The State Of Jharkhand vs M/S Alternative For India Development

against the judgment dated 25.06.2018 passed in

Commercial (REVOC) Case No. 05 of 2017 by the Presiding

Officer, Commercial Court, Ranchi, whereby and

whereunder the said case filed on behalf of the present 2

appellant under Section 34 of the Arbitration and

Conciliation Act, 1996 for setting aside the part of the

arbitral award dated 02.06.2017 and additional award

dated 07.07.2017 passed in Arbitration Case No. 01 of

2016 by learned Sole Arbitrator, whereby the claimant

awarded with revenue support for the total number of 594

Common Services Centres @ Rs. 3284/- per Common

Service Centres per month calculated from 26.11.2012 to

25.06.2016 totaling to Rs. 7,91,61,051/- plus interest upon

the same as per the prime lending rate of State Bank of

India for the applicable period to be calculated from

November, 2012 till actual payment to the claimant, as well

as the part of the impugned arbitral award dated

02.06.2017, whereby against the counter claim of

Rs.13,40,63,107/-only Rs.9,47,706/- with lump sum

amount of Rs. 2,00,000/- only awarded to the opposite

party (appellant) as well as against the order dated

11.08.2017 passed in the Arbitration Case No. 01 of 2016

by the learned Sole Arbitrator rejecting the application

under Section 33 (4) of the Arbitration and Conciliation Act,

1996 filed on behalf of the opposite party (present

appellant) has been dismissed by the learned Commercial

Court, Ranchi by the judgment dated 25.06.2018 passed in

Commercial (REVOC) Case No. 05 of 2017.

3

2. The brief facts of the case which are required to be

enumerated, reads hereunder as :-

The Government of Jharkhand intended to provide

convenient and speedy Government Services to the citizens,

using Information and Technologies Communication

through Common Services Centers (CSCs). The CSCs will

be utilized as efficient distribution channels through which

the Government of Jharkhand can offer its services,

information and schemes etc. to citizens in a cost effective,

sustainable and efficient manner. To undertake the delivery

of Government Services on a Public Private Partnership

basis, the Government of Jharkhand intends to appoint

Service Centre Agencies (SCAs) to roll out and manage the

CSCs in the State of Jharkhand and offer revenue support

to the SCAS, as mutually agreed and accepted by the State

Designated Agency (SDA) through the SCA's Financial Bid.

Therefore for the purpose of providing the said

services, such as issuance and preparation of Aadhar Card,

Voter ID, Caste Certificates, residential certificates etc., the

SCA was required to be engaged for the setting up such

CSCs, at least one CSC in a Panchayat, in the different

districts / division of the State. The Common Services

Centers are also known as Pragya Kendra.

Therefore, a tender for rolling out and operation of

around 4500 Common Service Centres in 5 divisions of the 4

State of Jharkhand was floated. Accordingly, M/s

Alternative For India Development, respondent herein,

submitted its technical and commercial bid for 600 CSCs in

Palamau Division in response to the tender and the said

bid was accepted by the SDA.

Thereafter, the Master Service Agreement (MSA) was

entered into on 11th April, 2007 for establishing 600 CSCs

in Palamau Division. It has been mentioned in the Request

for Proposal (RFP) that in each Panchayat of the Palamau

Division at least one CSC was to be established, roll out

and made operational. There were 600 Panchayats in the

entire Palamau Division. As such, at least / minimum 600

nos. of CSCs were essentially required to be rolled out and

operated by the SCA in the Palamau Division in accordance

with RFP, the bid documents and the Agreement.

Clause-2.3 of the MSA provided for roll out of CSCs,

the schedule for completion of Rollout with cumulative

percentage of minimum number of CSCS in each division to

be rolled out. As per the said clause of MSA, the 100% of

the CSCs i.e. 600 in numbers, were to be rolled out within

12 months. It has also been mentioned at Clause 2.3(a)

that the SCA shall set up and operationalize the CSCs at its

own cost and expense within 12 months from the Effective

Date.

5 Clause-3.1(f) clearly mentions that the SCA would

not be eligible for the revenue of GOJ, support unless the

CSCs have been rolled out within the specified timeframe

and are certified as operational by the SDA. Clause 3.1 (f)

also provides that only upon setting up CSCS and making

operational 50% of the said CSCs, the SCA shall be eligible

for 50% of the revenue support for the said operational

CSCs and the balance 50% shall be deferred till the roll out

of 100% CSCs.

As per the Master Service Agreement (MSA)

executed on 11th April, 2007, Alternative for India

Development, the respondent herein, was to roll out all the

600 CSCs within 12 months with effect from 11th April,

2007 but the respondent failed to meet the target.

Thereafter, vide Supplementary agreement dated

03.09.2012 wherein maximum period of completion of roll

out of CSCs by the SCA was extended to 66 months from

the effective date which was completed on 10th October,

2012. The respondent failed to complete 100% roll out, i.e.

roll out of 600 CSCs in Palamau division, till the date of

termination of agreement.

It is the case of the appellant that since M/s.

Alternative For India Development failed to set up and

made operational at least 50% of the CSCs during the

stipulated period, as such, was not eligible for any revenue 6

support since the Government of Jharkhand has incurred

heavy loss due to failure in roll out of required number of

CSCs in Palamau division.

The Revenue support for operational CSCs were

calculated and the non-roll out penalty, non-operational

penalty were imposed as per the provisions of MSA. The

JAP-IT had paid revenue support to the respondent for the

period September 2012 to March 2013. It was found that

Non Rollout and Non-operational penalty amount for period

of April, 2013 to December, 2013 was higher than the

payable revenue support amount, thus, no revenue support

amount found to be due for payment to the respondent.

It is the case of the appellant that non-performance

of the contractual obligation by the SCA was the reason for

the termination of the MSA vide order dated 27.06.2016.

However, said termination of MSA, forfeiture of bank

guarantee and blacklisting is not related to revenue

support.

The revenue support was main issue in the

arbitration proceedings. The prayer of the claimant (present

respondent) for additional award in relation to the forfeiture

of bank guarantee, termination of MSA by placing reliance

upon the order passed by the Hon'ble High Court of

Jharkhand in W.P. (C) No. 3103 of 2016 dated 22.06.2017

was having no relevancy in the matter in context. Therefore, 7

the prayer of the claimant for an additional award has been

rejected by the Sole Arbitrator on 11.08.2017.

It is the case of the appellant that L.P.A. No. 405 of

2017 filed on behalf of JAP-IT before this Court against the

order dated 22.06.2017 passed in W.P. (C) No. 3103 of

2016 has been disposed of on 19.03.2018.

