Ntpc Ltd vs M/S. Deconar Services Pvt. Ltd

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL No. 6483 of 2014

NTPC Ltd. … APPELLANT

Versus

M/s Deconar Services Pvt. Ltd. … RESPONDENT

WITH

CIVIL APPEAL No. 6484 of 2014

JUDGMENT

N.V. RAMANA, J.

1. The present Civil Appeals, by way of Special Leave arise out

of the impugned common judgment dated 09.04.2010 passed by

the Division Bench of the High Court of Delhi, whereby the High

Court dismissed the appeals filed by the present appellant

against the dismissal of their objections to an award passed by

the Arbitrator under the Arbitration Act, 1940. 2

2. A conspectus of the facts necessary for the disposal of the

present appeal is as follows: the appellant had issued two tenders

for the construction of certain quarters in which the respondent

had participated. The first project related to the construction of

100 units of A and B type quarters. The second, was with respect

to construction of 68 units of B, C and D type quarters. It

appears that while the respondent was L­3 with respect to the

first project, he was L­2 with respect to the second. After

negotiations between both parties, the appellant decided to award

both contracts to the respondent on the basis of an offer by the

respondent of 16% rebate on the prices for completing the first

project, in the event he was awarded both contracts. The two

letters of award were issued on 29.06.1988 to the respondent. It

appears from the record that there was some delay in the

handing over of sites by the appellant, which resulted in a delay

in the completion of the construction of quarters in both projects.

Since there were disputes between the parties regarding the final

payment due to the respondent­contractor, the respondent

sought arbitration under the dispute resolution clause, and an

Arbitrator was appointed.

3

3. The learned Arbitrator, vide awards dated 07.07.2000,

granted relief to the respondent under different heads of the

contract. With respect to the first contract pertaining to the

construction of 100 units of A and B type quarters, the Arbitrator

awarded a sum of Rs. 23,89,424/­ with interest at 18% per

annum pendente lite and 21% future interest to the respondent.

With respect to the second contract pertaining to the

construction of 68 units of B, C and D type quarters, the

Arbitrator awarded Rs. 24,36,532/­ at 18% per annum pendente

lite and 21% future interest to the respondent.

4. Aggrieved by the above awards, the appellant filed objections

against both the awards before the Delhi High Court under

Sections 30 and 33 of the Arbitration Act, 1940. Vide separate

orders dated 16.12.2009, the learned Single Judge of the Delhi

High Court dismissed the objections of the appellant (except to

the extent of modifying the interest rate granted by the Arbitrator)

with cost of Rs. 50,000/­ and made the award an order of the

Court.

5. The appellant challenged the above orders in appeal before

the Division Bench of the High Court under Section 39,

Arbitration Act, 1940, which was dismissed vide the common 4 impugned judgment dated 09.04.2010, with cost of Rs. 10,000/­.

6. Aggrieved by the same, the appellant has filed the present

Civil Appeals by way of Special Leave against the impugned

judgment.

7. Heard the learned counsel for the appellant and the

respondent at length.

8. The learned counsel for the appellant confined his

arguments to three main points­ the refund of the rebate agreed

upon by the parties, the grant of escalation of charges for work

done beyond the scheduled period and the costs imposed on the

appellant by all three forums below. Although the first issue of

the three arises only in Civil Appeal No. 6484 of 2014, as the

latter two issues are common to both appeals, and the facts are

connected, all the issues are being taken up together.

9. The learned counsel for the appellant submitted that the

Arbitrator erred in holding that the rebate was a conditional one,

as the terms of the offer by the respondent and the letter of award

do not indicate the same. Further, the learned counsel also

submitted that the Arbitrator erred in granting escalation of

prices when the contract expressly indicated that the “quoted

price shall remain firm during the execution of the contract”. The

Courts below should therefore have interfered with the award 5 passed by the Arbitrator as the same was passed contrary to the

terms of the contract between the parties.

10. On the other hand, the learned counsel for the respondent

supported the impugned judgment passed by the High Court and

stated that there are concurrent findings against the appellant,

who has only been prolonging the litigation. The respondent

submitted that the scope of interference in an arbitral award was

limited, as the Court did not sit in appeal over an award. As long

as the Arbitrator has taken a reasonable view, the Court should

not interfere in the same.

11. Before proceeding further, it is necessary to make note of

the scope of interference by Courts in arbitral awards passed

under the Arbitration Act, 1940. This Court has consistently held

that the Court does not sit in appeal over an award passed by an

arbitrator. In Kwality Manufacturing Corporation v. Central

Warehousing Corporation, (2009) 5 SCC 142 this Court held

as follows:

“10. At the outset, it should be noted that the scope of interference by courts in regard to arbitral awards is limited. A court considering an application under Section 30 or 33 of the Act, does not sit in appeal over the findings and decision of the arbitrator. Nor can it reassess or reappreciate evidence or examine the sufficiency or otherwise of the evidence.

6 The award of the arbitrator is final and the only grounds on which it can be challenged are those mentioned in Sections 30 and 33 of the Act. Therefore, on the contentions urged, the only question that arose for consideration before the High Court was, whether there was any error apparent on the face of the award and whether the arbitrator misconducted himself or the proceedings.”

