the same is against the public policy.
Once it is held that the termination was illegal and thereafter when the learned Arbitral Tribunal has considered the claims on merits, which basically were with respect to the unpaid amount in respect of the work executed under the contract and loss of profit. Cogent reasons have been given by the learned Arbitral Tribunal while allowing/partly allowing the respective claims.
It is required to be noted that the learned Arbitral Tribunal has partly allowed some of the claims and even disallowed also some of the claims.
There is a proper application of mind by the learned Arbitral Tribunal on the respective claims.
Therefore, the same is not required to be interfered with, under Sections 34 and 37 of the Arbitration Act.
1
NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE TO APPEAL (C) No. 13117 of 2019
The State of Jharkhand & Ors. .. Petitioners
Versus
M/s HSS Integrated SDN & Anr. .. Respondents
J U D G M E N T
M. R. Shah, J.
1. Aggrieved by the impugned judgment and order dated
30.01.2019 passed by the High Court of Jharkhand at Ranchi in
Commercial Appeal No. 01 of 2018, by which the High Court has
dismissed the said appeal preferred by the petitioners herein under
Section 37 of the Arbitration and Conciliation Act, 1996 (for short
‘the Arbitration Act’) and has confirmed the award declared by the
learned Arbitral Tribunal, confirmed by the First Appellate Court,
2
the original appellants have preferred the present special leave
petition.
2. This special leave petition arises out of the contractual dispute
between the petitionersState and the respondents in relation to a
consultancy agreement over construction of sixlane Divided
Carriage Way of certain parts of Ranchi Ring Road. Respondent
Nos. 1 and 2 acted as a consortium for providing such consultancy
and supervisory services. An agreement was entered into between
the parties on 28.08.2007. The original work period under the said
agreement was for 36 months, i.e. from 01.10.2007 to 30.09.2010.
There was a dispute with respect to the nonperformance and
unsatisfactory work done by the respondents. However, the
respondents were granted extension of contract twice. Thereafter,
a letter dated 25.11.2011 was issued by the Executive Engineer to
the respondents and other contractors entrusted with the task of
construction, granting a second extension of time of contract for
construction work. The respondents were called upon to make
compliances with the issues pointed out, at the earliest. In the said
communication dated 25.11.2011, it was stated that if the
deficiencies are not removed and/or complied with, in that case,
3
there shall be suspension of payment under Clause 2.8 of the
General Conditions of Contract (for short ‘the GCC’). On
05.12.2011, a review meeting was held between the parties,
followed by a letter dated 07.12.2011 issued by the respondentsoriginal claimants in reply/compliance of the aforesaid letter dated
25.11.2011. It was the case on behalf of the respondentsoriginal
claimants that without properly considering the said letter of the
respondentsoriginal claimants dated 07.12.2011, petitioners
herein issued letter dated 12.12.2011 invoking Clause 2.8 of the
GCC for suspension of payment, alleging certain deficiencies. It
was the case on behalf of the respondentsoriginal claimants that
by letter dated 27.12.2011, they replied to the suspension notice
and complied with the deficiencies. In reply to the aforesaid
letters, the petitioners issued letters dated 23.12.2011 and
28.12.2011 asking the claimants to ensure compliance of the
pending issues. That by letter/communication dated 09.02.2012,
the petitioners served a notice upon the respondents terminating
the contract with effect from 12.03.2012. The said termination
notice was issued under Clause 2.9.1(a) and (d) of the GCC. The
respondentsoriginal claimants replied to the said termination
notice by letters dated 16.02.2012 and 24.02.2012 and requested
4
the petitioners to reconsider the matter. However, the dispute
between the parties was not resolved. The respondentsoriginal
claimants served a legal notice dated 10.03.2012 and invoked the
arbitration clause 2.9.1(a). Pursuant to the order passed by the
High Court, the Arbitral Tribunal was constituted.