The claimant (present respondent) moved the

Hon'ble High Court in Arbitration Application No. 01 of

2016 in which final order dated 15.07.2016 was passed

and the sole Arbitrator was appointed.

Thereafter the claimant filed statement of claim

along with documents before the Arbitrator. The appellants,

being the opposite parties, filed their statement of defense

dated 07.10.2016 alongwith all relevant documents also

giving point wise reply of the claim petition.

It is the further case of the appellants that since

considerable amount was to be realized from M/s

Alternative for India Development on account of non-roll

out, non-operational penalty and also towards liquidated

damages for not confirming and not performing in terms of

the MSA, therefore, a counter claim also made by JAP-IT

dated 07.10.2016 before the learned Sole Arbitrator

claiming an amount of Rs. 13,40,63,107/- including

liquidated damages of Rs. 1,16,16,000/-. 8

After hearing the parties, an Arbitral Award has

been passed on 02.06.2017 in Arbitration Case No. 01 of

2016 by the Sole Arbitrator holding the respondents (the

appellant herein) entitled for an amount of Rs.9,47,706/-

towards the claim made under the head of the 70% share of

the amount received by the Claimant from the citizens by

offering the government services plus a lump sum amount

of Rs. 2,00,000/- for the delay caused in disbursement of

the said amount of the share of the State Government.

Further, the respondent has been awarded with right to

impose non-roll out penalty for the total 6 number of CSCs

for the period from 26th November, 2012, the date when

Claimant had rolled out 594 CSCs to 26th June, 2016, the

date of termination of the MSA, which comes to

Rs.7,84,800/-.

Further, direction has been given that after the

deduction of the amounts awarded to the Respondents as

well as after deduction of the amount already paid to the

Claimant by way of Revenue Support, i.e. Rs. 60, 66,912 for

the period from October, 2012 till March, 2013, the

Claimant is awarded with Revenue Support for the total

number of 594 CSCs @ of Rs. 3284/- per CSC per month

calculated from 26th November, 2012 to 25th June, 2016,

i.e., Rs.7,58,80,510/- plus interest upon the same within a

period of two months.

9

Thereafter, an application was filed under Section

33 (1) (a) of the Arbitration and Conciliation Act, 1996 on

behalf of the claimant, in which the learned Arbitrator

passed a supplementary award dated 07.07.2017 by adding

an amount of Rs. 32,80,541/- observing that the awarded

amount be read as Rs.7,91,61,051/- and the amount

awarded has been modified to the said extent.

The claimant filed another application under

Section 33(4) of the Arbitration and Conciliation Act, 1996

to pass additional award for refund of Rs.47,28,960/-

towards the bank guarantee submitted by the claimant

which was forfeited which has been held to be not

maintainable and accordingly dismissed.

Being aggrieved and dissatisfied with the said part

of the arbitral award dated 02.06.2017 passed by the

learned Arbitrator an Arbitration Case No. 01 of 2016,

whereby the claimant awarded with revenue support for

total number of 594 Common Service Centres as well as

Supplementary Award dated 07.07.2017 as also against the

rejection of the part of the counter claim and against the

order dated 11.08.2017 passed in the said Arbitration Case

No. 01 of 2016 by the learned Sole Arbitrator, the appellant

filed an application under Section 34 of the Arbitration and

conciliation Act, 1996 being the Commercial (REVOC) Case 10

No. 05 of 2017 before the learned Commercial Court,

Ranchi.

The learned Commercial Court heard the

application learned Commercial Court, Ranchi has passed

the judgment on 25.06.2018 dismissing the said petition.

Being aggrieved with the judgment dated

25.06.2018 passed in Commercial (REVOC) Case No. 05 of

2017 by the learned Commercial Court, Ranchi, the instant

Commercial Appeal has been preferred.

3. Mr. Sachin Kumar, learned Additional Advocate

General appearing for the appellant State, has submitted

that the work in question, i.e., 600 Common Service

Centres was ought to be completed and had to be made

operative and to that effect a certificate was required to be

given by the authority concerned and it is only thereafter

the revenue support was to be given to the claimant, as

would appear from the condition stipulated under

Condition No.3.1(f) of the Master Service Agreement.

But, herein, the centre has not been completed in

entirety, rather only 594 centres have been installed and it

has not been made operative since no revenue has been

transmitted to the State Exchequer and, therefore, there

was no certificate of making the centres operational as was

required to be given in view of the condition stipulated for

the purpose of providing revenue support. 11

But the learned Arbitrator, without taking into

consideration the aforesaid aspect of the matter, has

passed the Award in favour of the respondent concerned

and hence the very issue of the condition as contained

under Condition No.3.1(f) has been given go-bye and,

therefore, it is against the public policy and the Award

suffers from perversity.

The further contention has been raised that the

learned Arbitrator has further erred in passing the Award

in the counter claim by holding the appellant State entitled

to meager amount of Rs.9,47,706/-

According to the learned counsel for the appellant,

the learned Arbitrator ought to have decided the counter

claim by passing an Award commanding upon the claimant

to compensate the State Exchequer by making payment of

the amount which ought to have been collected through the

people at large way of extending the benefit from the

centres. But, instead of doing so, the Award has been

passed in favour of the claimant directing the State

appellant to make payment of Rs.7,91,61,051/- and hence,

the very aspect of the matter of putting State Exchequer at

loss has not been appreciated.

The contention has been made that on these

grounds the Award has been challenged before the forum

available under Section 34 of the Arbitration and 12 Conciliation Act, 1996, but the learned court has also not

appreciated the aforesaid fact and merely on the basis of

the reason that the forum available under Section 34 is

having very little scope to exercise the power of judicial

review so far as the finding recorded by the Arbitral

Tribunal is concerned. But the issue which is being raised

as a ground, as referred hereinabove, ought to have been

considered by the forum exercising the power conferred

under Section 34 of the Act, 1996.

Learned counsel for the appellant, in support of his

argument, has relied upon the judgment rendered by

Hon'ble Apex Court in the case of Ssangyong Engineering

and Construction Company Limited v. National

Highways Authority of India (NHAI) reported in (2019)

15 SCC 131.

Learned counsel for the appellant, in the backdrop

of the aforesaid premise, coupled with the reliance put

upon the judgment rendered by the Hon'ble Apex Court in

the case of Ssangyong Engineering and Construction

Company Limited v. National Highways Authority of

India (NHAI) (Supra) has contended that the order

impugned dated judgment dated 25.06.2018 passed in

Commercial (REVOC) Case No. 05 of 2017 suffers from

patent illegality and, hence, not sustainable in the eyes of

law.

13

4. Per contra, Mr. Harendra Kr. Mahato, learned

counsel appearing for the claimant, the respondent herein,

has submitted that the learned Arbitrator has considered

each and every aspect of the matter, if the Award will be

looked into, more particularly paragraph 12 and 27 thereof.

