Oil and Natural Gas Corporation Ltd. vs Newton Engineering and Chemicals Ltd.

J-CARBP 648.2021.doc

Kavita S.J.

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION

COMMERCIAL ARBITRATION PETITION NO.648 OF 2021

Oil and Natural Gas Corporation Ltd., ...Petitioner Versus Newton Engineering and Chemicals Ltd., ...Respondent ---------- Mr. Vishal Kanade a/w Mr. Virendra Pereira, Mr. Anagh Pradhan, Ms. Aneesha Munshi, Mr. Anand Iyer, M.s Niyati Dasondi and Ms. Palak Jain i/b Divya Shah Associates for the Petitioner. Mr. Mayur Khandeparkar a/w Mr. Bernando Reis i/b Dr. Prem S. Motiramani for the Respondent. ----------

CORAM : R.I. CHAGLA, J.

RESERVED ON : 22nd APRIL, 2025.

PRONOUNCED ON : 17th OCTOBER, 2025.

JUDGMENT :

1. By this Commercial Arbitration Petition, the Petitioner

has impugned the Award dated 26th August, 2021 passed by the

Arbitral Tribunal. By the impugned Award the Arbitral Tribunal has

KAVITA directed the Petitioner to pay an aggregate amount of SUSHIL JADHAV Digitally signed Rs.27,43,69,720/- alongwith interest @ 12% per annum as well as by KAVITA SUSHIL JADHAV Date: 2025.10.17 17:16:35 +0530 costs as mentioned in the impugned Award.

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2. It is pertinent to note that by an Order dated 17 th April

2023, the present commercial Arbitration Petition had been admitted

by this Court and execution of the impugned Award was stayed

subject to deposit of the said amount. The Petitioner has deposited

an amount of Rs.41,12,17,356/- with the learned Prothonotary and

Senior Master of this Court on 25th May 2023, within the time

stipulated by the said order.

3. A brief background of facts is necessary and which are as

under:

(i) A Tender was floated for Modernization of

the Effluent Treatment Plant ("ETP") at Uran Plant of

Petitioner. The scope of work, which the successful

bidder was required to inter-alia carry out included :

i. Process design, basic engineering, detailed

engineering, manufacture, fabrication, supply,

total procurement of all the Items including

construction materials as defined in the special

condition of the bid;

ii. demolition of existing surge pond and other

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units;

iii. revamp of existing units as indicated in the

bid;

iv. construction, erection, and installation, air-

conditioning, ventilation, testing, painting, lining,

insulation, commissioning and guaranteeing the

entire modernization of ETP on turnkey basis to

meet the treated effluent quality;

v. remove debris and sludge from the surge

pond.

(ii) A Pre-Bid Meeting was held on 10th January,

2014. Clarification was issued by the Petitioner that M/s

Mumbai Waste Management Limited ("MWML") Taloja

was the approved party for sludge disposal and bidders

may fix a Contract with them.

(iii) On 6th May 2014, an Agreement and

Memorandum of Understanding ("MoU") was executed

between the Respondent and M/s UEM India Pvt. Ltd.

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("UEM"). As per Technical Collaboration Agreement

between the Respondent and UEM, UEM was primarily

responsible for basic design and engineering, detailed

engineering, technical collaboration assistance / services,

critical equipment supplies and expert supervision.

(iv) The Bid of the Respondent was submitted on

7th July, 2014. The Respondent's bid qualified for

consideration. It is the Petitioner's claim that this was

only because UEM was the Respondent's technical

collaborator for execution of the project. The bid of the

Respondent was accordingly reviewed considering the

fact that UEM was meeting the criteria given in the

tender document.

(v) A Letter of Award ("LOA") was issued by

Petitioner to Respondent. The Petitioner claims that

based on the submission of technical collaboration

agreement with UEM, the Respondent's Bid was

technically accepted and the Respondent was awarded

the Contract.

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(vi) Pursuant to the Respondent having been

awarded the Contract, a letter dated 1 st August, 2015

was addressed by the Respondent to Midland Oil

Corporation Limited ("MOCL") accepting their offer for

disposal of sludge from Surge Pond B @ Rs. 4000 per MT

- Sludge in Surge Pond A which was to be released only

after Pond B equipment's were erected and

commissioned and which may be commissioned after 8

months after Pond B is cleaned and handed over.

(vii) The Respondent for the first time on 29 th

February, 2016 informed the Petitioner about the

Contract with MOCL for recycling and safe disposal of

sludge from surge pond B.

(viii) The Petitioner by letter dated 3rd March

2016, brought to the notice of the Respondent that in

respect of sludge removal it was clarified in the pre-bid

reply that "M/s. MWML, Taloja" was the only agency

through whom the sludge could be disposed of in view of

the MPCB consent granted to the Petitioner.

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(ix) The Petitioner by Letter dated 23 rd March

2016, informed the Respondent that MWML Taloja was

approved by CPCB / MPCB for handling/disposal of

sludge and the bidder was to fix Contract and disposal of

sludge through that agency. It was mentioned that MOCL

was not the authorized agency to dispose of sludge and

that the consent available with MOCL was for waste oil

and not sludge.

(x) On 29th March 2016, a detailed Contract

Agreement was executed between the Petitioner and the

Respondent.

(xi) A Letter dated 16th April, 2016 was

addressed by the Respondent to the Petitioner pointing

out that they were not bound to send the sludge to

MWML - Taloja and that the pre-bid queries only

suggested that they may approach them. It was pointed

out that since sludge analysis was pending processing

from MPCB Laboratory, the Respondent cannot proceed

further and hence, delay for sludge disposal as recorded

in Weekly Review Meetings (WRMs) was not due to

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Respondent.

(xii) A letter dated 21st April, 2016 was addressed

by the Respondent to the Petitioner once again pointing

out that sludge in Surge Pond could be processed by

MPCB Authorized Reprocessor and the remaining sludge

would be disposed off by incineration facility at any

MPCB approved agency and requested for permission for

the same.

(xiii) The Petitioner recorded by Letter dated 11 th

July, 2016 that the Management Review Meeting to be

held on 8th July, 2016 was constrained to be rescheduled

since the Respondent's MD did not attend the meeting.