2.1 The Arbitral Tribunal comprised of nominees of the rival
parties and a retired Judge of the Jharkhand High Court as the
Presiding Arbitrator. The respondentsoriginal claimants claimed a
total sum of Rs.5,17,88,418/ under 13 different heads, excluding
interest. The petitioners also filed a counterclaim for
Rs.6,00,78,736/ under five heads. The claim of the original
claimants primarily involved the unpaid amount in respect of the
work executed under the contract, loss of profit and overhead
charges, apart from other consequential claims arising out of
termination. It was the specific case on behalf of the original
claimants that the termination was absolutely illegal and not being
in according with the terms of the contract. The counterclaim filed
by the petitionersState was for reimbursement on account of
unsatisfactory performance by the respondents.
2.2 That, on appreciation of evidence, the learned Arbitral
Tribunal gave a specific finding that the termination of the contract
5
was illegal and without following the procedure as required under
the contract (paras 17 to 36). That, thereafter the learned Arbitral
Tribunal proceeded to consider the claims on merits and ultimately
allowed the claims to the extent of Rs.2,10,87,304/ under different
heads as under:
Claims Amount Allowed Comments
Claim 1A – Claim
Unpaid Bills from
1/11/2011 to
28/2/2012
53,37,294 50,59,957 Partly allowed
Claim 1B – Claim
Due/Unpaid against
Bills from Oct 2007
to Oct 2011
79,04,819 67,07,032 Partly allowed
Claim 1C – Claim
against Design of
Bridges
8,30,000 8,30,000 Allowed
Total Claim 1 1,40,72,11
3
1,25,96,98
9
Claim 2 – Invoice for
the month of March,
2012 (month of
termination)
11,05,954 11,05,954 Allowed
Claim 3 – Claim
towards Shifting of
Office from Ranchi to
site
1,57,000 Disallowed
Claim 4 – Claim
towards Laboratory
set up at site
4,41,000 Disallowed
Claim 5 –
Demobilisation of
staff
5,00,000 Disallowed
Claim 6 – Bank
Guarantee charge for
extended period
33,730 Disallowed
6
Claim 7 – Claim
towards cost incurred
to submit record to
EE in person
1,28,500 Disallowed
Claim 8 – Loss of
profit (for 24 months
extension period)
1,18,54,639 19,75,733 Partly allowed
Claim 9 – Claim
against Encashment
of BG
14,08,765 13,90,000 Partly allowed
Claim 10 – Claim
towards solicitor and
advocates payments
3,06,200
Claim 11 – Claim
towards arbitration
cost
10,00,000 10,00,000 Partly allowed
Claim 12 – Staff
maintenance fee (3
months notice pay
only)
17,97,084 Disallowed
Claim 13 – Claim
towards inability to
bid for projects bad
reputation
50,00,000 Disallowed
Interest claimed as
per contract beyond
60 days of Invoice
submission
1,39,89,633 30,18,588 Interest @ 12%
from the date
when Tribunal
got constituted.
TOTAL OF CLAIMS
& ALLOWED (Indian
Rupees)
5,17,94,61
8
2,10,94,30
4
% amount allowed 40.71
2.3 In view of the finding arrived at by the learned Arbitral
Tribunal that the termination of the contract was illegal and
without following due procedure as required under the contract and
7
in view of allowing the claims of the claimants partly, the Arbitral
Tribunal dismissed the counter claims submitted by the petitioners.
2.4 The award declared by the learned Arbitral Tribunal has been
confirmed by the First Appellate Court in a proceeding under
Section 34 of the Arbitration Act. The same has been further
confirmed by the High Court by the impugned judgment and order
in an appeal under Section 37 of the Arbitration Act.
2.5 Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the High Court dismissing the
appeal under Section 37 of the Arbitration Act and consequently
confirming the award passed by the learned Arbitral Tribunal, the
original respondentsState and others have preferred the present
special leave petition.
3. Learned counsel appearing on behalf of the petitioners has
vehemently submitted that the High Court has materially erred in
dismissing the appeal under Section 37 of the Arbitration Act and
has materially erred in not properly appreciating the fact that the
arbitral award was passed contrary to the materials on record.