According to the learned counsel for the claimant,

the respondent herein, the learned Arbitrator has

considered the condition stipulated at Condition No. 2.1(a)

i.e. (i) for completion of 600 centres; and Condition

No.3.2(a)(i) that a certificate is to be given of making the

centres operational.

The learned Arbitrator has considered the aforesaid

condition and considering the fact that 594 centres have

already been installed out of 600 which is near about 99%

and hence only because 1% of the centre has not been

installed the benefit of revenue support cannot be denied to

be given to the respondent.

The learned Arbitrator has further considered the

second condition of certificate to be given by the agency

making the centres operational but the said certificate was

to be given by the S.D.A., the agency concerned and hence,

giving the certificate with respect to making the centre

operational was the duty of the agency and if such

certificate was not given by the agency for which the

claimant cannot be made to suffer.

14

Learned Arbitrator has further considered the stand

of the claimant as referred at paragraph 12 of the Award

wherein it has been admitted by the State that in order to

make out the operational process more easier and

transparent OMT/E-Nagrick/E-Taal systems have been

adopted.

The State has taken the plea that aforesaid software

system since has been found to be faulty and hence the

certificate could not be given.

Learned counsel for the claimant, therefore, has

taken the ground that if the learned Tribunal has

considered the very condition as contained in Condition No.

2.1(a) i.e. (i) for completion of 600 centres; and Condition

No.3.2(a)(i) that a certificate is to be given of making the

centres operational. However, learned Tribunal has passed

the Award by taking into consideration the fact that 99% of

the centres has been installed and the Certificate of making

the centre operational since has not been given due to the

faulty software system, as per the admission made by the

agency, as would appear from the discussion made in

paragraph 12 of the Award and in that view of the matter if

the Award has been passed in favour of the claimant, the

same cannot be said to suffer from an error.

in that view of the matter, it cannot be said that the

Award is against the public policy.

15

The further contention has been made that the

scope of judicial review either under Section 34 or the

Arbitration and Conciliation Act, 1996 or under Section

13(1A) of the Commercial Courts Act is very limited and the

same can only be exercised if the Award is found to be

contrary to the public policy and the Award suffers from

perversity. But, none of the condition is available herein

and by taking into consideration the aforesaid fact the

learned court while exercising the power under Section 34

of the Act, 1996 if has declined to interfere with the arbitral

Award, the same cannot be said to suffer from an error.

Learned counsel appearing for the respondent has

relied upon the judgment Associate Builders v. Delhi

Development Authority reported in (2015) 3 SCC 49, Oil

& Natural Gas Corporation Ltd. V. Saw Pipes Ltd.

reported in (2003) 5 SCC 705 and Navodaya Mass

Entertainment Limited v. J.M. Combines reported in

(2015) 5 SCC 698.

5. We have heard learned counsel for the parties,

perused the documents available on record as also the

finding recorded by the learned Arbitrator and the learned

court while exercising the power under Section 34 of the

Act, 1996.

6. This Court, before appreciating the argument

advanced on behalf of the parties, deems it fit and proper to 16

refer the position of law regarding the power of judicial

review in the arbitral Award.

In the case of Associate Builders v. Delhi

Development Authority reported in (2015) 3 SCC 49, the

Hon'ble Apex Court while dealing with the scope of judicial

review in the matter of an arbitral Award has taken into

consideration the judgment passed in McDermott

International Inc. v. Burn Standard Co. Ltd., (2006) 11

SCC 181 and has held at para 22 which is required to be

referred herein which reads hereunder as :-

22. In McDermott International Inc. v. Burn Standard Co.

Ltd. [(2006) 11 SCC 181] , this Court held:

"58. In Renusagar Power Co. Ltd. v. General Electric Co. [1994 Supp (1) SCC 644] this Court laid down that the arbitral award can be set aside if it is contrary to (a) fundamental policy of Indian law; (b) the interests of India; or (c) justice or morality. A narrower meaning to the expression 'public policy' was given therein by confining judicial review of the arbitral award only on the aforementioned three grounds. An apparent shift can, however, be noticed from the decision of this Court in ONGC Ltd. v. Saw Pipes Ltd. [(2003) 5 SCC 705] (for short 'ONGC'). This Court therein referred to an earlier decision of this Court in Central Inland Water Transport Corpn. Ltd. v. Brojo Nath Ganguly [(1986) 3 SCC 156] wherein the applicability of the expression 'public policy' on the touchstone of Section 23 of the Contract Act, 1872 and Article 14 of the Constitution of India came to be considered. This Court therein was dealing with unequal bargaining power of the workmen and the employer and came to the conclusion that any term of the agreement which is 17

patently arbitrary and/or otherwise arrived at because of the unequal bargaining power would not only be ultra vires Article 14 of the Constitution of India but also hit by Section 23 of the Contract Act, 1872. In ONGC [(2003) 5 SCC 705] this Court, apart from the three grounds stated in Renusagar [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , added another ground thereto for exercise of the court's jurisdiction in setting aside the award if it is patently arbitrary.

59. Such patent illegality, however, must go to the root of the matter. The public policy violation, indisputably, should be so unfair and unreasonable as to shock the conscience of the court. Where the arbitrator, however, has gone contrary to or beyond the expressed law of the contract or granted relief in the matter not in dispute would come within the purview of Section 34 of the Act. However, we would consider the applicability of the aforementioned principles while noticing the merits of the matter.

60. What would constitute public policy is a matter dependent upon the nature of transaction and nature of statute. For the said purpose, the pleadings of the parties and the materials brought on record would be relevant to enable the court to judge what is in public good or public interest, and what would otherwise be injurious to the public good at the relevant point, as contradistinguished from the policy of a particular Government.

Further, the Hon'ble Apex Court in the case of PSA

SICAL Terminals Pvt. Ltd. Vs Board of Trustees of V.O.

Chidambranar Port Trust Tuticorin and Others

reported in 2021 SCC OnLine SC 508, has taken the

similar view which has been observed at paragraph 43 of

the judgment which is being referred hereunder as:-

18 43. It will thus appear to be a more than settled legal position, that in an application under Section 34, the court is not expected to act as an appellate court and reappreciate the evidence. The scope of interference would be limited to grounds provided under Section 34 of the Arbitration Act. The interference would be so warranted when the award is in violation of "public policy of India", which has been held to mean "the fundamental policy of Indian law". A judicial intervention on account of interfering on the merits of the award would not be permissible. However, the principles of natural justice as contained in Section 18 and 34(2)(a)(iii) of the Arbitration Act would continue to be the grounds of challenge of an award. The ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the "most basic notions of morality or justice". It is only such arbitral awards that shock the conscience of the court, that can be set aside on the said ground. An award would be set aside on the ground of patent illegality appearing on the face of the award and as such, which goes to the roots of the matter. However, an illegality with regard to a mere erroneous application of law would not be a ground for interference. Equally, reappreciation of evidence would not be permissible on the ground of patent illegality appearing on the face of the award.