The meeting was of grave importance since the

important issues of sludge disposal and project progress

were to be discussed.

(xiv) The MPCB on 7th September, 2016 directed

the Petitioner to carry out sludge testing and accordingly,

the Laboratory Report of Sludge Analysis was submitted

by MWML, Taloja. The report established that almost

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30% of the contents of surge pond B consisted of hydro

carbons i.e. crude oil and not waste oil.

(xv) A letter was addressed by the Petitioner on

9th November, 2016 to the Respondent that since the

progress of the Respondent's execution of the subject

Contract project was only 0.71% as against the

scheduled target of 26.20% as on 9 th November 2016, it

was abnormally low.

(xvi) The Petitioner once again by a letter dated

29th December, 2016 recorded that the progress of the

project was only 0.72% against the schedule of 33.99%

as on the date of the letter, which was abnormally low.

(xvii) The Petitioner by a letter dated 13th

February, 2016 recorded that the progress achieved by

the Respondent upto 13th February, 2017 was highly

unsatisfactorily to the extent of only 1.62% as against

the scheduled progress of 59.42%.

(xviii) The Respondent through its letter dated 11 th

March, 2017 stated that there were commercial issues

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between the Respondent and UEM which were

unresolved inspite of meetings held between UEM and

the Respondent.

(xix) The Petitioner by a letter dated 15 th March,

2017 recorded that the project progress was only 1.8%

against the schedule of 68.15%.

(xx) The Petitioner by a letter dated 31st March,

2017 recorded that the progress of the project is 2.01%

against the schedule of 68.70% which was highly

unsatisfactory and the Respondent was called upon to

improve the performance forthwith.

(xxi) The Respondent by its letter dated 13th April,

2017 informed the Petitioner that the Project has slowed

down because of the Sludge disposal issue.

(xxii) The Respondent by a letter dated 8 th May,

2017 informed the Petitioner about its progress with

UEM. The Respondent accepted that there were agreed

terms between them and UEM. The Respondent further

admitted that there was delay in the start of the Project

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as the issue pertaining to sludge was resolved only in

November, 2016.

(xxiii) The Petitioner issued Notice of Termination

dated 9th May, 2017 to the Respondent, notifying the

Respondent to complete the minimum actions on design

and engineering, procurement and construction activities

within period of 30 days of the notice, as particularly set

out therein.

(xxiv) A detailed letter dated 29th May, 2017 was

addressed by the Respondent to the Petitioner pointing

out all the difficulties faced by the Respondent in the

execution of the Contract and the work done by them

together with various documents annexed. The

Respondent reiterated that the delay in execution of

the project was due to the sludge issue. Due to delay in

project the Respondent had invested huge sums in the

project from its own pocket due to which the Respondent

ran out of funds and couldn't pay their technology back

up partners. The Respondent had paid more than 80

lakhs to UEM even though they had not been paid by the

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Petitioner. UEM was the technical collaborator but any

Contractual liability would be on the Respondent. It was

further informed to the Petitioner by the said letter that

the commercial dispute with UEM had been resolved.

(xxv) The Respondent addressed a Reply dated 3rd

June, 2017 to the Termination Notice of the Petitioner,

wherein it was claimed that the Respondent has

submitted large number of engineering documents to the

Petitioner. The Respondent also informed the Petitioner

that some documents were simultaneously also pending

for review with UEM.

(xxvi) A Confirmation Letter of Termination dated

15th June, 2017 was addressed by the Petitioner to the

Respondent confirming termination by the Petitioner to

the Respondent, wherein it is inter alia stated that the

Respondent failed to take any steps to complete the

activities that it was called upon to perform in the

Termination Notice.

(xxvii) The Respondent by their letter dated 16th

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June, 2017 replied to the Petitioner's Letter of

Confirmation dated 15th June 2017, which terminated

the Contract.

(xxviii) The Respondent issued a Notice invoking

arbitration under the subject Contract on 27th June,

2017.

(xxix) The Respondent filed Arbitration Petition (L)

No.289 of 2017 under Section 9 of the Arbitration and

Conciliation Act, 1996 ("Arbitration Act") inter alia

seeking injunction on invocation of the Performance

Bank Guarantees. It is pertinent to note that no

injunction was granted by this Court restraining the

Petitioner from invoking the Bank Guarantees.

(xxx) The Petitioner invoked the Bank Guarantees

on 23rd June, 2017.

(xxxi) The Arbitral Tribunal passed the impugned

Award on 26th August, 2021 after hearing the parties.

The Arbitral Tribunal arrived at the conclusion that the

Petitioner had wrongfully terminated the subject

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Contract on the reasons mentioned therein.

(xxxii) Being aggrieved by the impugned award, the

Petitioner filed the present Commercial Arbitration

Petition on 23rd November, 2021 inter alia seeking to

quash and set aside the impugned Award. An Interim

Application No.3169 of 2021 was also filed for stay of

execution and implementation of the impugned Award.

(xxxiii) This Court vide its Order dated 17 th April,

2023 admitted the present Commercial Arbitration

Petition and granted stay of the impugned Award upon

the Petitioner depositing the amounts under the Award

with the learned Prothonotary & Senior Master of this

Court.

(xxxiv) As per the direction in the Order dated 17 th

April, 2023, the Petitioner deposited a sum of

Rs.41,12,17,356/- in this Court on 25 th May, 2023. By

virtue of this deposit, the impugned Award has been

stayed.

4. Mr. Vishal Kanade, the learned Counsel appearing for the

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Petitioner has submitted that the Arbitral Tribunal had framed 34

issues for determination of the claim of the Respondent/Claimant

therein and the Counter Claim of the Petitioner/Respondent therein.

The Arbitral Tribunal awarded the monetary claim of the Claimant on

issue Nos.10, 15, 16 & 17. The monetary claims have been allowed

on the basis that the Petitioner failed to perform his Contractual

obligations arising under the subject Contract 11th May, 2015 singed

on 29th March, 2016 and that the Petitioner had breached the terms

thereof because of which the Petitioner's termination has been held

to be wrongful. This is covered by issue Nos.1, 2, 6, & 9.