3.1 It is vehemently submitted by the learned counsel appearing
on behalf of the petitioners that the High Court has materially erred
8
in not properly considering that the suspension under the
agreement was not the suspension of work per se, rather was
suspension of all payments to the consultants and therefore there
was no question of dilution/gobye of the suspension letter. It is
further submitted by the learned counsel appearing on behalf of the
petitioners that the High Court has not properly
appreciated/considered the scheme of the contract. It is submitted
that in case of nonperformance of the contract satisfactorily, the
first step was suspension of payment and if the failure in
performance is not remedied, then the consequence which follows is
the next step that being notice of termination by issuing 30 days’
notice. It is submitted that suspension is either operative or
revoked by resuming the payments, for, suspension is suspension
of payment and not suspension of work/contract. It is submitted
that therefore the High Court has materially erred in confirming the
findings recorded by the learned Arbitral Tribunal that the
termination of the contract was illegal and without following due
procedure as required under the contract.
4. While opposing the present special leave petition, learned
counsel appearing on behalf of the respondentsoriginal claimants
9
has vehemently submitted that, as such, there are concurrent
findings of fact recorded by all the Courts below on the illegal
termination of the contract. It is submitted that, on appreciation of
evidence, the learned Arbitral Tribunal (in paragraphs 17 to 36)
gave the specific findings by giving cogent reasons that the
termination of the contract was illegal and without following due
procedure as required under the contract. It is submitted that once
the findings recorded by the learned Arbitral Tribunal are on
appreciation of evidence and considering the materials on record,
the same is rightly not interfered with by the Courts below in the
proceedings under Sections 34 and 37 of the Arbitration Act.
4.1 Making the above submissions and relying upon the decisions
of this Court in the cases of Associate Builders v. DDA (2015) 3
SCC 49, NHAI v. ProgressiveMVR (2018) 14 SCC 688 and
Maharashtra State Electricity Distribution Co. Ltd. v. Datar
Switchgear Ltd. (2018) 3 SCC 133, it is prayed to dismiss the
present special leave petition.
5. Heard learned counsel appearing on behalf of the respective
parties at length.
10
6. The main controversy is with respect to the termination of the
contract vide letter/communication dated 09.2.2012 terminating
the contract with effect from 12.03.2012 invoking Clause 2.9.1(1)
and (d) of the GCC. That, on appreciation of evidence and
considering the various clauses of the contract, the learned Arbitral
Tribunal has observed and held by giving cogent reasons that the
termination of the contract was illegal and contrary to the terms of
the contract and without following due procedure as required under
the relevant clauses of the contract. The said finding of fact
recorded by the learned Arbitral Tribunal is on appreciation of
evidence. The said finding of fact has been confirmed in the
proceedings under Sections 34 and 37 of the Arbitration Act.
Thus, there are concurrent findings of fact recorded by the learned
Arbitral Tribunal, First Appellate Court and the High Court that the
termination of the contract was illegal and without following due
procedure as required under the relevant provisions of the contract.
6.1 In the case of ProgressiveMVR (supra), after considering the
catena of decisions of this Court on the scope and ambit of the
proceedings under Section 34 of the Arbitration Act, this Court has
observed and held that even when the view taken by the arbitrator
is a plausible view, and/or when two views are possible, a
11
particular view taken by the Arbitral Tribunal which is also
reasonable should not be interfered with in a proceeding under
Section 34 of the Arbitration Act.
6.2 In the case of Datar Switchgear Ltd. (supra), this Court has
observed and held that the Arbitral Tribunal is the master of
evidence and the findings of fact which are arrived at by the
arbitrators on the basis of the evidence on record are not to be
scrutinized as if the Court was sitting in appeal. In para 51 of the
judgment, it is observed and held as under:
51 Categorical findings are arrived at by the
Arbitral Tribunal to the effect that insofar as
Respondent 2 is concerned, it was always ready and
willing to perform its contractual obligations, but was
prevented by the appellant from such performance.
