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2019 DIGILAW 303 (JHR)

State of Jharkhand v. HSS Integrated SDN, BH

2019-01-30

ANIRUDDHA BOSE, RATNAKER BHENGRA

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JUDGMENT : ANIRUDDHA BOSE, J. 1. The appeal arises out of a contractual dispute between the State and the opposite parties in relation to a consultancy agreement over construction of six-lane Divided Carriage-way of certain parts of Ranchi Ring Road. The respondent nos. 1 and 2 acted as a consortium for providing such consultancy and supervisory services. The contract, a copy of which has been produced before us by Mr. Banerjee, learned counsel for the appellants-State, appears to be a standard form contract for “Construction Supervision of Domestic Civil Project”. That is how the contract has been described in various communications amongst the parties but the contract itself does not carry such title or heading. The contract was executed on 28th August, 2007. We find from page 31 of the compilation tendered before us by Mr. Banerjee that the selection of the respondents who represented themselves as a joint venture was on the basis of bidding process. The State had issued a letter dated 12th December 2011 for suspension of payment in terms of Clause 2.8 of the GCC followed by another notice issued on 9th February 2012 seeking to terminate the contract. The dispute between the parties primarily originated from termination of contract by the State. There were disputes on other counts also. An Arbitral Tribunal was constituted by an order passed by this Hon’ble Court for addressing the disputes by and between the parties. 2. For proper appreciation of the rival contentions, we reproduce below two clauses, being 2.8 and 2.9 from the General Conditions of Contract:- “2.8. Suspension The Client may, by written notice of suspension to the Consultants, suspend all payments to the Consultants hereunder if the Consultants fail to perform any of their obligations under this Contract, including the carrying out of the Services, provided that such notice of suspension (i) shall specify the nature of the failure, and (ii) shall request the Consultants to remedy such failure within a period not exceeding thirty (30) days after receipt by the Consultants of such notice of suspension. 2.9 Termination 2.9.1 By the Client The Client may, by not less than thirty (30) days’ written notice of termination to the Consultants (except in the event listed in paragraph (f) below, for which there shall be a written notice of not less than sixty (60) days), such notice to be given after the occurrence of any of the events specified in paragraphs (a) through (g) of this Clause GC 2.9.1, terminate this Contract. (a) if the Consultants fail to remedy a failure in the performance of their obligations hereunder, as specified in a notice of suspension pursuant to Clause GC 2.8 herein above, within thirty (30) days of receipt of such notice of suspension or within such further period as the Client may have subsequently approved in writing:……” 3. The Arbitral Tribunal comprised of nominees of the rival parties and a retired Judge of this Court as the Presiding Arbitrator. There was claim for Rs.5,17,88,418/- under 13 heads excluding interest. The State referred to in the contract as the client had also made counterclaim for Rs.6,00,78,736.00/- under five heads. The claim primarily involved unpaid amount in respect of work executed under the contract, loss of profit and overhead charges apart from other consequential claims arising out of termination. The claimant contended that such termination was illegal, not being in accordance with the terms of the contract. The nature of counterclaims, on the other hand was for reimbursement on account of unsatisfactory performance by the claimant. That formed major part of the counter claim. So far as this appeal is concerned, we do not consider it necessary to reproduce each and every head of claim. 4. In the award, the Tribunal was unanimous in its finding that termination of the contract was illegal and invalid. Question of legality of the termination was dealt with by the Arbitral Tribunal in the following manner:- “17. Now the question is whether the termination of the contract is legal and valid? 18. The answer is in the negative for the following reasons. 19. The Respondents on the one hand granted the 2nd extension vide letter No. 623 dated 25.11.2011 but on the other hand issued a letter No. 626 on the same day i.e., 25.11.2011 threatening suspension of payment under Cl.2.8 of the GCC alleging certain deficiencies. 20. 18. The answer is in the negative for the following reasons. 19. The Respondents on the one hand granted the 2nd extension vide letter No. 623 dated 25.11.2011 but on the other hand issued a letter No. 626 on the same day i.e., 25.11.2011 threatening suspension of payment under Cl.2.8 of the GCC alleging certain deficiencies. 