Delhi High Court: In a case wherein a petition was filed by the petitioner, National Highways Authority of India (‘NHAI’) under Section 34 of the Arbitration and Conciliation Act, 1996 (‘the Act’) to quash and set aside the arbitral award dated 25-03-2019 passed by the Arbitral Tribunal (‘Tribunal’), Chandra Dhari Singh, J.*, opined that a perusal of the impugned Award made it evident that there was no patent illegality or error apparent on the face of the record and the Arbitrator had passed the impugned Award after considering all the relevant material placed before it during the arbitral proceedings. The Court further opined that the impugned Award was well-reasoned and was not in contravention of the fundamental policy of Indian law. Therefore, the Court held that as the petitioner failed to show that any grounds stipulated under Section 34 of the Act were being met, there was no reason for interfering with the impugned Award.
The petitioner was an autonomous body constituted under the National Highways Authority of India Act, 1988 having its office in New Delhi and it functioned towards developing, maintaining, and managing the country’s National Highways and for matters connected thereto. The respondent, Ashoka Buildcon Ltd., was a company incorporated under the provisions of the Companies Act, 1956 having its office in Nashik. The petitioner on 15-02-2016 invited a proposal for the construction of the Project Highway for the construction of Two/Four laning with paved shoulders of Govindpur (Rajgunj)-Chas-West Bengal Border section of NH-32 from km. 0.000 to km. 56.889 (‘Project Highway’) in the State of Jharkhand on NHDP Phase-IV on Engineering, Procurement, and Construction (‘EPC’) mode.
The respondent submitted its bid pursuant to the proposal by the petitioner and the same was accepted by the petitioner through a Letter of Acceptance. Accordingly, the Contract Agreement was entered into between the parties for the above-mentioned project’s execution. Thereafter, the respondent invoked the provisions of arbitration as per Clause 26.3 of the Contract Agreement and accordingly submitted a list of disputes to the petitioner leading to the setting up of the Tribunal in 2017. The Tribunal passed the impugned Arbitral Award on 25-03-2019, whereby, Rs. 3628.79 lakhs plus GST were awarded in favour of the respondent. Hence, on being aggrieved by the impugned Award, the petitioner approached this Court challenging the impugned Award.
Analysis, Law, and Decision
The Court observed that there were essentially three broad areas in which an arbitral award was likely to be challenged under Section 34 of the Act. Firstly, an award might be challenged on jurisdictional grounds. Secondly, an award might be challenged on procedural grounds, such as failure to give a party an equal opportunity to be heard. Thirdly, most rarely, an award might be challenged on substantive grounds because the Arbitral Tribunal made a mistake of law.
The Court noted that the petitioner was partially challenging the Impugned Award qua Claim No. 4, Claim No. 5 and Claim No. 6.
1. Claim No. 4 — Compensation on account of delay on account of access to site for the period from signing of agreement to appointed date.
The Court noted that Claim No. 4 pertained to non- commencement of the work because there was inability on petitioner’s behalf in handing over the Right of Way (‘ROW’) to the respondent and as per the terms of the Contract, the petitioner was bound to hand-over 90% of the ROW to the respondent. The Court also noted that the Tribunal had allowed the respondent’s claim on various grounds which were overheads of the project after signing of the agreement; idle charges of machinery and plant; additional expenditure on the items arising out of peculiar situation; demobilization of plant, machinery, manpower and sub-contractors etc.; losses on account of cost of works and maintenance not commenced/not completed; the expenditure incurred in barricading and repairing the barricades for Telmachu bridge and keeping the machinery ready for demolition of structures as ordered by the petitioner etc.
Thus, the Court observed that the Tribunal had considered the various factors which had influenced the appointment date and accordingly, arrived at a decision as to whether the respondent was entitled to the loss as claimed by it. The Court opined that the submissions made by the parties and the documents which were referred by them had been duly taken into consideration and after such consideration, the Tribunal concluded that there was no delay in the arbitral proceedings. Thus, the Court held that it did not find any reason to interfere in the findings given by the Tribunal qua the claim No. 4.
2. Claim No. 5 – Cost of Arbitration
The Court observed that as per Section 31A of the Act which enunciated upon the principle of awarding cost, the Tribunal had the discretion to award cost to the parties and Section 31A(1) of the Act allowed only for reasonable costs to be recovered and not actual costs as claimed by the party. Therefore, the Court opined that “the test of reasonableness must be done by the Tribunal, and it must consider the reasonableness of the costs claimed by the claimant. The factors which might be considered to determine reasonableness vary and such an assessment was not a straightforward formula. The issues in determining reasonable costs were further compounded by the significant costs imposed on parties by their solicitors and counsel, which, along with the manner of billing, vary”.
The Court noted that the Tribunal directed the parties to pay in advance the fees of the Tribunal and in case of default on account of the petitioner in making the said payment, the petitioner shall make such payment to the Tribunal. Thereafter, when the petitioner did not make the payment towards the arbitral fees due to the Tribunal and the respondent in compliance with the said order paid the Tribunal, the Tribunal held that the respondent was entitled for the cost of arbitration. This Court thus opined that the test of reasonableness of cost had been considered by the Tribunal towards the cost/expenditure incurred by the respondent towards Arbitration and accordingly, modified the amount and included in the Award for Claim no. 5. Thus, this Court held that it did not find any reason to interfere in the findings given by the Tribunal qua the Claim No. 5.
3. Claim No. 6 – Interest on amount claimed both Pre-lite and Pendente lite
The Court observed that under Section 31(7)(b) of the Act, the Arbitrator had the discretion to determine the rate of reasonable interest, the sum on which the interest was to be paid, and the period for which payment of interest was to be made. The Court noted that the Tribunal after considering the prevailing low rates of interest in the past, had decided the payable interest amount by way of simple interest at the rate of 10% per annum on the amounts as included in the Impugned Award towards the pre-lite and pendente lite interest. This Court opined that the Tribunal had correctly exercised its discretion of awarding interest under Section 31(7)(b) of the Act in a reasonable manner and had given its reason for awarding the interest, thus, it did not find any reason to interfere in the findings given by the Arbitrator qua the Claim No. 6.
Thus, this Court held that the petitioner had failed to corroborate with evidence as to how the Arbitrator had erred in adjudicating upon the dispute. The Court stated that in the instant petition, it was argued that the Impugned Award was patently illegal and thus was liable to be set aside, but, the Court opined that it was essential that there be illegalities or deficiencies at the face of the Award which shocked the conscience of the Court in order for it to qualify to be set aside by an act of this Court while adjudicating upon a petition filed under Section 34 of the Act.
The Court opined that a perusal of the impugned Award made it evident that there was no patent illegality or error apparent on the face of the record and the Arbitrator had passed the Impugned Award after considering all the relevant material placed before it during the arbitral proceedings. The Court further opined that the impugned Award was well-reasoned and was not in contravention of the fundamental policy of Indian law. Therefore, the Court held that as the petitioner failed to show that any grounds stipulated under Section 34 of the Act were being met, there was no reason for interfering with the Impugned Award. Thus, the Court dismissed the petition.
[National Highways Authority of India v. Ashoka Buildcon Ltd., 2023 SCC OnLine Del 5658, decided on 13-09-2023]
*Judgment authored by: Justice Chandra Dhari Singh
Advocates who appeared in this case :
For the Petitioner: Madhu Sweta, Raveena Dewan, Advocates
For the Respondent: Jay Salva, Senior Advocate; Rajpal Singh, Advocate