5. Mr. Kanade has submitted that the Petitioner had

terminated the said Contract on the grounds mentioned in the

termination notice. The said Contract entered into between the

parties i.e. the Petitioner and the Respondent primarily contemplated

the Respondent to construct, erect and install the modernized

effluent treatment plant and provide facilities in connection

therewith. The Respondent was required to complete the works

within a period of 32 months from the date of issuance of the Letter

of Award (LoA) which was issued on 11th May, 2015 and the

expected date of completion thus was 10th January, 2018.

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6. Mr. Kanade has submitted that the Respondent was

responsible for inordinate delay in the completion of its Contractual

obligations leading to the delay in the project. The Respondent had

appointed one UEM as its technical collaborator and submitted the

MoU with UEM to the Petitioner. As per the technical collaboration

agreement UEM was responsible for basic design and detailed

engineering, technical collaboration assistance, services, critical

equipment supplies and expert supervision.

7. Mr. Kanade has submitted that in view of the delays on

the part of the Respondent, on 9th May 2017 the Petitioner issued

termination notice to complete minimum action on design and

engineering within 30 days. The reason for termination by the

Petitioner was on account of unsatisfactory performance of the

Respondent for which remedy period of 30 days was provided under

Clause 12.4 of the said Contract. During this period the Respondent

was required to complete essentially six items.

8. Mr. Kanade has referred to the correspondence

addressed by the Respondent which was without submitting any

catch-up plan duly endorsed by UEM to arrest the delay.

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9. Mr. Kanade has submitted that the Arbitral Tribunal had

found that the Respondent has no technical expertise for this project

(Paragraph 107 of the impugned Award). Further, the Arbitral

Tribunal held that but for participation of UEM, the Respondent

could not have been awarded this tender (Paragraph 111 of the

impugned Award). The Arbitral Tribunal further found that

although signatures of UEM on the basic plans and engineering

designs were not required but the fact remained that the Respondent

had to satisfy the Petitioner that UEM was involved and had

approved what was submitted (Paragraph 124 of the impugned

Award).

10. Mr. Kanade has submitted that inspite of rendering the

aforesaid findings, the Arbitral Tribunal gave a contradictory finding

that although approval of UEM was not provided, the said Contract

could not be terminated (Paragraph 163, 181 and 192 of the

impugned Award).

11. Mr. Kanade has submitted that the Arbitral Tribunal has

erred in equating the milestone payment for drawings at 5% as the

basis of importance of submission of approved drawings without

which construction could not have proceeded. He has submitted that

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the value of preparation of plans cannot be conflated to the

importance of approved plans, since it is only after plans for ETP

were approved, could further work be carried out under the said

Contract.

12. Mr. Kanade has submitted that once the Tribunal held in

Paragraph 124 of the impugned Award that the Respondent had to

satisfy the Petitioner herein that UEM was involved and had

approved the plans that were submitted, it was for the Respondent to

show that the said plans were approved by UEM. He has submitted

that there is no such evidence on record. Despite rendering this

finding, the Arbitral Tribunal in further portion of the said award has

held that the said Contract does not provide for any involvement of

UEM. He has submitted that the contradictory findings make the

impugned Award perverse.

13. Mr. Kanade has submitted that there was no effective

response to this argument of the Petitioner on the aforementioned

issue. The findings on termination not being valid are ex facie

erroneous necessitating interference under Section 34 of the

Arbitration Act.

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14. Mr. Kanade has submitted that the Arbitral Tribunal has

awarded monetary claims of the Respondent by deciding Issue No.

10, 15, 16 and 17 in its favour. He has submitted that the

Respondent had sought the claim of work done not paid for inter alia

the expenses incurred towards the purchase orders, sludge removal

and shifting from Pond B to the excavated area, amounts paid to

UEM and M/s. RPS (Engineering Consultant) and other work orders.

In support of this claim, the Respondent had produced the Work

Order/Purchase Orders, Invoices and Bank Statements in the

Statement of Claim. The Petitioner had explicitly denied the

contentions of the Respondent in the Statement of Defence and inter

alia denied that the Respondent was entitled to any amounts under

the head of work done not paid.

15. Mr. Kanade has submitted that the documents submitted

by the Respondent having not been admitted by the Petitioner and

denied on the ground that they were photocopies and some

documents were not offered for inspection has not been considered

by the Arbitral Tribunal.

16. Mr. Kanade has submitted that the Petitioner has pleaded

that the Statements of Expenses have not been proved by the

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Respondent's witness and this further explicated the discrepancy in

the purchase orders and bank statements produced by the

Respondent. He has referred to the discrepancies in the documents

relied upon by the Respondent. His submission is that the Statement

of Expenses are not certified by the bank and is a mere print out and

there are further discrepancies in the statement. He has submitted

that there are no invoices which backed the Statement of Expenses

and thus, no proof of payment.

17. Mr. Kanade has submitted that the work orders were not

offered for inspection. Further, it does not contain acceptance by the

Vendor. Hence, no evidence was led by Respondent to corroborate

the same.

18. Mr. Kanade has submitted that the Arbitral Tribunal has

awarded the claim of 'work done not paid' only on the basis of the

statement made by the Respondent that it had made payments to

various third parties, and in the absence of any supporting evidence.

The Respondent had merely made bold assertions without any

reasoning to support it, i.e., a bare ipse dixit.

19. Mr. Kanade has submitted that the Arbitral Tribunal has

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rejected the Counter Claim of the Petitioner without furnishing

reasons. On the contrary, the Arbitral Tribunal has erroneously

observed that in the absence of any Counter-claim, the Respondent

must be paid for work done / payments made, whether the Contract

was terminated or not.

20. Mr. Kanade has submitted that the Respondent has

claimed profit of 15% on the amount of work withdrawn on account

of the alleged wrongful and illegal termination. However, the

Respondent failed to substantiate with proof that such a loss or

damage has actually been incurred. The Respondent was never

prevented from performing its part of the Contract. The figure of

15% is arbitrary and unsubstantiated.

21. Mr. Kanade has submitted that the Arbitral Tribunal has

erroneously awarded the claim for loss of profit on the basis that the

termination of the said Contract was allegedly wrongful. He has

submitted that in the event the Court interferes with the findings on

termination, this issue of loss of profit would have to be answered in

the negative.