20. On 05.12.2011, a review meeting was held between the parties, followed by a letter dated 07.12.2011 issued by the Claimant in reply/compliance of the said letter dated 25.11.2011. 21.Without properly considering the said letter of the Claimant, dt.7.12.2011, the Respondents issued letter No. 663 dated 12.12.2011 invoking Cl.2.8 of the GCC for suspension of payment, alleging certain deficiencies. Cl.2.8 reads as follows:- “Cl.2.8: Suspension The Client may, by written notice of suspension to the Consultants, suspends all payments to the Consultants hereunder if the Consultants fail to perform any of their obligations under this Contract, including the carrying out of the services, provided that such notice of suspension (i) shall specify the nature or the failure and (ii) shall request the consultants to remedy such failure within a period not exceeding thirty (30) days after receipt by the Consultants of such notice of suspension.” 22. The claimant vide letter dated 27.12.2011 replied/complied to the said suspension notice. 23. In reply to the said letters, the Respondents issued letter No. 681 dated 23.12.2011 and a letter No. 687 dated 28.12.2011 asking the Claimants to ensure compliance of the pending issues. Thus by these letters the said suspension letter No. 663 dated 12.12.2011, was given a go bye/diluted by the Respondents. 24. But even then, on 09,02.2012 a purported notice terminating the contract w.e.f. 12.03.2012 was issued by the Respondent under Cl.2.9.1(a) and (d). Thus by these letters the said suspension letter No. 663 dated 12.12.2011, was given a go bye/diluted by the Respondents. 24. But even then, on 09,02.2012 a purported notice terminating the contract w.e.f. 12.03.2012 was issued by the Respondent under Cl.2.9.1(a) and (d). Cl.2.9.1.reads as follows:- “Cl.2.9 Termination; 2.9.1 By the Client The Client may by not less than thirty (30) days written notice of termination to the Consultants (except in the event listed in paragraph (f) below, for which there shall be a written notice of not less than sixty (60) days), such notice to be given after the occurrence of any of the events specified in paragraphs (a) through (g) of this Clause GC2.9.1, terminate this contract.” (a) If the Consultants fail to remedy a failure in the performance of their obligations hereunder, as specified in a notice of suspension pursuant to Clause CG 2.8 above, within thirty (30) days of receipt of such notice of suspension or within such further period as the Client may have subsequently approved in writing. ……….. (d) If the Consultants submit to the Client a statement which has a material effect on the rights, obligations or interests of the Client and which the Consultants know to be false. 25. As already noticed above, the suspension letter dated 12.12.2011 was given a go bye/diluted by the Respondents themselves and therefore Cl.2.9.1(a) was not attracted, on the basis of which the contract was terminated. 26. However the Claimant replied to the said termination notice by letters dated 16.02.2012 and 24.02.2012 and requested the Respondents to reconsider the matter. The Claimant is justified in arguing that this letter was for amicable settlement in terms of Cl.8 of G.C.C which reads as follows:- “Cl.8: Settlement of Disputes Cl.8.1Amicable Settlement The parties shall use their best efforts to settle amicably all disputes arising out of or in connection with this Contract or the interpretation thereof. Cl.8.2 Dispute Settlement Any dispute between the parties as to matters arising pursuant to this contract which cannot be settled amicably within thirty (30 days) after receipt by one party of the other party’s request for such amicable settlement in accordance with the provisions specified in the SC.” 27. Cl.8.2 Dispute Settlement Any dispute between the parties as to matters arising pursuant to this contract which cannot be settled amicably within thirty (30 days) after receipt by one party of the other party’s request for such amicable settlement in accordance with the provisions specified in the SC.” 27. But without considering the said reply of the Claimant and without responding to the request for amicable settlement, the Respondents issued a letter dated 01.03.2012, asking the Claimant to adhere to Cl.2.9.4 of GCC-“Cessation/Closing the Service.” 28. The Claimant through a legal notice dated 10.03.2012 denied and disputed the alleged events specified in Cl.2.9.1(a) and cautioned the Respondents not to terminate the contract in view of Cl.2.9.6 of GCC., and referred the matter to arbitration, by naming Mr. G. Sharan as arbitrator. Cl.2.9.6 of GCC reads as follows:- “Cl.2.9.6 Disputes about events of termination If either party disputes whether an event specified in paragraphs (a) through (e) of Clause CC 2.9.1 or in Clause GC 2.9.2 hereof has occurred such party may within forty five days after receipt of notice of termination from the other party refer the matter to arbitration pursuant to Clause CC 8 hereof, and this contract shall not be terminated on account of such event except in accordance with the terms of any resulting arbitral award.” 