In a recent judgment passed in Reliance

Infrastructure Ltd. Vs State of Goa reported in 2023

SCC OnLine SC 604, the Hon'ble Apex Court has 19

reiterated its view and has observed at paragraph 48 which

reads hereunder as :-

"48. In MMTC Limited (supra), this Court took note of various decisions including that in the case of Associate Builders (supra) and exposited on the limited scope of interference under Section 34 and further narrower scope of appeal under Section 37 of the Act of 1996, particularly when dealing with the concurrent findings (of the Arbitrator and then of the Court). This Court, inter alia, held as under:--

"11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the "fundamental policy of Indian law" would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., [1948] 1 K.B. 223 (CA)] reasonableness. Furthermore, "patent illegality" itself has been held to mean contravention of the substantive law of India, 20

contravention of the 1996 Act, and contravention of the terms of the contract.

12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts.

13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such 21

interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings."

It is evident from the judicial pronouncements

referred hereinabove, that the appellate court while

exercising the power regarding the illegality and propriety of

the arbitral Award is not supposed to reappraise the

evidence as also interference to the arbitral Award does not

intend a review of the merits of the dispute, rather, it is

limited to the situations whether the findings of the

Arbitrator are arbitrary or capricious or perverse or when

the conscience of the court shocks or when the illegality is

not trivial but goes to the root of the matter.

Further, an arbitral Award may not be interfered

with if the view taken by the Arbitrator is a possible view

based on facts.

7. So far as the fact of the given case is concerned, the

Government of Jharkhand, for convenient and speedy

Government Services to the citizens, through Common 22

Services Centers (CSCs) such as issuance and preparation

of Aadhar Card, Voter ID, Caste Certificates, residential

certificates etc., decided that at least one CSC in a

Panchayat, in the different districts / division of the State

should be established and, therefore, a tender for rolling

out and operation of around 4500 Common Service Centres

in 5 divisions of the State of Jharkhand was floated.

Accordingly, M/s Alternative For India Development,

respondent herein, submitted its technical and commercial

bid for 600 CSCs in Palamau Division in response to the

tender and the said bid was accepted by the SDA.

Thereafter, Agreement was entered into on 11th

April, 2007 for establishing 600 CSCs in Palamau Division.

There were 600 Panchayats in the entire Palamau Division.

As such, at least / minimum 600 nos. of CSCs were

essentially required to be rolled out and operated by the

SCA in the Palamau Division.

Clause-3.1(f) of the contract stipulates that the SCA

would not be eligible for the revenue support of

Government of Jharkhand, unless the CSCs have been

rolled out within the specified timeframe and are certified

as operational by the SDA. Clause 3.1 (f) also provides that

only upon setting up CSCs and making operational 50% of

the said CSCs, the SCA shall be eligible for 50% of the

revenue support for the said operational CSCs and the 23

balance 50% shall be deferred till the roll out of 100%

CSCs.

As per the Agreement, Alternative for India

Development, the respondent herein, was to roll out all the

600 CSCs within 12 months with effect from 11th April,

2007 but the respondent failed to meet the target.

Thereafter, vide Supplementary agreement dated

03.09.2012 wherein maximum period of completion of roll

out of CSCs by the SCA was extended to 66 months from

the effective date which was completed on 10th October,

2012. The respondent failed to complete 100% roll out, i.e.

roll out of 600 CSCs in Palamau division, till the date of

termination of agreement.

It is the case of the appellant that since M/s.

Alternative For India Development failed to set up and

made operational at least 50% of the CSCs during the

stipulated period, as such, was not eligible for any revenue

support since the Government of Jharkhand has incurred

heavy loss due to failure in roll out of required number of

CSCs in Palamau division.

The Revenue support for operational CSCs was

calculated and the non-roll out penalty, non-operational

penalty were imposed as per the provisions of the

Agreement. The JAP-IT had paid revenue support to the

respondent for the period September 2012 to March 2013. 24

It was found that Non Rollout and Non-operational penalty

amount for period of April, 2013 to December, 2013 was

higher than the payable revenue support amount, thus, no

revenue support amount found to be due for payment to

the respondent.

The revenue support was main issue in the

arbitration proceedings wherein prayer was made by the

claimant for additional award has been rejected by the Sole

Arbitrator on 11.08.2017.

The claimant (respondent herein) moved before this

Court in Arbitration Application No. 01 of 2016 in which

final order dated 15.07.2016 was passed and the sole

Arbitrator was appointed.

Thereafter the claimant filed statement of claim

along with documents before the Arbitrator. The appellants,

being the opposite parties, filed their statement of defense

dated 07.10.2016 alongwith all relevant documents.

After hearing the parties, the Arbitral Award has

been passed on 02.06.2017 in Arbitration Case No. 01 of

2016 by the Sole Arbitrator holding the respondents (the

appellant herein) entitled for an amount of Rs.9,47,706/-

towards the claim made under the head of the 70% share of

the amount received by the Claimant from the citizens by

offering the government services plus a lump sum amount

of Rs. 2,00,000/- for the delay caused in disbursement of 25

the said amount of the share of the State Government.

Further, the respondent has been awarded with right to

impose non-roll out penalty for the total 6 number of CSCs

for the period from 26th November, 2012, the date when

Claimant had rolled out 594 CSCs to 26th June, 2016, the

date of termination of the MSA, which comes to

Rs.7,84,800/-.

Further, direction has been given that after the

deduction of the amounts awarded to the Respondents as

well as after deduction of the amount already paid to the

Claimant by way of Revenue Support, i.e. Rs. 60, 66,912 for

the period from October, 2012 till March, 2013, the

Claimant is awarded with Revenue Support for the total

number of 594 CSCS @ of Rs. 3284/- per CSC per month

calculated from 26th November, 2012 to 25th June, 2016,

i.e., Rs.7,58,80,510/- plus interest upon the same within a

period of two months.

Thereafter, an application was filed under Section

33 (1) (a) of the Arbitration and Conciliation Act, 1996 on

behalf of the claimant, in which the learned Arbitrator

passed a supplementary award dated 07.07.2017 by adding

an amount of Rs. 32,80,541/- observing that the awarded

amount be read as Rs.7,91,61,051/- and the amount

awarded has been modified to the said extent. 26

The claimant filed another application under

Section 33(4) of the Arbitration and Conciliation Act, 1996

to pass additional award for refund of Rs.47,28,960/-

towards the bank guarantee submitted by the claimant

which was forfeited which has been held to be not

maintainable and accordingly dismissed.