Another specific finding which is returned by the
Arbitral Tribunal is that the appellant had not given
the list of locations and, therefore, its submission
that Respondent 2 had adequate lists of locations
available but still failed to install the contract objects
was not acceptable. In fact, on this count, the
Arbitral Tribunal has commented upon the working
of the appellant itself and expressed its dismay about
lack of control by the Head Office of the appellant
over the field offices which led to the failure of the
contract. These are findings of facts which are arrived
at by the Arbitral Tribunal after appreciating the
evidence and documents on record. From these
findings it stands established that there is a
fundamental breach on the part of the appellant in
carrying out its obligations, with no fault of
Respondent 2 which had invested whopping amount
of Rs 163 crores in the project. A perusal of the
12
award reveals that the Tribunal investigated the
conduct of the entire transaction between the parties
pertaining to the work order, including withholding of
DTC locations, allegations and counterallegations by
the parties concerning installed objects. The
arbitrators did not focus on a particular breach qua
particular number of objects/class of objects.
Respondent 2 is right in its submission that the
fundamental breach, by its very nature, pervades the
entire contract and once committed, the contract as a
whole stands abrogated. It is on the aforesaid basis
that the Arbitral Tribunal has come to the conclusion
that the termination of contract by Respondent 2 was
in order and valid. The proposition of law that the
Arbitral Tribunal is the master of evidence and the
findings of fact which are arrived at by the arbitrators
on the basis of evidence on record are not to be
scrutinised as if the Court was sitting in appeal now
stands settled by a catena of judgments pronounced
by this Court without any exception thereto [ See
— Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204 and S. Munishamappa v. B.
Venkatarayappa, (1981) 3 SCC 260] .
As held by this Court in catena of decisions, the award passed by
the Arbitral Tribunal can be interfered with in the proceedings
under Sections 34 and 37 of Arbitration Act only in a case where
the finding is perverse and/or contrary to the evidence and/or the
same is against the public policy. (see Associate Builders v. DDA
(2015) 3 SCC 49 etc.)
13
6.3 In the present case, the categorical findings arrived at by the
Arbitral Tribunal are to the effect that the termination of the
contract was illegal and without following due procedure of the
provisions of the contract. The findings are on appreciation of
evidence considering the relevant provisions and material on record
as well as on interpretation of the relevant provisions of the
contract, which are neither perverse nor contrary to the evidence in
record. Therefore, as such, the First Appellate Court and the High
Court have rightly not interfered with such findings of fact recorded
by the learned Arbitral Tribunal.
6.4 Once it is held that the termination was illegal and thereafter
when the learned Arbitral Tribunal has considered the claims on
merits, which basically were with respect to the unpaid amount in
respect of the work executed under the contract and loss of profit.
Cogent reasons have been given by the learned Arbitral Tribunal
while allowing/partly allowing the respective claims. It is required
to be noted that the learned Arbitral Tribunal has partly allowed
some of the claims and even disallowed also some of the claims.
There is a proper application of mind by the learned Arbitral
Tribunal on the respective claims. Therefore, the same is not
required to be interfered with, more particularly, when in the
14
proceedings under Sections 34 and 37 of the Arbitration Act, the
petitioners have failed.
7. Once the finding recorded by the learned Arbitral Tribunal
that the termination of the contract was illegal is upheld and the
claims made by the claimants have been allowed or allowed partly,
in that case, the counterclaim submitted by the petitioners was
liable to be rejected and the same is rightly rejected. No
interference of this Court is called for.
8. In view of the above and for the reasons stated above, the
present special leave petition deserves to be dismissed and is
accordingly dismissed. However, in the facts and circumstances of
the case, there will be no order as to costs.
..................................J.
(ARUN MISHRA)
...................................J.
(M. R. SHAH)
New Delhi,
October 18, 2019.
under Sections 34 and 37 of Arbitration Act only in a case where the finding is perverse and/or contrary to the evidence and/or the same is against the public policy.