22. Mr. Kanade has submitted that the Arbitral Tribunal has

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erroneously awarded Rs.14,93,79,332/- for loss of profit only on the

basis of the contentions made by the Respondent without any

evidentiary proof thereof. Thus, such a claim could not have been

awarded in the first place.

23. Mr. Kanade has submitted that the Petitioner has been

directed to refund the performance bank guarantee only on the

premise that the termination was invalid and Issue No. 9 being

decided in favour of the Respondent. He has submitted that if the

findings on Issue No. 9 i.e. the 'Issue on Termination' is found to be

erroneous warranting interference under Section 34 of the

Arbitration Act, the encashment of the performance bank guarantee

cannot be faulted with.

24. Mr. Kanade has submitted that the Arbitral Tribunal has

awarded interest of 12%. He has submitted that this is contrary to

Clause 28.1(6) of the said Contract, wherein the parties have agreed

that any claim for such interest made by any party shall be void. He

has submitted that in view of this Contractual stipulation, the Arbitral

Tribunal could not have awarded pendent lite interest on the claim

granted under this issue.

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25. Mr. Kanade has submitted that the sludge cannot be

equated to scrap. He has referred to the said Contract as well as the

pre bid meeting held on 10th January, 2014. At the meeting the

bidders which included the Respondent also consciously addressed

separate queries on the method of disposal of sludge and scrap. He

has submitted that the bidders including the Respondent were aware

that sludge did not form part of the scrap generated from the

dismantling activities under the said Contract. The Petitioner had

satisfactorily answered the queries raised by different bidders clearly

differentiating sludge from scrap and clarifying the method in which

they had to be independently disposed. He has submitted that the

clarifications provided by the Petitioner during the pre-bid meeting

are to be read with and forms part of the said Contract.

26. Mr. Kanade has submitted that even in the terms of the

Contract, more particularly Clause 1.11 of the Scope of Work it was

postulated for a strict adherence to the statutory requirements and

approvals and specifically connoted the term 'disposal' as the method

of dealing with and removing sludge from the existing facilities

contemplated. He has relied upon Clause 6.8 of General Conditions

of Contract in support of his submission that even assuming that the

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Respondent herein was permitted to treat the sludge as its

entitlement and dispose of the same in any manner it chooses, in

view of inconsistency between discretion of the parties, the

instruction of the Petitioner would prevail and the Respondent would

be bound to implement the Contract in the manner as called upon by

the Petitioner.

27. Mr. Kanade has submitted that the Arbitral Tribunal

erred in not appreciating the test reports placed on record. The

Arbitral Tribunal failed to notice that the reason for re-processing of

the sludge content was a result of the 3 rd Test Report, which was

conclusive in relation to presence of hydrocarbons. He has submitted

that it was in that context that the Petitioner re-processed the sludge

from surge pond B.

28. Mr. Kanade has submitted that the Petitioner's re-

processing sludge from surge pond B has been disregarded by the

Arbitral Tribunal.

29. Mr. Kanade has submitted that the Arbitral Tribunal has

failed and erred in awarding the Claim for loss of revenue against

sludge recycling. He has submitted that the basis of granting the

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claim is that scrap and sludge are synonymous and that amount of

Claim (Rs.4000/- per MT) is based on a single document being a

purported letter dated 10th August 2015 from the Respondent to

MOCL.

30. Mr. Kanade has submitted that the Petitioner had denied

the aforementioned document in his Statement of Defence. This

document had been relied upon by the Respondent's witness in his

evidence, however, the contents of the documents have not been

proved in evidence.

31. Mr. Kanade has submitted that the Respondent having

failed to prove its case is evident from reading of Paragraph 234 of

the said Award, inspite of which the Tribunal relied upon the

approximate sludge quantity of 4459 MT, suo moto and without any

basis increased this quantity to 5000 MT. He has submitted that there

was no basis for this supposition and conjecture. He has submitted

that even the rate mentioned of Rs. 4,000/- was not proved in as

much as this is a quotation and not a final Contract. He has

submitted that accordingly, the Arbitral Tribunal has arrived at

findings which are not supported by evidence and / or has not dealt

with objections of the Petitioner to the admissibility and reliance on

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this document while granting the claim.

32. Mr. Kanade has accordingly submitted that the impugned

Award be set aside as the impunged Award has been challenged

within the scope and confines of Section 34 of the Arbitration Act on

the ground that the impugned Award is patently illegal and perverse.

33. Mr. Kanade has in support of his submission that the

impugned Award is vitiated on account of patent illegality and

findings rendered in the impugned Award are merely based on the

Respondent's herein contentions without dealing with the Petitioner's

evidence is against the public policy of India has relied upon the

Judgment of the Supreme Court in Ssangyong Engineering

Construction Ltd. v. NHAI1 at Pargraphs 34 to 36 (Award being

against public policy) and Paragraph 37 onwards (Setting out the

grounds of patent illegality); Delhi Metro Railway Corporation Pvt.

Ltd. v. Delhi Airport Metro Express Pvt. Ltd. 2 at Paragraph 29

onwards & Associate Builders v Delhi Development Authority 3 at

Paragraph 27 onwards.

1 [(2019) 15 SCC 131] 2 [(2024) 6 SCC 357] 3[(2015) 3 SCC 49]

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34. Mr. Kanade has submitted that there is no proof of loss of

profit adduced by the Respondent in support of its claim and the

amount awarded is merely predicated on there being breach on

behalf of the Petitioner. In support of his submission on this issue, he

has relied upon the ratio laid down in the Judgments requiring the

party claiming damages (including by way of loss of profit) to

establish proof of the damages suffered upon established procedure

and principles. These Judgments are as under:

(i) Bharat Coking Coal v LK Ahuja [(2004) 5 SCC

109] at Paragraph 24.

(ii) State of Rajasthan and Another Versus Ferro

Concrete Construction Private Limited [(2009) 12 SCC

1] at Paragraph 24 read with Paragraphs 52 to 55.

(iii) Essar Procurement Services Ltd. v. Paramount

constructions (2016 SCC OnLine Bom 9697) at

Paragraphs 101 to 113.