Being aggrieved and dissatisfied with the said part

of the arbitral award dated 02.06.2017 passed by the

learned Arbitrator an Arbitration Case No. 01 of 2016,

whereby the claimant awarded with revenue support for

total number of 594 Common Service Centres as well as

Supplementary Award dated 07.07.2017 as also against the

rejection of the part of the counter claim and against the

order dated 11.08.2017 passed in the said Arbitration Case

No. 01 of 2016 by the learned Sole Arbitrator, the appellant

filed an application under Section 34 of the Arbitration and

conciliation Act, 1996 being the Commercial (REVOC) Case

No. 05 of 2017 before the learned Commercial Court,

Ranchi.

The learned Commercial Court heard the

application and passed the judgment on 25.06.2018

dismissing the said petition.

Being aggrieved with the judgment dated

25.06.2018 passed in Commercial (REVOC) Case No. 05 of 27

2017 by the learned Commercial Court, Ranchi, the instant

Commercial Appeal has been preferred.

It is evident from the record that the agreement has

been entered which contains several conditions. One of the

conditions is for the purpose of giving revenue support to

the claimant.

8. Learned counsel appearing for the appellant since is

questioning the arbitral Award as also the order passed by

the learned court in exercise of power conferred under

Section 34 of the Act, 1996 that the Award so passed by

casting liability upon the State appellant due to the

negligence in not giving the revenue support even after

completion of the entire centres and the centres have not

become operational.

Therefore, this Court, instead of dealing with other

conditions, is now confining to deal with the condition

which pertains to extending the benefit of revenue support

in favour of the claimant which is available at Condition

No.2.1 of the Agreement which is being referred hereunder

as :-

"2.1 Scope of the MSA

a) The SCA mandated to establish around 600 number of CSCs in Palamu Division of the State of Jharkhand. The GoJ will provide a variety of Government Services through the CSCs. These centres are proposed to be set up in the panchayat bhawans or suitable spaces available or at alternate 28

locations preferably near the same. The SCA shall be responsible for identifying such locations with the guidance of the SDA.

b) The GoJ will extend revenue support to the SCA as agreed mutually under this MSA.

c) The details of the Palamu division and the revenue support sought is as follows :

Sl. Name of Approx Revenue Support Required No. Division No. of from JAP-IT in Indian CSCs Rupees per CSC per proposed month over the 4 year period

1 Palamu 600 3284

It is evident that for the purpose of giving revenue

support, two conditions have been stipulated in the

condition as referred hereinabove. The first is that the

centre, 600 in number, is to be set up and the second

condition is that the centre is to be made operational and to

that effect a certificate is to be given by the S.D.A., the

agency concerned, the State functionary herein.

The claim of the claimant is that out of 600 centres,

594 centres have been set up, however, it was not within

the period as agreed in pursuance to the agreement dated

11th April, 2007 but subsequent thereto, a supplementary

agreement has been enreached in between the parties

whereby extension of 66 months have been granted under

which out of 600 centres, 594 centres have been set up.

But no revenue support has been given and a dispute arose

which was finally referred to the Arbitrator by appointing 29

Arbitrator by the High Court in exercise of power conferred

under Section 11(6) of the Arbitration and Conciliation Act,

1996.

The claimant has taken the plea that there is no

laches on his part and out of 600 centres, 594 centres have

been set up and the operation certificate which was to be

given by the S.D.A. has not been given and, therefore, the

revenue support, which, as per the agreement the claimant

was entitled, since has not been given, the claimant has

been made to suffer and hence the Award is prayed to be

passed in his favour.

9. While on the other hand, the State appellant has

also filed counter claim on the pretext of the fact that the

revenue which was to be generated by virtue of setting up

of the agency has not been transmitted to the State

Exchequer due to the laches committed on the part of the

claimant and, hence they are entitled for the damages.

10. The learned Tribunal has considered various aspect

of the matter. The documents have been adduced. The

learned Tribunal, in order to adjudicate the issue, has

formulated following issues :-

(i) Whether the Claimant is entitled to the claim raised by it in the petition of Claim and whether the same is payable in law or on facts in terms of the Master Service Agreement and the Supplementary Agreement?

(ii) Whether the Supplementary Agreement dated 03.09.2012 has merged with the main Master Service 30

Agreement dated 11.04.2007 and whether the parties are bound by the terms of the Master Service Agreement as well as the Supplementary Agreement dated 03.09.2012?

(iii) Whether the Respondents have relinquished or waived the provisions of the Master Service Agreement in relation to the payment of the revenue support amount by the Respondent to the Claimant?

(iv) Whether the Respondents are barred by Principle of estoppels from relying on the provisions of Master Service Agreement relating to the payment of the revenue support amount by the Respondent to the Claimant?

(v) Whether the Claimant has performed its part of the contract and / or whether it has breached / violated any of the terms of the contract entered into between the parties particularly Clause 4.2(b) of the Contract as alleged by the Respondent?

(vi) Whether an amount of Rs.8,52,07,100/- is payable by the Respondents to the Claimant towards the revenue support as claimed by it?

(vii) Whether an amount of Rs. 2,79,62,132/- is payable by the Respondents to the Claimant as Escalation Cost as claimed by the Claimant?

(viii) Whether the Claimant is entitled to interest @ 15% on delayed payment i.e. Rs. 3,97,92,689/- till the date of filing of the Claim Petition as claimed by it?

(ix) Whether an amount of Rs.13,40,63,107/- is payable by the Claimant to the Respondent by way of Counter Claim on account of revenue collected from the citizens for government services, non-rollout penalty amount, non-operational penalty amount, offsetting amount, liquidated damages as claimed by the Respondent in terms of the Master Service Agreement read with Supplementary Agreement dated 03.09.2012 and whether the amount aforesaid is at all admissible to be paid by the Claimant to the Respondent and whether the Claimant was required to 31

roll out 600 Common Service Centers in accordance with the provisions of Master Service Agreement dated 11.04.2007 read with Supplementary Agreement dated 03.09.2012?

The State appellant is only concerned with issue

No.(ix) which pertains to revenue support in the light of

non-compliance of the condition stipulated under Condition

No.2.1(a) of the Master Service Agreement.

The learned Tribunal has considered the aforesaid

condition and by taking note of the fact that out of 600

centres, 594 centres have been installed which is almost

99% of the work in entirety and hence came to the

conclusion that if 1% of the centres has not been set up,

the claimant cannot be denied the benefit of revenue

support.