Once it is held that the termination was illegal and thereafter when the learned Arbitral Tribunal has considered the claims on merits, which basically were with respect to the unpaid amount in respect of the work executed under the contract and loss of profit. Cogent reasons have been given by the learned Arbitral Tribunal while allowing/partly allowing the respective claims.
It is required to be noted that the learned Arbitral Tribunal has partly allowed some of the claims and even disallowed also some of the claims.
There is a proper application of mind by the learned Arbitral Tribunal on the respective claims.
Therefore, the same is not required to be interfered with, under Sections 34 and 37 of the Arbitration Act.
1
NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE TO APPEAL (C) No. 13117 of 2019
The State of Jharkhand & Ors. .. Petitioners
Versus
M/s HSS Integrated SDN & Anr. .. Respondents
J U D G M E N T
M. R. Shah, J.
1. Aggrieved by the impugned judgment and order dated
30.01.2019 passed by the High Court of Jharkhand at Ranchi in
Commercial Appeal No. 01 of 2018, by which the High Court has
dismissed the said appeal preferred by the petitioners herein under
Section 37 of the Arbitration and Conciliation Act, 1996 (for short
‘the Arbitration Act’) and has confirmed the award declared by the
learned Arbitral Tribunal, confirmed by the First Appellate Court,
2
the original appellants have preferred the present special leave
petition.
2. This special leave petition arises out of the contractual dispute
between the petitionersState and the respondents in relation to a
consultancy agreement over construction of sixlane Divided
Carriage Way of certain parts of Ranchi Ring Road. Respondent
Nos. 1 and 2 acted as a consortium for providing such consultancy
and supervisory services. An agreement was entered into between
the parties on 28.08.2007. The original work period under the said
agreement was for 36 months, i.e. from 01.10.2007 to 30.09.2010.
There was a dispute with respect to the nonperformance and
unsatisfactory work done by the respondents. However, the
respondents were granted extension of contract twice. Thereafter,
a letter dated 25.11.2011 was issued by the Executive Engineer to
the respondents and other contractors entrusted with the task of
construction, granting a second extension of time of contract for
construction work. The respondents were called upon to make
compliances with the issues pointed out, at the earliest. In the said
communication dated 25.11.2011, it was stated that if the
deficiencies are not removed and/or complied with, in that case,
3
there shall be suspension of payment under Clause 2.8 of the
General Conditions of Contract (for short ‘the GCC’). On
05.12.2011, a review meeting was held between the parties,
followed by a letter dated 07.12.2011 issued by the respondentsoriginal claimants in reply/compliance of the aforesaid letter dated
25.11.2011. It was the case on behalf of the respondentsoriginal
claimants that without properly considering the said letter of the
respondentsoriginal claimants dated 07.12.2011, petitioners
herein issued letter dated 12.12.2011 invoking Clause 2.8 of the
GCC for suspension of payment, alleging certain deficiencies. It
was the case on behalf of the respondentsoriginal claimants that
by letter dated 27.12.2011, they replied to the suspension notice
and complied with the deficiencies. In reply to the aforesaid
letters, the petitioners issued letters dated 23.12.2011 and
28.12.2011 asking the claimants to ensure compliance of the
pending issues. That by letter/communication dated 09.02.2012,
the petitioners served a notice upon the respondents terminating
the contract with effect from 12.03.2012. The said termination
notice was issued under Clause 2.9.1(a) and (d) of the GCC. The
respondentsoriginal claimants replied to the said termination
notice by letters dated 16.02.2012 and 24.02.2012 and requested
4
the petitioners to reconsider the matter. However, the dispute
between the parties was not resolved. The respondentsoriginal
claimants served a legal notice dated 10.03.2012 and invoked the
arbitration clause 2.9.1(a). Pursuant to the order passed by the
High Court, the Arbitral Tribunal was constituted.