35. Mr. Kanade has submitted that the Arbitral Tribunal has

erred in awarding the claim for pendent lite interest, particularly in

view of the Contractual bar contained in the said Contract between

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the parties. He has in support of this submission relied upon Union

of India v Manraj Enterprises4 at Paragraphs 23 to 36 & IOCL v.

Shree Ganesh Petroleum Ltd.5 at Paragraphs 15 and 44.

36. Mr. Kanade has distinguished the Judgments cited on

behalf of the Respondent as being inapplicable to the present case.

He has submitted that the impugned Award be set aside as it has

been challenged within the scope and confines of Section 34 of the

Arbitration Act as being patently illegal and perverse.

37. Mr. Mayur Khandeparker, the learned Counsel appearing

for the Respondent has submitted that the Arbitral Tribunal has

arrived at findings with regard to the rival issues as to Performance of

the Work and which are in Paragraphs 195 to 226 of the impugned

Award.

38. He has submitted that disposal of the sludge was the

prime activity without which the work could not be progressed. It is

an expressed finding of the Arbitral Tribunal that the Petitioners

wrongly insisted on the Respondent for disposing the sludge through

incineration right from start of work. This is despite 3 Test Reports

4 (2021 SCC OnLine SC 1081) 5(2022 SCC OnLine SC 131)

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on the record which clearly established that the sludge was to be

recycled. He has referred to the three Reports which have been

relied upon by the Arbitral Tribunal viz. Geo Chem Report dated 31st

December, 2015; MPCB Report dated 17 th May, 2016 & MWML

Report dated 07th September, 2016.

39. Mr. Khandeparkar has submitted that there were further

activities as per the Planning Package which could not be achieved as

the prime activity of disposal of sludge was still not completed due to

the Petitioner's insistence in not allowing the Respondent to dispose

sludge through recycling. Hence, the delay in progress though

negligible, was purely on the Petitioner's Account.

40. Mr. Khandeparkar has submitted that finally after 18

Months on 29th November, 2016 the Petitioner gave permission and

allowed the Respondent to shift the sludge inside the Plant in nearby

area of Pond-B. Due to the bulk quantity of sludge of 7500 MT the

Respondent consumed a period of 3.5 Months to shift the Sludge.

The shifting was completed by March, 2017. It was only then that the

Respondent could place orders for Equipment and submitted 143

Nos. of Drawings against Requirement of 129 Drawings as per

Planning Package.

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41. Mr. Khandeparkar has submitted that the Petitioners by

their Show Cause Notice dated 9th May, 2017 called upon the

Respondent to show progress as per the Original Planning Package

without considering the delay of 18 Months committed by the

Petitioner in giving their decisions for disposal of the sludge.

42. Mr. Khandeparkar has submitted that the Respondent has

in its correspondence shown its bonafides by placing orders of

Equipment's, submitting Drawings with respect to progress of the

work and requested the Petitioner not to compare the progress

achievable as per the Planning Package. This due to the sludge

having to be removed 18 months back but it was on the Petitioner's

wrong insistence and wrong decision that the entire said period of 18

Months was wasted. He has submitted that the progress has to be

calculated by giving effect of sludge removal from November, 2016

instead of May, 2015.

43. Mr. Khandeparkar has submitted that the Petitioner

terminated the Contract on 15 th June, 2017 without dealing with any

of the issues raised by the Respondent and without considering the

aforementioned correspondence of the Respondent.

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44. Mr. Khandeparkar has referred to the findings of the

Arbitral Tribunal at Paragraphs 223 & 224 of the impugned Award

wherein there is a categorical finding that the Respondent had

achieved a progress of 2.01% which as per the statistics in Planning

Package only 1.62% could have been achieved without removal of

sludge. Hence, the Respondent had achieved more than what was

required.

45. Mr. Khandeparkar has submitted that the Arbitral

Tribunal has awarded an amount of Rs. 1.06 Crores only for which

the Respondent had submitted the Invoices & Work Orders of UEM,

the Engineering Consultant and Vendors. The Respondent had also

submitted the Bank Statements in support thereof. He has submitted

that it is not the case of the Petitioner that the payments made to

Vendors were pertaining to another Contract. The Bank Statements

clearly establish that the payment of Rs. 1,06,91,238.00 was made by

the Respondent to UEM, the Engineering Consultant and Vendors

under the said Contract. The evidence of Respondent Witness was left

uncontroverted as no questions were asked by the Petitioner in that

regard. Accordingly, the awarded sum of Rs.1,06,91,238.00 was

justified.

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46. Mr. Khandeparkar has submitted that reliance has been

placed by the Petitioner on the Pre-Bid Meeting on the queries of the

Bidders wherein the Petitioner had recorded that "MWML, Taloja an

approved Party from CPCB / MPCB for handling / disposal. Bidder

may fix Contract and dispose sludge". He has submitted that this was

not an explicit condition but merely a suggestion on the part of the

Petitioner.

47. Mr. Khandeparkar has submitted that it was the case of

the Respondent that the Respondent had shifted 7500 MT of sludge

in the area nearby to Pond-B inside the Plant allotted by the

Petitioner. However, the said quantity was not awarded by the

Tribunal against which the Tribunal awarded 5000 MT of sludge

revenue to the Respondent. He has submitted that the impugned

Award for quantity of 5000 MT was based on various documents on

the record. The dimension of the Pond- B where sludge was lying

was answered in pre-bid query by the Petitioners. Further, during

cross-examination of RW-1, in Q.138, the witness has answered that

the dimensions of the Pond were l00 meters x 35 meters; hence, the

Quantity of Sludge can be worked out as 100 x 35 x 2.00 Depth =

7000 cum which translates to 7000 MT; the Petitioner's Suggestion to

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the Respondent Witness CW-1 during cross examination was that the

maximum capacity of the surge pond B is 7500 MT. CW-1 had

confirmed that the Sludge of 7500 MT was shifted from one Pond to

the other; it was the case of Petitioner that the sludge lying in the

Pond was 7500 MT; Respondent's CW- 1 Evidence at Paragraph 31

has pleaded his case for Quantity of 7500 MT.