The learned Arbitrator has considered the second

condition regarding certificate to be given of making the

centres operational, that is the ground taken by the State

appellant that in absence of certificate of making the

centres operational, there cannot be revenue support to be

given to be claimant.

The learned Arbitrator has considered the stand of

the State appellant in order to assess that by whom the

operational certificate was to be given, whether it was to be

given by the State or if the State has not given, whether the

claimant can be held responsible for that so as to put him 32

at financial loss by not giving the benefit of revenue

support.

The learned Arbitrator has further considered the

stand of the appellant wherein it has been admitted that

the operational certificate could not be given due to change

in the system, as would appear from the discussion so

made at paragraph 12 of the Award passed by the learned

Arbitrator, for ready reference, paragraph 12 is quoted

hereunder as :-

"12. Further, the Learned Senior Counsel for the Claimant, arguing upon the penal provisions under the MSA emphasized on the point that, as a consequence of the execution of the Supplementary Agreement, the entire Clause 2.3(b) stood deleted and thereby no penal provisions remained enforceable under the MSA. Therefore, non-operational penalty and or non-roll out penalty cannot be levied as there is no provision in the MSA regarding penalty for the same and therefore the schedule to the MSA which speaks about penalty is of no avail. Further he contended that, the Respondent has calculated the non-operational penalty on the basis of reports of E- Nagrik software which in itself was faulty and not provided for in the MSA. Accordingly the Claimant is not liable to pay any amount towards penalty for non- roll out or non operationality of any CSCs. Therefore, Respondent cannot rely on the penalty clause which stood deleted after the execution of the Supplementary Agreement; therefore the Respondent cannot bank upon something which does not exist in the MSA. Further by citing Clause 3.2(a)(i) of the MSA, the Claimant stated that, it had to submit certificate from JAP-IT or designated agency certifying that all the 33

CSCs have been rolled out and are operational but the Respondent never issued a single certificate in respect of the same rather they alternatively introduced Online Monitoring Tool for certifying CSCs. He further submitted that, the fact that the OMT/E- Nagrick/E- Taal systems introduced by the Respondent at subsequent stages of Agreement period were non- functioning and not reliable, was also recorded in the internal CSC review meeting held on 14.05.2017 in the chamber of the Principal Secretary, Department of IT."

The learned Arbitrator, after taking into

consideration the admission on the part of the State, that

due to the glitch in the software, the operational certificate

could not be given, has given specific finding at paragraph

27 of the Award wherein it has been held that if it is the

admission on the part of the State appellant that the

operational certificate could not be given due to

introduction of the new software which has been found to

be faulty, therefore, for the fault on the part of the State,

the claimant cannot be allowed to suffer, for ready

reference paragraph 27 of the Award is being quoted and

referred hereunder as :-

"27. Further, under Clause 2(a) which provides for the scope of the MSA states that, the SCA is mandated to establish 600 numbers of CSCs in the Palamu Division of State of Jharkhand. Further the Clause 2(c) goes on to provide the details of the Palamu Division and the revenue support sought for the same. The 3rd row of the table provided in the said clause which deals with the number of CSCs reads as - "approx no of CSC's proposed". Therefore, after analysing the MSA in its 34

entirety, I am of the view that, under various clauses in the said MSA the roll-out and operations of the CSCs are indicated in percentile calculation and the same is not practically possible without the figures being certain or exact. I am therefore certain that, it is evidently clear from the wordings and interpretation of the terms of the MSA in total that, the SCA was required to roll-out a total of 600 CSCs, since all the calculations made under the MSA, may it be for revenue support or for imposition of penalty was provided in percentage manner and the same percentile figure cannot be obtained unless and until the figure out of which it has to be derived is certain or exact."

The learned Arbitrator on the basis of the aforesaid

fact, has passed the Award holding therein that the

appellant itself is at fault in not giving operation certificate

who is only to give certificate as per the stipulation made

under Condition No.3.2(a)(i) and, therefore, for the fault

committed by the Agency, the claimant cannot be allowed

to suffer and, accordingly, passed the Award in favour the

claimant.

11. The argument of the learned counsel for the

appellant that the Award is contrary to the public policy

and suffers from perversity, which according to our

considered view, cannot be said to have substance, reason

being that if the condition has been enshrined in the

agreement, it is incumbent upon the parties to comply it in

strict sense. Either of the parties, if do not comply with the 35

condition and due to such non-compliance no relief can be

sought for by such party who is at fault.

Herein, the condition stipulated at Condition No.

2.1(a) i.e., for completion of 600 centres; and Condition

No.3.2(a)(i) that a certificate is to be given of making the

centres operational.

12. So far as the completion of 600 centres are

concerned, out of 600 centres, 594 centres have already

been installed, i.e., 99% of the work and hence denial of the

revenue support only if 1% centres have not been set up,

the same has been held to be not justified by the learned

Arbitrator as also the learned court while refusing to

interfere with the Award in exercise of power conferred

under Section 34 of the Act, 1996, which according to our

considered view, cannot be said to suffer from an error, it is

for the reason that there cannot be any deviation from the

agreement and if condition has been stipulated, the same

has to be adhered to.

The plea is being taken on behalf of the State

appellant that the operational certificate is not available

and hence the learned Arbitrator or the forum under

Section 34 of the Act, 1996 ought to have taken into

consideration the aforesaid fact.

13. There is no denial that it ought to have been

considered but the fact herein is that the operational 36

certificate if was required to be given by the State and when

the State is admitting the fact that due to the technical

glitch in the new software introduced for giving operation

certificate which establishes that the laches is on the part

of the State and the law is well settled that if the laches is

on the part of the party, such party cannot be allowed to

take advantage of its wrong/illegality as has been held by

Hon'ble Apex Court in the case of Kusheshwar Prasad

Singh vs. State of Bihar and Ors., (2007) 11 SCC 447,

wherein at paragraphs-14, 15 and 16, the Hon'ble Apex

Court has observed as under:

"14. In this connection, our attention has been invited by the learned counsel for the appellant to a decision of this Court in Mrutunjay Pani v. Narmada Bala Sasmal [AIR 1961 SC 1353] wherein it was held by this Court that where an obligation is cast on a party and he commits a breach of such obligation, he cannot be permitted to take advantage of such situation. This is based on the Latin maxim commodum ex injuria sua nemo habere debet (no party can take undue advantage of his own wrong).

15. ... This Court (at SCC p. 142, para 28) referred to Broom's Legal Maxims (10th Edn.), p. 191 wherein it was stated:

"It is a maxim of law, recognised and established, that no man shall take advantage of his own wrong; and this maxim, which is based on elementary principles, is fully recognised in courts of law and of equity, and, indeed, admits of illustration from every branch of legal procedure."