(emphasis supplied)

12. Further, it is also a settled proposition that where the

arbitrator has taken a possible view, although a different view

may be possible on the same evidence, the Court would not

interfere with the award. This Court in Arosan Enterprises Ltd.

v. Union of India, (1999) 9 SCC 449 held as follows:

“36. Be it noted that by reason of a long catena of cases, it is now a well­settled principle of law that reappraisal of evidence by the court is not permissible and as a matter of fact exercise of power by the court to reappraise the evidence is unknown to proceedings under Section 30 of the Arbitration Act. In the event of there being no reasons in the award, question of interference of the court would not arise at all. In the event, however, there are reasons, the interference would still be not available within the jurisdiction of the court unless of course, there exist a total perversity in the award or the judgment is based on a wrong proposition of law. In the event however two views are possible on a 7 question of law as well, the court would not be justified in interfering with the award.

37. The common phraseology “error apparent on the face of the record” does not itself, however, mean and imply closer scrutiny of the merits of documents and materials on record. The court as a matter of fact, cannot substitute its evaluation and come to the conclusion that the arbitrator had acted contrary to the bargain between the parties. If the view of the arbitrator is a possible view the award or the reasoning contained therein cannot be examined...”

13. From the above pronouncements, and from a catena of other

judgments of this Court, it is clear that for the objector/appellant

in order to succeed in their challenge against an arbitral award,

they must show that the award of the arbitrator suffered from

perversity or an error of law or that the arbitrator has otherwise

misconducted himself. Merely showing that there is another

reasonable interpretation or possible view on the basis of the

material on the record is insufficient to allow for the interference

by the Court [See State of U.P. v. Allied Constructions, (2003)

7 SCC 396; Ravindra Kumar Gupta and Company v. Union of

India, (2010) 1 SCC 409; Oswal Woollen Mills Limited v.

Oswal Agro Mills Limited, (2018) 16 SCC 219].

8

14. Keeping in view the above principles, the question before us

is whether the arbitral awards in question are assailable on any

of the available grounds. While deciding this, due regard must

also be given to the fact that both the learned Single Judge, and

subsequently the Division Bench, of the Delhi High Court have

concurrently held against the appellant herein.

15. Coming to the facts at hand, it is an admitted fact that there

was substantial delay attributable to the appellant in handing

over the sites for the 68 B, C and D quarters to the respondent.

The appellant has not contested this finding before us.

16. With respect to the first issue, viz., on the issue of refund of

rebate, the Arbitrator held that the rebate of 16% on the price of

construction of 100 units of A and B quarters was given by the

respondent on the condition that he would be able to execute

both the works simultaneously. The Arbitrator interpreted the

rebate as a conditional one on analysis of the documents on

record, particularly the letter dated 14.06.1988 sent by the

respondent to the appellant subsequent to the negotiations held

between them, the award of both contracts to the respondent on

the same date and the works programme (L­2) for both the works.

The Arbitrator specifically highlighted that the appellant had not

denied the L­2 programme, which indicated that both the works 9 were to be carried out together. From a reading of the above

material, the Arbitrator held that the intention of the parties was

to complete the work together, which would have enabled the

respondent to reduce its costs and optimizing its charges, thereby

allowing it to grant the 16% rebate to the appellant. By delaying

the handing over of the sites, the appellant had therefore

breached the condition for the grant of rebate, entitling the

respondent to a refund of the same.

17. The learned counsel for the appellant sought to canvas an

alternate interpretation regarding the rebate on the basis of the

letter dated 14.06.1988, stating that the same was granted

merely for the awarding of both sets of contract to the

respondent. While we are in agreement with the appellant that

such an interpretation is possible, we are of the opinion that this

is not sufficient to interfere with the award passed by the

Arbitrator. As already highlighted, the Court does not sit as an

appellate Court over the decision of an arbitrator, and cannot

substitute its views for that of the Arbitrator as long as the

Arbitrator had taken a possible view of the matter. We are of the

considered opinion that in the present case, the Arbitrator has

given clear reasoning for the possible view taken by him on the

interpretation of the contract between the parties. As such, the 10 Courts below rightly refused to interfere with the holding of the

Arbitrator on the first issue.

18. The second issue pertains to the grant of escalation charges

for work done by the respondent beyond the scheduled period of

the contract. It is significant to note herein that the Arbitrator

only allowed a part of the claim made by the respondent under

this head. In Civil Appeal No. 6483 of 2014, the Arbitrator

awarded a sum of Rs. 17,86,212/­ against a claim of Rs.

66,98,773/­, while in Civil Appeal No. 6484 of 2014, the

Arbitrator awarded a sum of Rs. 3,03,419/­ as against a claim of

Rs. 42,20,261/­. The Arbitrator took a view on the construction

of the clauses of the contract that the firm price clause operated

only with respect to the period for which the contract subsisted,

and would not subsist beyond the scheduled period of the

contract. The Arbitrator also noted that the appellant accepted

the work undertaken by the respondent beyond the period of the

contract without objections. The Arbitrator also carefully

assessed the period of delay attributable to the appellant and

awarded escalation to the respondent only for the same.