48. Mr. Khandeparkar has submitted that the impugned

Award for quantity of 5000 MT is substantiated based on the

documents produced. He has referred to the MPCB Letter dated 23 rd

January 2013 which gave Consent to the Petitioner to operate for

5000 MT of oil sludge from the storage tank in Ponds under Sr. No.

3.3 of Schedule I of the HW Rules 2008 which provides for disposal

through CHWTSDF for incineration / bioremediation / MPCB

authorized reprocessor. Further, the Petitioner's Witness RW-1 in

answer to Question 67 admitted that the 2014 consent to operate

does not apply to the 5000MT of sludge which was lying in the surge

ponds since the same was covered only by the earlier 2013 Consent

to Operate. Hence RW-1 had admitted the quantity of 5000 MT lying

in Surge Pond. Finally, Petitioner floated the Tender on 14 th March,

2017 for recycling of the said sludge and mentioned Estimate

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Quantity as 4459 MT of sludge. He has submitted that there was

sufficient evidence to support at least minimum quantity of 5000 MT

of sludge lying.

49. Mr. Khandeparkar has submitted that the Arbitral

Tribunal had considered and allowed the quantity of 5000 MT of

sludge revenue to the Respondent. The Petitioner has not dealt with

the aforementioned documents in Rejoinder.

50. Mr. Khandeparkar has submitted that the objection to the

rate of sludge of Rs.4000 Per MT is misplaced. There is sufficient

material to justify the said rate considered by the Arbitral Tribunal.

He has referred to the Order dated 01st August, 2015 placed on

MOCL @ Rs.4000/ Per MT by the Respondent for disposal of sludge.

The MOCL had attended and participated in the process of Sample

Testing of the Sludge inside the Uran Plant. Further, MOCL was an

Approved Agency for recycling, approved by MPCB & CPCB. He has

also relied upon the DAR and Final Audit Report wherein it was

recognised by the Petitioner's Audit Team that for recycling of sludge,

the rate prevailing prior to the year 2000 was Rs.1600/-

51. Mr. Khandeparkar has submitted that the Respondent's

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CW-1 Evidence at Paragraph 31 has pleaded its case and claimed the

Rate of Rs.4000/- Per MT for the said quantity of sludge. This

evidence was left uncontroverted as no questions were asked by the

Petitioner in that regard. He has submitted that after a period of 17

years, it cannot be said that the rate of Rs.4,000/- is inflated and / or

exaggerated. He has submitted that the Tribunal based on the

aforementioned documents granted Award for the quantity of 5000

MT to be paid @ Rs.4000/- MT amounting to Rs.2.00 Crores to the

Respondent and hence, the impugned Award insofar as this claim is

concerned is justified.

52. Mr. Khandeparkar has then referred to the findings of the

Arbitral Tribunal on the claim of loss of profit, in particular

Paragraphs 195 to 226 of the impugned Award. The Arbitral

Tribunal has rendered detailed justification with elaborate findings

that termination of the Contract was declared as illegal and

wrongful. Hence, the claim for Loss of Profit was justified.

53. Mr. Khandeparkar has submitted that the Petitioner's

contentions that the Respondent was never prevented from

performing its part of Contract is a mere Statement without any

supportive document.

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54. Mr. Khandeparkar has submitted that the Respondent

never lacked in achieving the progress and that the termination of

the Contract was wrongful & unjustified. He has reiterated his

submissions with regard to the sludge being recyclable and within

the Respondent's Scope. The Respondent has relied on various

documents to substantiate that the Respondent was very well

prevented from progressing the work and the Petitioners action of

terminating the Contract for short progress was highly erroneous

since the Petitioner itself had delayed the work and hence could not

have expected / sought the progress from the Respondent achievable

as per planning package more specifically by giving decision of

sludge on 29th November, 2016 which otherwise was to be given in

May, 2016.

55. Mr. Khandeparkar has placed reliace upon A. T. Brij Paul

Singh v. State of Gujarat,6 and Mohd. Salamatullah V. Govt.of A.P. 7

wherein the Supreme Court has laid down directives that the proof of

expected profit cannot be given but on the grounds of wrongful

termination and upon which the Loss of Profit claim will follow @

15% towards the amount of balance remaining work. He has

6 (1984) 4 SCC 59) 7(1977) 3 SCC 590)

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submtited that it is the Respondent's case that in the said Contract

the Respondent Profit Margin was 15% on the entire Contract sum

i.e. Rs.111,04,76,499/-.

56. Mr. Khandeparkar has submitted that the balance work

remained to be executed was Rs.99,58,62,217/- after deducting the

total work claimed to be done i.e. Rs. 11,46,14,282/- Hence, 15% on

said balance remaining work of Rs.99,58,62,217/- comes to Rs.

14,93,79,332/-.

57. Mr. Khandeparkar has submitted that the Respondents

through CW-1 Affidavit of Evidence has claimed 15% on the

aforementioned balance remaining work which comes to

Rs.14,93,79,332/-.

58. Mr. Khandeparkar has submitted that the evidence of

Respondent's witness was left uncontroverted as no questions were

asked by the Petitioner in this regard. He has submitted that the

Arbitral Tribunal in Paragraphs 248 to 252 of the impugned Award

has with sufficient justification awarded amount of

Rs.14,93,79,332/- towards Loss of Profit.

59. Mr. Khandeparkar has submitted that the Petitioners'

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contention that out of entire Contract sum of Rs.111,04,76,499/-, the

Cost of Rs.16,74,85,000/- was towards the operation & maintenance

work and hence the Loss of Profit ought not to have been granted by

the Arbitral Tribunal for the said operation & maintenance work is

misplaced. He has submitted that whereas the Respondent had a

Profit Margin of 15% on entire Contract value including for the work

of operation & maintenance of Rs.16,74,85,000/- since the said work

was to maintain the ETP Plant i.e., the subject work itself. Hence, the

Respondent had correctly claimed the Loss of Profit on the balance

remaining entire subject Contract work. He has accordingly

submitted that the finding of the Arbitral Tribunal of

Rs.14,93,79,332/- which was the claim for Loss of Profits was

justified and there is no error or discrepancy in such finding.