16. It is settled principle of law that a man cannot be permitted to take undue and unfair advantage of his own wrong to gain favourable interpretation of law. It is sound principle that he who prevents a thing from being done shall not avail himself of the non-performance he has 37

occasioned. To put it differently, "a wrongdoer ought not to be permitted to make a profit out of his own wrong"."

So far as the question of public policy is concerned,

there is not dispute that the interference would be

warranted if the Award is in violation of the public policy of

India. The Hon'ble Apex Court in the case of Oil & Natural

Gas Corporation Ltd. v. Saw Pipes Ltd. (Supra), has

been pleased to observe as under paragraph 31 that the

expression public policy of India, as contained in Section

34, would now be the fundamental policy of Indian Law, as

explained in para 18 and 27 of Associate Builders v.

Delhi Development Authority reported in (2015) 3 SCC

49, i.e., the fundamental policy of Indian Law would be

related to Renusagar [Renusagar Power Co. Ltd. v. general

Electric Co. (1994) Supp (1) SCC 644] understanding of this

expression. Paragraph 31 of the judgment rendered in

public policy of India. The Hon'ble Apex Court in the case of

Oil & Natural Gas Corporation Ltd. v. Saw Pipes

Ltd.(Supra) is quoted hereunder as :-

"31. Therefore, in our view, the phrase "public policy of India" used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public 38

interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term "public policy" in Renusagar case [1994 Supp (1) SCC 644] it is required to be held that the award could be set aside if it is patently illegal. The result would be

-- award could be set aside if it is contrary to:

(a) fundamental policy of Indian law; or

(b) the interest of India; or

(c) justice or morality, or

(d) in addition, if it is patently illegal.

Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void."

It has further been observed that the public policy

of India is now constricted to be first; Award is contrary to

the fundamental policy of Indian Law as understood in

paragraph 28 of the Associate Builders v. Delhi

Development Authority (Supra), which reads hereunder

as:-

28. In a recent judgment, ONGC Ltd. v. Western Geco International Ltd. [(2014) 9 SCC 263 : (2014) 5 SCC (Civ) 12] , this Court added three other distinct and fundamental juristic principles which must be understood as a part and parcel of the fundamental policy of Indian law. The Court held: (SCC pp. 278-80, paras 35 & 38-40) "35. What then would constitute the 'fundamental policy of Indian law' is the question.

The decision in ONGC [(2003) 5 SCC 705 : AIR 2003 39

SC 2629] does not elaborate that aspect. Even so, the expression must, in our opinion, include all such fundamental principles as providing a basis for administration of justice and enforcement of law in this country. Without meaning to exhaustively enumerate the purport of the expression 'fundamental policy of Indian law', we may refer to three distinct and fundamental juristic principles that must necessarily be understood as a part and parcel of the fundamental policy of Indian law. The first and foremost is the principle that in every determination whether by a court or other authority that affects the rights of a citizen or leads to any civil consequences, the court or authority concerned is bound to adopt what is in legal parlance called a 'judicial approach' in the matter. The duty to adopt a judicial approach arises from the very nature of the power exercised by the court or the authority does not have to be separately or additionally enjoined upon the fora concerned. What must be remembered is that the importance of a judicial approach in judicial and quasi-judicial determination lies in the fact that so long as the court, tribunal or the authority exercising powers that affect the rights or obligations of the parties before them shows fidelity to judicial approach, they cannot act in an arbitrary, capricious or whimsical manner. Judicial approach ensures that the authority acts bona fide and deals with the subject in a fair, reasonable and objective manner and that its decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a court, tribunal or authority vulnerable to challenge.

***

38. Equally important and indeed fundamental to the policy of Indian law is the principle that a 40

court and so also a quasi-judicial authority must, while determining the rights and obligations of parties before it, do so in accordance with the principles of natural justice. Besides the celebrated audi alteram partem rule one of the facets of the principles of natural justice is that the court/authority deciding the matter must apply its mind to the attendant facts and circumstances while taking a view one way or the other. Non- application of mind is a defect that is fatal to any adjudication. Application of mind is best demonstrated by disclosure of the mind and disclosure of mind is best done by recording reasons in support of the decision which the court or authority is taking. The requirement that an adjudicatory authority must apply its mind is, in that view, so deeply embedded in our jurisprudence that it can be described as a fundamental policy of Indian law.

39. No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 :

(1947) 2 All ER 680 (CA)] principle of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a court of law often in writ jurisdiction of the superior courts but no less in statutory processes wherever the same are available.

40. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the 41

straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an Arbitral Tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest."

(emphasis in original) It requires to refer herein the paragraph 33 of the

judgment rendered in the case of Associate Builders v.

Delhi Development Authority (Supra) for the purpose of

consideration of the argument advanced on behalf of the

appellant in order to assess as to whether the learned

Arbitrator or the learned court exercising the power under

Section 34 of the Act, has acted contrary to the public

policy of India, for ready reference, paragraph 33 is quoted

hereunder as :-

"33. It must clearly be understood that when a court is applying the "public policy" test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the arbitrator on facts has necessarily to pass muster as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. Thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score [ Very 42

often an arbitrator is a lay person not necessarily trained in law. Lord Mansfield, a famous English Judge, once advised a high military officer in Jamaica who needed to act as a Judge as follows:"General, you have a sound head, and a good heart; take courage and you will do very well, in your occupation, in a court of equity. My advice is, to make your decrees as your head and your heart dictate, to hear both sides patiently, to decide with firmness in the best manner you can; but be careful not to assign your reasons, since your determination may be substantially right, although your reasons may be very bad, or essentially wrong".It is very important to bear this in mind when awards of lay arbitrators are challenged.] . Once it is found that the arbitrators approach is not arbitrary or capricious, then he is the last word on facts. In P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd. [(2012) 1 SCC 594] , this Court held:

"21. A court does not sit in appeal over the award of an Arbitral Tribunal by reassessing or reappreciating the evidence. An award can be challenged only under the grounds mentioned in Section 34(2) of the Act. The Arbitral Tribunal has examined the facts and held that both the second respondent and the appellant are liable. The case as put forward by the first respondent has been accepted. Even the minority view was that the second respondent was liable as claimed by the first respondent, but the appellant was not liable only on the ground that the arbitrators appointed by the Stock Exchange under Bye-law 248, in a claim against a non-member, had no jurisdiction to decide a claim against another member. The finding of the majority is that the appellant did the transaction in the name of the second respondent and is therefore, liable along with the second respondent. Therefore, in the absence of any ground under Section 34(2) of the Act, it is not 43

possible to re-examine the facts to find out whether a different decision can be arrived at."