2.1 The Arbitral Tribunal comprised of nominees of the rival
parties and a retired Judge of the Jharkhand High Court as the
Presiding Arbitrator. The respondentsoriginal claimants claimed a
total sum of Rs.5,17,88,418/ under 13 different heads, excluding
interest. The petitioners also filed a counterclaim for
Rs.6,00,78,736/ under five heads. The claim of the original
claimants primarily involved the unpaid amount in respect of the
work executed under the contract, loss of profit and overhead
charges, apart from other consequential claims arising out of
termination. It was the specific case on behalf of the original
claimants that the termination was absolutely illegal and not being
in according with the terms of the contract. The counterclaim filed
by the petitionersState was for reimbursement on account of
unsatisfactory performance by the respondents.
2.2 That, on appreciation of evidence, the learned Arbitral
Tribunal gave a specific finding that the termination of the contract
5
was illegal and without following the procedure as required under
the contract (paras 17 to 36). That, thereafter the learned Arbitral
Tribunal proceeded to consider the claims on merits and ultimately
allowed the claims to the extent of Rs.2,10,87,304/ under different
heads as under:
Claims Amount Allowed Comments
Claim 1A – Claim
Unpaid Bills from
1/11/2011 to
28/2/2012
53,37,294 50,59,957 Partly allowed
Claim 1B – Claim
Due/Unpaid against
Bills from Oct 2007
to Oct 2011
79,04,819 67,07,032 Partly allowed
Claim 1C – Claim
against Design of
Bridges
8,30,000 8,30,000 Allowed
Total Claim 1 1,40,72,11
3
1,25,96,98
9
Claim 2 – Invoice for
the month of March,
2012 (month of
termination)
11,05,954 11,05,954 Allowed
Claim 3 – Claim
towards Shifting of
Office from Ranchi to
site
1,57,000 Disallowed
Claim 4 – Claim
towards Laboratory
set up at site
4,41,000 Disallowed
Claim 5 –
Demobilisation of
staff
5,00,000 Disallowed
Claim 6 – Bank
Guarantee charge for
extended period
33,730 Disallowed
6
Claim 7 – Claim
towards cost incurred
to submit record to
EE in person
1,28,500 Disallowed
Claim 8 – Loss of
profit (for 24 months
extension period)
1,18,54,639 19,75,733 Partly allowed
Claim 9 – Claim
against Encashment
of BG
14,08,765 13,90,000 Partly allowed
Claim 10 – Claim
towards solicitor and
advocates payments
3,06,200
Claim 11 – Claim
towards arbitration
cost
10,00,000 10,00,000 Partly allowed
Claim 12 – Staff
maintenance fee (3
months notice pay
only)
17,97,084 Disallowed
Claim 13 – Claim
towards inability to
bid for projects bad
reputation
50,00,000 Disallowed
Interest claimed as
per contract beyond
60 days of Invoice
submission
1,39,89,633 30,18,588 Interest @ 12%
from the date
when Tribunal
got constituted.
TOTAL OF CLAIMS
& ALLOWED (Indian
Rupees)
5,17,94,61
8
2,10,94,30
4
% amount allowed 40.71
2.3 In view of the finding arrived at by the learned Arbitral
Tribunal that the termination of the contract was illegal and
without following due procedure as required under the contract and
7
in view of allowing the claims of the claimants partly, the Arbitral
Tribunal dismissed the counter claims submitted by the petitioners.
2.4 The award declared by the learned Arbitral Tribunal has been
confirmed by the First Appellate Court in a proceeding under
Section 34 of the Arbitration Act. The same has been further
confirmed by the High Court by the impugned judgment and order
in an appeal under Section 37 of the Arbitration Act.
2.5 Feeling aggrieved and dissatisfied with the impugned
judgment and order passed by the High Court dismissing the
appeal under Section 37 of the Arbitration Act and consequently
confirming the award passed by the learned Arbitral Tribunal, the
original respondentsState and others have preferred the present
special leave petition.
3. Learned counsel appearing on behalf of the petitioners has
vehemently submitted that the High Court has materially erred in
dismissing the appeal under Section 37 of the Arbitration Act and
has materially erred in not properly appreciating the fact that the
arbitral award was passed contrary to the materials on record.