60. Mr. Khandeparkar has submitted that the Arbitral

Tribunal in Paragraphs 195 to 226 of the impugned Award has

rendered detail justification with elaborate findings that Termination

of the Contract was declared as illegal and wrongful. Hence, the

claim for refund of Bank Guarantee was justified. He has submitted

that the Arbitral Tribunal in Paragraph 264 of the impugned Award

allowed refund of Performance Bank Guarantee amount of

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Rs.9,42,99,150/- alongwith interest @ 12% from the date the

Petitioner received the said amount from the Bank. This is totally

justified.

61. Mr. Khandeparkar has submitted that the Supreme Court

has laid down directives that in the Award if the reasons appear to be

insufficient or inadequate but on a careful reading of the Entire

Award, coupled with Documents recited / relied therein, the

underline the reason, factual or legal, that forms the basis of the

Award is in discernible / intelligible and the same Exhibits no

perversity then the Court need not set aside the Award while

exercising the powers under Section 34 and 37 of the Act. The Court

may explain the existence of that underline the reason while dealing

with a challenge laid to the Award and in doing so, the Court does

not supplant the reasons of the Arbitral Tribunal but only explains it

for a better and a clearer understanding of the Award. He has placed

reliance upon the Judgment of the Supreme Court in OPG Power

Generation Pvt. Ltd. V/s. Enexio Power Cooling Solutions India Pvt.

Ltd. & Anr.,8 at Paragraph 148 in this context.

62. Mr. Khandeparkar has submitted that the jurisdiction of

8 2024 SCC Online SC 2600

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the Courts under Section 34 is fairly narrow and the Court may

interfere on merits on limited grounds under Section 34 of the

Arbitration Act. He has in this context placed reliace upon the

Judgment of the Supreme Court in UHL Power Co. Ltd. Vs. State of

Himachal Pradesh9.

63. Mr. Khandeparkar has further relied upon the Judgment

of the Supreme Court in Delhi Airport Metro Express Private Limited

Vs. Delhi Metro Rail Corporation Limited10 in support of his

submission that the Courts cannot re-appreciate evidence to conclude

that the impugned Award suffers from patent illegality.

64. Mr. Khandeparkar has submitted that if the conclusion of

the Arbitrator is based on a possible view of the matter, the Court

should not interfere. In this connection he has placed reliance upon

the Judgment of the Supreme Court in OPG Power Generation Pvt.

Ltd. (supra).

65. Having considered the submissions, the Arbitral Tribunal

has in the impugned Award held that the Petitioner / Respondent

therein had failed to perform its Contractual obligations under the

9 (2022) 4 SCC 116

10 (2022) 1 SCC 131

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said Contract dated 11th May, 2015 signed on 29th March, 2016.

There is a finding that the Petitioner has breached the terms of the

said Contract and because of which the Petitioner's termination has

been held to be wrongful. This is a finding in relation to Issue Nos.1,

2, 6, & 9. It is by virtue of this finding that the Arbitral Tribunal has

awarded the monetary claim of the Respondent / Claimant therein

under Issue Nos.10, 15, 16 & 17.

66. The Petitioner has contended that the Arbitral Tribunal

has erroneously held that the Petitioner has wrongfully terminated

the Contract. It is their contention that the delay in performance of

the said Contract i.e. delay in issuance of the basic plans and

engineering design / drawings had resulted in the Termination Notice

to complete minimal action on design and engineering within 30

days thereof. There is reliance upon the period within which the

Respondent was to complete the works under the said Contract i.e. to

construct, erect, install the modernized Effluent Treatment Plant and

provide facilities for air-conditioning, ventilation, testing, painting,

lining, insulation, commissioning and guaranteeing the entire

modernization of ETP. These contentions are in my view misplaced

and are contrary to the plain reading of the said Contract as well as

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the documents on record / evidence which was before the Arbitral

Tribunal and appreciated by them.

67. The Petitioner has called upon this Court exercising

jurisdiction under Section 34 of the Arbitration Act to re-appreciate

the evidence as well as arrived at an interpretation of the terms of

the Contract contrary to that arrived at by the Arbitral Tribunal and

particularly when the conclusion of the Arbitral Tribunal is a possible

view. It has been held by the Supreme Court in Delhi Airport Metro

Express Pvt. Ltd. (Supra) that Courts exercising jurisdiction under

Section 34 of the Arbitration Act cannot re-appreciate evidence to

conclude that the Award suffers from patent illegality. Further, the

Supreme Court in OPG Power Generation Pvt. Ltd. (Supra) has held

that if the conclusion of the Arbitrator is based on a possible view of

the matter, the Court under Section 34 of the Arbitration Act should

not interfere. The grounds raised by the Petitioner are directly hit by

the aforementioned Judgments of the Supreme Court as these are

considered to be not valid grounds to be raised under Section 34 of

the Arbitration Act.

68. The contention of the Petitioner that the Arbitral

Tribunal erred in equating the mile stone payment for drawings at

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5% as the basis of importance of submission of the approved

drawings without which construction could not have proceeded is

misconceived. The Arbitral Tribunal has in construing the Contract

held that the disposal of the sludge was a prime activity without

which the work of construction / engineering under the said Contract

could not proceed. The Petitioner had wrongly insisted on the

Respondent disposing the sludge through incineration right from the

start of the work. The Arbitral Tribunal has placed reliance upon the

three Test Reports viz. Geo Chem Report dated 31st December, 2015;

MPCB Report dated 17th May, 2016 & MWML Report dated 07 th

September, 2016 which clearly establish that sludge was to be

recycled, inspite of which, the Petitioner insisted on the Respondents

to dispose of the sludge through incineration.

69. The Petitioner's reliance on the work to be completed

within a period of 32 months from the date of issuance of the LoA

and there being delay in issuance of basic plans and engineering

design / drawings is entirely misplaced. The issuance of the basic

plans and engineering designs / drawings by the Petitioner cannot be

read in isolation as the prime activity was the disposal of sludge,

without which the construction work could not commence.

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70. It is to be seen that the Petitioner after a period of 18

months of execution of the said Contract, i.e. on 29th November,

2016 gave permission and allowed the Respondent to shift the sludge

inside the Plant in nearby area of Pond-B. It is only after the period

of 3.5 months consumed by the Respondent for shifting the bulk

quantity of sludge of 7500 MT and which was completed by March,

2017, could the Respondent placed orders for equipment and submit

143 numbers of drawings against requirement of 129 drawings as per

the planning package.