19. With respect to the question of law as to whether the

Arbitrator could order such an escalation, this Court has, in a

catena of judgments, upheld the same. A three­Judge Bench of 11 this Court in Assam State Electricity Board v. Buildworth

Private Limited, (2017) 8 SCC 146, was faced with almost

identical circumstances. In that case, the Arbitrator granted

escalation charges beyond what was permissible under the

contract between the parties, which prescribed a cap on the

same. Upholding such an award, the Court in that case held as

follows:

“13. The arbitrator has taken the view that the provision for price escalation would not bind the claimant beyond the scheduled date of completion. This view of the arbitrator is based on a construction of the provisions of the contract, the correspondence between the parties and the conduct of the Board in allowing the completion of the contract even beyond the formal extended date of 6­9­1983 up to 31­1­1986. Matters relating to the construction of a contract lie within the province of the Arbitral Tribunal. Moreover, in the present case, the view which has been adopted by the arbitrator is based on evidentiary material which was relevant to the decision. There is no error apparent on the face of the record which could have warranted the interference of the court within the parameters available under the Arbitration Act, 1940. The arbitrator has neither misconducted himself in the proceedings nor is the award otherwise invalid.”

(emphasis supplied) 12

20. We are of the opinion that the above holding of this Court is

directly applicable to the present case. The Arbitrator in the

present case has constructed the present contract, and the fixed

price clause, in the same manner. This construction was on the

basis of the evidence on record and the submissions of the

counsel before him. The Arbitrator has carefully delineated the

period of delay attributable to the appellant, and has granted the

claim of the respondent only to that limited extent.

21. The counsel for the appellant has placed on record certain

judgments of this Court, which according to him mandate a

different view. As such, it would be necessary to analyze the

same.

22. In New India Civil Erectors (P) Ltd. v. Oil & Natural Gas

Corporation, (1997) 11 SCC 75, this Court rejected the claim

for escalation of prices during the period of delay on the basis of

the specific stipulation in the contract therein, which specifically

excluded price escalation “till the completion of work”. On the

other hand, in the present case, the contractual clause stipulates

only that the price would be firm during the “period of execution

of the contract”, which the Arbitrator took to refer only to the 12

month period originally stipulated for the execution of the

contract. This may appear to be a technical distinction, but it 13 must be remembered that construction of a contract is in the

domain of the Arbitrator, and as long as the interpretation given

is a possible view, the Court may not interfere with the same. In

the New India Civil Erectors case (supra), this Court was of the

opinion that, in view of the specific clause of the contract in that

case, the granting of escalation prices was not a possible view.

This is not the case in the present matter. As we have already

held above, we are of the opinion that in the facts and

circumstances of the present case, the view taken by the

Arbitrator was a possible one, and cannot therefore be interfered

with by the Courts.

23. In State of Orissa v. Sudhakar Das (Dead) by Lrs, (2000)

3 SCC 27, this Court was not seized of the issue of grant of

escalation charges beyond the period of the contract or with

respect to delay. As such, it has limited applicability to the

present case.

24. In General Manager, Northern Railway v. Sarvesh

Chopra, (2002) 4 SCC 45, the Court was seized of a matter

pertaining to a reference to arbitration. The considerations of a

Court in such a matter are distinct from those of a Court in

appeal over the final award of an Arbitrator. Be that as it may, in 14 that case, a contractual clause between the parties specifically

excluded any claims of the contractor arising out of delays

attributable to the opposite party, which is not the case in the

present matter.

25. It is clear from the above analysis that any decision

regarding the issue of whether an arbitrator can award a

particular claim or not, will revolve on the construction of the

contract in that case, the evidence placed before the arbitrator

and other facts and circumstances of the case. No general

principle can be evolved as to whether some claim can be granted

or not. The judgments placed on record by the appellant, wherein

claim for escalation was denied, have to therefore be read in the

context of their facts, and cannot be read in isolation. It is clear

that all the judgments cited by the appellant can be distinguished

on facts.

26. In these circumstances, we are of the opinion that the

appellant has neither been able to point out any error apparent

on the face of the record, nor otherwise made out a case for

interference with the award by the Arbitrator with respect to this

issue.

27. With respect to the final issue, pertaining to imposition of

costs on the appellant by the forums below, we are not inclined to 15 interfere with the same, in view of the fact that the counsel for

the appellant has not pressed the same and looking to the

quantum involved.

28. In view of the above, we see no reason to interfere with the

impugned judgment passed by the High Court.

29. Accordingly, the Civil Appeals filed by the appellant are

dismissed. The appellant is directed to pay the pending amounts

to the respondent within a period of 6 months from the date of

this judgment.

30. Pending applications, if any, are accordingly disposed of.

............................J. (N. V. RAMANA)

…..........................J. (SURYA KANT)

............................J. (ANIRUDDHA BOSE)

NEW DELHI;

MARCH 04, 2021.