29. Thus, within 45 days of the purported notice of termination, the Claimant invoked arbitration, in terms of Cl.8 of GCC and consequently, in terms of Clause 2.9.6 the contract did not stood terminated; and the Respondents were obliged to proceed with the process of arbitration resulting in arbitral award. 30. But the Respondents returned the bills for November, 2011 to February 2012 without any cogent reason. 31. Thereafter the Respondents proposed the name of Mr. R.P. Indoria as an arbitrator, by letter dated 30.04.2012. 32. Then the Claimant moved the Hon’ble High Court of Jharkhand for appointment of a sole arbitrator by filing an application being Arbitration Application No. 8 of 2012. The Respondents filed counter affidavit. The said application was disposed off on 17.05.2013, constituting this arbitral tribunal. 33. During the pendency of the said Arbitration Application, the Respondents encashed the Bank guarantee of the Claimant on 22.11.2012. 34. During the hearing when asked by us, the Respondents could not show how Cl.2.9.1(d) was attracted. Then they accepted that Cl. (d) was written in the notice by mistake. 33. During the pendency of the said Arbitration Application, the Respondents encashed the Bank guarantee of the Claimant on 22.11.2012. 34. During the hearing when asked by us, the Respondents could not show how Cl.2.9.1(d) was attracted. Then they accepted that Cl. (d) was written in the notice by mistake. This also shows non application of mind on the part of the Respondents. 35. In the facts and circumstances noticed above, it has to be held that the termination of the contract was illegal and invalid. Firstly, whenever the Respondents raised issues and/or alleged deficiencies, the Claimant replied/complied to the issues/allegations. But there was no final word from the Respondents, specifying the deficiencies, which the Claimant failed to remedy. Secondly the Respondents themselves gave a go bye and diluted the suspension notice, by asking the Claimant to ensure compliance of the pending issues. Thirdly, within 45 days of the notice of termination, the Claimant referred the matter to arbitration and therefore in view of Cl.2.9.6 of the GCC, the plea of the Respondents that the contract stood terminated is wholly untenable. 36.Thus it is clear that the contract did not stood terminated and therefore the actions/inactions of the Respondents in treating the contract as terminated were wrong and arbitrary. Accordingly, the purported termination of the contract is held illegal and invalid.” 5. On the basis of such finding the individual claims were dealt with and the award was made on 15th February 2015 for a sum of Rs.2, 10, 87, 304/- and counterclaim stood altogether rejected. 6. The award was challenged under Section 34 of the Arbitration and Conciliation Act, 1996 before the Commercial Court, Ranchi. The Presiding Officer of the Commercial Court found no reason to interfere with the award. Referring to various authorities primarily dealing with the jurisdiction of the Court under the aforesaid provision to interfere with the award, the learned Commercial Court held:- “18.The objection that the award is bad and illegal, it was contrary to the terms and condition and against the public policy are not sustainable. Nothing has been explained for such objection. The perusal of the record as well as the award, nowhere show that it is contrary to the terms and conditions of the agreement. Nothing has been explained for such objection. The perusal of the record as well as the award, nowhere show that it is contrary to the terms and conditions of the agreement. 19.The learned Arbitrators have dealt with the matter in detail after giving cogent reasons and has arrived at conclusion that petitioners herein are jointly and severally liable to pay an amount of Rs.2,10,87,304/- along with interest to the claimants ( Opposite Parties herein). The award nowhere reflects that it is against public policy or that, there is any bias or arbitrator has decided the dispute beyond his jurisdiction etc. 20. Even though, the petitioners have taken several grounds for setting aside the award but the basic ground taken by the objectors is that the impugned Award has been passed without any reasonable and sufficient ground and against the principles of natural justice and gross mistake has been committed by the learned Arbitrator which is against the law and against the documentary evidence and in violation of the public policy. 