3.1 It is vehemently submitted by the learned counsel appearing
on behalf of the petitioners that the High Court has materially erred
8
in not properly considering that the suspension under the
agreement was not the suspension of work per se, rather was
suspension of all payments to the consultants and therefore there
was no question of dilution/gobye of the suspension letter. It is
further submitted by the learned counsel appearing on behalf of the
petitioners that the High Court has not properly
appreciated/considered the scheme of the contract. It is submitted
that in case of nonperformance of the contract satisfactorily, the
first step was suspension of payment and if the failure in
performance is not remedied, then the consequence which follows is
the next step that being notice of termination by issuing 30 days’
notice. It is submitted that suspension is either operative or
revoked by resuming the payments, for, suspension is suspension
of payment and not suspension of work/contract. It is submitted
that therefore the High Court has materially erred in confirming the
findings recorded by the learned Arbitral Tribunal that the
termination of the contract was illegal and without following due
procedure as required under the contract.
4. While opposing the present special leave petition, learned
counsel appearing on behalf of the respondentsoriginal claimants
9
has vehemently submitted that, as such, there are concurrent
findings of fact recorded by all the Courts below on the illegal
termination of the contract. It is submitted that, on appreciation of
evidence, the learned Arbitral Tribunal (in paragraphs 17 to 36)
gave the specific findings by giving cogent reasons that the
termination of the contract was illegal and without following due
procedure as required under the contract. It is submitted that once
the findings recorded by the learned Arbitral Tribunal are on
appreciation of evidence and considering the materials on record,
the same is rightly not interfered with by the Courts below in the
proceedings under Sections 34 and 37 of the Arbitration Act.
4.1 Making the above submissions and relying upon the decisions
of this Court in the cases of Associate Builders v. DDA (2015) 3
SCC 49, NHAI v. ProgressiveMVR (2018) 14 SCC 688 and
Maharashtra State Electricity Distribution Co. Ltd. v. Datar
Switchgear Ltd. (2018) 3 SCC 133, it is prayed to dismiss the
present special leave petition.
5. Heard learned counsel appearing on behalf of the respective
parties at length.
10
6. The main controversy is with respect to the termination of the
contract vide letter/communication dated 09.2.2012 terminating
the contract with effect from 12.03.2012 invoking Clause 2.9.1(1)
and (d) of the GCC. That, on appreciation of evidence and
considering the various clauses of the contract, the learned Arbitral
Tribunal has observed and held by giving cogent reasons that the
termination of the contract was illegal and contrary to the terms of
the contract and without following due procedure as required under
the relevant clauses of the contract. The said finding of fact
recorded by the learned Arbitral Tribunal is on appreciation of
evidence. The said finding of fact has been confirmed in the
proceedings under Sections 34 and 37 of the Arbitration Act.
Thus, there are concurrent findings of fact recorded by the learned
Arbitral Tribunal, First Appellate Court and the High Court that the
termination of the contract was illegal and without following due
procedure as required under the relevant provisions of the contract.
6.1 In the case of ProgressiveMVR (supra), after considering the
catena of decisions of this Court on the scope and ambit of the
proceedings under Section 34 of the Arbitration Act, this Court has
observed and held that even when the view taken by the arbitrator
is a plausible view, and/or when two views are possible, a
11
particular view taken by the Arbitral Tribunal which is also
reasonable should not be interfered with in a proceeding under
Section 34 of the Arbitration Act.
6.2 In the case of Datar Switchgear Ltd. (supra), this Court has
observed and held that the Arbitral Tribunal is the master of
evidence and the findings of fact which are arrived at by the
arbitrators on the basis of the evidence on record are not to be
scrutinized as if the Court was sitting in appeal. In para 51 of the
judgment, it is observed and held as under:
51 Categorical findings are arrived at by the
Arbitral Tribunal to the effect that insofar as
Respondent 2 is concerned, it was always ready and
willing to perform its contractual obligations, but was
prevented by the appellant from such performance.