In this regard, paragraph 42.3 and paragraphs 43

to 45 of the aforesaid judgment are also relevant which are

quoted hereunder as :-

"42.3. (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under:

"28.Rules applicable to substance of dispute.--(1)-(2)*** (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction."

This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.

43. In McDermott International Inc. v. Burn Standard Co. Ltd. [(2006) 11 SCC 181] , this Court held as under:

"112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the 44

conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law.

113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award."

44. In MSK Projects (I) (JV) Ltd. v. State of Rajasthan [(2011) 10 SCC 573] , the Court held:

"17. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic evidence. The rationale of this rule is that the nature of the dispute is something which has to be determined outside and independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award.

45. In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran [(2012) 5 SCC 306], the Court held:

"43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or 45

that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator.

44. The legal position in this behalf has been summarised in para 18 of the judgment of this Court in SAIL v. Gupta Brother Steel Tubes Ltd. [(2009) 10 SCC 63] and which has been referred to above. Similar view has been taken later in Sumitomo Heavy Industries Ltd. v. ONGC Ltd. [(2010) 11 SCC 296] to which one of us (Gokhale, J.) was a party. The observations in para 43 thereof are instructive in this behalf.

45. This para 43 reads as follows: (Sumitomo case [(2010) 11 SCC 296] '43. ... The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn. [(2009) 5 SCC 142] the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding.'"

46 14. It is evident from the aforesaid judgment that the

construction of the terms of the contract is primarily for an

Arbitrator to decide, unless the arbitrator construes the

contract in such a manner that no fair-minded or

reasonable person would, in short, that the Arbitrator's

view is not even a possible view to take. If the Arbitrator

wanders outside the contract and deals with matters not

allotted to him, he commits an error of jurisdiction.

This ground of challenge will now fall within the

new ground under Section 34(2-A).

Further, re-appreciation of evidence which is what

an appellate court is permitted to do, cannot be permitted

under the ground of patent illegality appearing on the face

of Award.

The paragraph 42.1 of the judgment rendered in the

case of Associate Builders v. Delhi Development

Authority (Supra) laid down that mere contravention of the

substantive law in India itself is no longer a ground

available to set aside an arbitral Award. Paragraph 42.2 of

the aforesaid judgment, however, would remain for an

Arbitrator gives no reason for an Award and contravenes

Section 31(3) of the 1996 Act that would certainly amount

to patent illegality on the face of the Award.

The Hon'ble Apex Court has further observed

therein that a decision which is perverse, as understood in 47

paragraph 31 and 32 of the Associate Builders v. Delhi

Development Authority (Supra), will no longer being a

ground for challenge a public policy of India would certainly

amount to patent illegality appearing on the face of the

Award.

Thus, a finding based on no evidence at all or an

Award which ignores vital evidence in arriving at its

decision would be perverse and liable to be set aside on the

ground of patent illegality.

Additionally, the finding based on documents taken

behind the back of the parties by the Arbitrator, would also

qualify as a decision based on no evidence in as much as

such decision is not based on evidence laid by the parties,

therefore, would also have to be categorized as perverse.

15. It is, thus, evident that the settled legal position is

that in an application under Section 34 of the Act, 1996,

the court is not expected to act as an appellate court and

re-appreciate the evidence. The scope of interference would

be limited to the ground provided under Section 34 of the

Act, 1996. The interference would be so warranted when

the Award is in violation of the public policy of India which

has been held to be a fundamental policy of Indian law.

Further, the arbitral Award can also be interfered

with if it shocks the conscience of the court as also the

Award would be set aside on the ground of patent illegality 48

appearing on the face of the Award and if the decision is

perverse.

16. This Court, having considered the proposition laid

down by the Hon'ble Apex Court in the aforesaid judgment

and coming back to the Award passed by the learned

Tribunal, has found that the Award has not been passed by

giving go-bye to the condition stipulated in the agreement,

rather, thoughtful consideration has been given by the

learned Tribunal regarding the condition stipulated under

Condition No. 2 and having discussed the same at

paragraph 27, the Award has been passed on 02.06.2017.

17. This Court, thus, is of the view after going through

the Award passed by the learned Arbitrator that there is no

error on the face of it, it does not suffer from perversity and

it is not against the public policy.

18. This Court, after considering the order passed by

the court exercising the power under Section 34 of the Act,

1996 has found therefrom that the learned court has

considered the fact in entirety as also has considered the

scope of judicial review by taking note of the judgment

rendered in the case of Oil & Natural Gas Corporation

Ltd. v. Saw Pipes Ltd. (Supra) which pertains to

interference to be shown in a case of violation of public

policy/perversity or if there is any error on the face of the 49

Award, but the learned court has not found any error on

the face of the Award and the Award having not been found

contrary to the public policy and does not suffer from the

perversity, rather, the learned court, by taking note of the

consideration so made by the learned Arbitrator, has given

specific finding that the Award suffers from no error.

19. This Court, on the basis of the discussion made

hereinabove, is of the view that the Award passed by the

learned Tribunal as also the order passed by the learned

court in exercise of power under Section 34 of the Act,

1996, suffer from no error.

20. So far as the ground agitated that the Award of

counter claim awarding meager amount is concerned,

according to the considered view of this Court, the learned

sole Arbitrator has awarded Rs.9,47,706/- towards the

claim made under the head of the 70% share of the amount

received by the Claimant from the citizens by offering the

government services plus a lump sum amount of

Rs.2,00,000/- towards the delay caused in disbursement of

the said amount of the share of the State Government.

The aforesaid finding, therefore, suggests that it is

not that there is no order on counter claim, as has been

argued, rather, the order has been passed on the counter

claim awarding Rs.9,47,706/- towards the claim made

under the head of the 70% share of the amount received by 50

the Claimant from the citizens by offering the government

services plus a lump sum amount of Rs.2,00,000/- towards

the delay caused in disbursement of the said amount of the

share of the State Government, therefore, the counter claim

has also been considered and Award has been passed

holding the State entitled for the aforesaid amount of

Rs.9,47,706/- plus Rs.2,00,000/-.

21. This Court, taking into consideration the fact that

the Award passed by the learned sole Arbitrator since

suffers from no error, having not found to be contrary to

public policy, therefore, is of the view that the order passed

by the learned court under Section 34 of the act, 1996

requires no interference in exercise of power of judicial

review.

22. Accordingly, the instant appeal fails and is

dismissed.

23. Consequently, pending interlocutory applications

also stand dismissed.

(Sujit Narayan Prasad, J.)

I agree

(Ratnaker Bhengra, J.) (Ratnaker Bhengra, J.)

Birendra/ A.F.R.