71. The Petitioner has relied upon findings of the Arbitral

Tribunal that but for the participation of UEM who had technical

expertise, the Respondent would not have been awarded the tender

and that although the signatures of UEM on basic plans and

engineering designs were not required but the fact remains that the

Respondent had to satisfy the Petitioner that UEM was involved and

had approved what was submitted. This Petitioner has by placing

reliance on these findings contended that the Arbitral Tribunal gave

contradictory finding that though the approval of UEM to the basic

plans and engineering designs was not provided, the said Contract

could not be terminated. This contention in my view is misconceived.

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This overlooks the conclusion arrived at by the Arbitral Tribunal that

under the said Contract, the approval of UEM to such basic plans and

engineering designs was not required.

72. The Termination of the Contract on 15th June, 2017 by

the Petitioner was without considering the issues raised by the

Respondent and the multiple correspondence addressed by them. The

Arbitral Tribunal has in Paragraphs 223 and 224 given a categorical

finding that the Respondent had achieved progress of 2.01% which as

per the statistics and planning package only 1.62% could have been

achieved, without removal of sludge. Hence, the Respondent had

achieved more than what was required.

73. The Arbitral Tribunal after appreciating the evidence on

record as well as terms of the said Contract has awarded the amount

of Rs.1.06 Crores for work done but not paid and this after finding

that the termination of the said Contract by the Petitioner was

wrongful. This Court under Section 34 of the Arbitration Act, cannot

re-appreciate the evidence which is in the form of invoices and work

orders of UEM, the Engineering Consultants and Vendors as well as

the bank statements which were produced by the Respondent and

upon an appreciation of which the Arbitral Tribunal has held that

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they establish payment of Rs.1,06,91,238/- made by the Respondent

to UEM, the engineering consultants and vendors under the said

Contract. Thus, I find no infirmity in the findings in the Award on the

material forming part of the evidence and which has been

appreciated by the learned Arbitrator.

74. In so far as the issue of loss of revenue against sludge

recycling, the findings of the Arbitral Tribunal in the impugned

Award for quantity of 5000 MT is based on the evidence on record as

well as various documents produced by the Respondent. The

evidence of the Respondent through its witness CW-1 has been

referred to whilst recording the submissions on behalf of the

Respondent. The Arbitral Tribunal having found that there was

sufficient evidence to support at least minimum quantity of 5000 MT

of sludge lying, this finding on evidence cannot be faulted with

particularly by this Court exercising jurisdiction under Section 34 of

the Arbitration Act. Further, it is well settled that re-appreciation of

evidence is impermissible.

75. With regard to the rate of Rs.4000 per MT, the Arbitral

Tribunal has held that there was sufficient material to justify the said

rate and based upon which the Arbitral Tribunal has held that the

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loss of revenue against sludge recycling is Rs.2 Crores. This finding of

the learned Arbitral Tribunal is also on an appreciation of evidence,

and cannot be re-appreciated as held above.

76. The claim for loss of profits of Rs.14,93,79,332/-

awarded by the Arbitral Tribunal is pursuant to elaborate findings

that the termination of the Contract by the Petitioner was illegal and

wrongful. It has been held by the Supreme Court M/s. AT Brij Paul

Singh (Supra) and Mohd. Salamatullah & Ors. (Supra) that proof of

expected loss of profit cannot be given but on the grounds of

wrongful termination. The loss of profit claim will follow at the rate

of 15% towards the amount of balance remaining work. The attempt

made by the Petitioner to distinguish these Judgments is entirely

misconceived. The Arbitral Tribunal has awarded the sum of

Rs.14,93,79,332/- on the basis of 15% on the balance remaining

entire subject Contract work. This after taking into consideration the

work done of Rs.11,46,14,282/- which has been deducted from the

entire Contract sum of Rs.111,04,76,499/- leaving balance work as

Rs.99,58,62,217/- from which 15% has been computed as the loss of

profit. I am of the considered view that there is no infirmity in the

Arbitral Tribunal awarding the claim of loss of profits of

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Rs.14,93,79,332/- which is as per the terms of the said Contract and

the settled law.

77. In so far as the claim of release / refund of Performance

Bank Guarantee which has been awarded i.e. in a sum of

Rs.9,42,99,150/-, this follows from the finding that the termination

of the said Contract was illegal and wrongful. Hence, in view of this

finding of the Arbitral Tribunal which has been upheld by this Court

under Section 34 of the Arbitration Act, the Respondent is entitled to

refund of Performance Bank Guarantee which has been invoked by

the Petitioner on the grounds of termination of the said Contract. The

interest awarded also cannot be faulted with as reasonable rate of

interest has been awarded by the Arbitral Tribunal and this awarded

claim is totally justified.

78. The reliance placed by the Petitioner on Ssangyong

Engineering Construction Ltd. (Supra); Delhi Metro Railway

Corporation Pvt. Ltd. (Supra) and Associate Builders (Supra) in

contending that the impugned award is against the public policy of

India and requires to be set aside is misplaced. These Judgments do

not apply in the present case as the Arbitral Tribunal has appreciated

the evidence on record and arrived at its findings based on such

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appreciation of which cannot be re-appreciated under Section 34 of

the Arbitration Act as per settled law.

79. I further do not find merit in the reliance placed by the

Petitioner in Bharat Coking Coal (Supra); State of Rajasthan (Supra)

and Essar Procurement Services Ltd. (Supra) in support of their

contention that the party claiming damages (including by way of loss

of profits) is required to establish proof of damages suffered upon

established procedure and principles. These Judgments are

inapplicable in the present case as they are distinguishable on facts.

80. The Arbitration Petition having raised grounds of

challenge to the impugned Award which are not valid under Section

34 of the Arbitration Act is dismissed. There shall be no orders as to

costs.

81. The Prothonotary and Senior Master of this Court is

directed to release the sum of Rs.41,12,17,356/- deposited by the

Petitioner for stay of the impugned Award together with the accrued

interest to the Respondent within a period of six weeks from

uploading of this Judgment.

[R.I. CHAGLA, J.]

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