Another specific finding which is returned by the
Arbitral Tribunal is that the appellant had not given
the list of locations and, therefore, its submission
that Respondent 2 had adequate lists of locations
available but still failed to install the contract objects
was not acceptable. In fact, on this count, the
Arbitral Tribunal has commented upon the working
of the appellant itself and expressed its dismay about
lack of control by the Head Office of the appellant
over the field offices which led to the failure of the
contract. These are findings of facts which are arrived
at by the Arbitral Tribunal after appreciating the
evidence and documents on record. From these
findings it stands established that there is a
fundamental breach on the part of the appellant in
carrying out its obligations, with no fault of
Respondent 2 which had invested whopping amount
of Rs 163 crores in the project. A perusal of the
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award reveals that the Tribunal investigated the
conduct of the entire transaction between the parties
pertaining to the work order, including withholding of
DTC locations, allegations and counterallegations by
the parties concerning installed objects. The
arbitrators did not focus on a particular breach qua
particular number of objects/class of objects.
Respondent 2 is right in its submission that the
fundamental breach, by its very nature, pervades the
entire contract and once committed, the contract as a
whole stands abrogated. It is on the aforesaid basis
that the Arbitral Tribunal has come to the conclusion
that the termination of contract by Respondent 2 was
in order and valid. The proposition of law that the
Arbitral Tribunal is the master of evidence and the
findings of fact which are arrived at by the arbitrators
on the basis of evidence on record are not to be
scrutinised as if the Court was sitting in appeal now
stands settled by a catena of judgments pronounced
by this Court without any exception thereto [ See
— Associate Builders v. DDA, (2015) 3 SCC 49 :
(2015) 2 SCC (Civ) 204 and S. Munishamappa v. B.
Venkatarayappa, (1981) 3 SCC 260] .
As held by this Court in catena of decisions, the award passed by
the Arbitral Tribunal can be interfered with in the proceedings
under Sections 34 and 37 of Arbitration Act only in a case where
the finding is perverse and/or contrary to the evidence and/or the
same is against the public policy. (see Associate Builders v. DDA
(2015) 3 SCC 49 etc.)
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6.3 In the present case, the categorical findings arrived at by the
Arbitral Tribunal are to the effect that the termination of the
contract was illegal and without following due procedure of the
provisions of the contract. The findings are on appreciation of
evidence considering the relevant provisions and material on record
as well as on interpretation of the relevant provisions of the
contract, which are neither perverse nor contrary to the evidence in
record. Therefore, as such, the First Appellate Court and the High
Court have rightly not interfered with such findings of fact recorded
by the learned Arbitral Tribunal.
6.4 Once it is held that the termination was illegal and thereafter
when the learned Arbitral Tribunal has considered the claims on
merits, which basically were with respect to the unpaid amount in
respect of the work executed under the contract and loss of profit.
Cogent reasons have been given by the learned Arbitral Tribunal
while allowing/partly allowing the respective claims. It is required
to be noted that the learned Arbitral Tribunal has partly allowed
some of the claims and even disallowed also some of the claims.
There is a proper application of mind by the learned Arbitral
Tribunal on the respective claims. Therefore, the same is not
required to be interfered with, more particularly, when in the
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proceedings under Sections 34 and 37 of the Arbitration Act, the
petitioners have failed.
7. Once the finding recorded by the learned Arbitral Tribunal
that the termination of the contract was illegal is upheld and the
claims made by the claimants have been allowed or allowed partly,
in that case, the counterclaim submitted by the petitioners was
liable to be rejected and the same is rightly rejected. No
interference of this Court is called for.
8. In view of the above and for the reasons stated above, the
present special leave petition deserves to be dismissed and is
accordingly dismissed. However, in the facts and circumstances of
the case, there will be no order as to costs.
..................................J.
(ARUN MISHRA)
...................................J.
(M. R. SHAH)
New Delhi,
October 18, 2019.