21. A perusal of impugned Award clearly shows that the learned Arbitrators have duly dealt with the matter and thereafter the detailed well-reasoned Award has been passed. They have dealt with each and every aspect of the matter. The findings arrived at by the learned Arbitrators are supported by cogent reasons and detailed proceedings. After considering the record and testimonies of witnesses etc. the impugned Award has been passed. 22. In these circumstances, this court is of the view that the impugned Award passed by learned Arbitrators is well reasoned award. This Court is not required to appreciate, re-evaluate the findings before the learned Arbitrators. The learned Arbitrators have duly explained for arriving at its decision. 23. Therefore, in view of the above said discussion and after considering the contentions of learned counsel for parties and in view of the various authoritative pronouncements discussed above and as this court is not sitting in appeal against the impugned Award passed by three arbitrators and the court is not required to re-appreciate or re-evaluate the evidence lead before the learned Arbitrator, the objector has failed to show how the passing of the impugned award is also against public policy. There is nothing from the award to show that there was no evidence to support the findings of the arbitrators which calls for interference as such the findings of arbitrator which have been objected are upheld. 24. In view of the foregoing reasons this court hold that the objector/petitioner has failed to make out any case for any interference with the impugned award dated 15.02.2015 passed by the learned Presiding Arbitrator, Hon’ble Mr. Justice R.K. Merathia (Rtd.), High Court of Jharkhand and Mr. G. Sharan and Mr.Indoria, both Arbitration Application no. 08 of 2012 under Section 34 of the Arbitration and Conciliation Act. 25. Accordingly, objections are overruled and petition is dismissed. In the facts and circumstances of the case the parties shall bear their own cost.” 7. Mr. Banerjee has assailed the judgment of the Commercial Court primarily on the grounds on which the award was challenged before the said Court. His argument is that the award was perverse and that the Arbitral Tribunal had failed to take into account the contractual clauses. According to him, termination was done in appropriate manner. His submission is that the notice of suspension in terms of Clause 2.8 was given on 12th December, 2011 followed by the termination letter of 9th February, 2012. His client, according to Mr. Banerjee, had given sufficient time for taking remedial measures to the opposite parties, but when the same was not undertaken, the State had no other option but to terminate the contract. Mr. Banerjee further contended that there was no evidence before the learned Tribunal to come to a conclusion that the notice of suspension stood diluted. 8. Stand of the opposite parties, on the other hand, is that the letter of 12th December, 2011 cannot be treated as a notice under Clause 2.8 of the GCC as it was not a letter which called for one time performance so that time could run from the date of the letter. There had been subsequent exchange of correspondences and compliance was being made in stages which was accepted by the State and hence if termination was to be effected at all, a fresh notice was required to be issued. This argument had been accepted by the Arbitral Tribunal as would be evident from the part of the award which we have reproduced earlier in this judgment. 9. This argument had been accepted by the Arbitral Tribunal as would be evident from the part of the award which we have reproduced earlier in this judgment. 9. The reviewing Court exercising its jurisdiction under Section 34 of the 1996 Act cannot undertake the exercise of re-appreciation of evidence except on very limited ground specified in the case of OIL & Natural Gas Corporation Ltd. versus Saw Pipes Ltd, reported in (2003) 5 SCC 705 and further elaborated by a subsequent authority, Associate Builders Versus Delhi Development Authority, reported in (2015) 3 SCC 49 . To examine the contentions raised by Mr. Banerjee, we would have to engage ourselves in re-appreciation of evidence, which is impermissible at this stage. We have already opined our inability to do so earlier in this judgment. 10. We do not find involvement of any grave violation of public policy by the Arbitral Tribunal in passing the award. The facts narrated in the award do not project any gross misuse of jurisdiction which could shock the conscience of the Court. What the appellant really wants from this Court exercising jurisdiction under Section 37 of the 1996 Act is to enter into re-appreciation of evidence. We also find that reasons were given by the Arbitral Tribunal for rejecting the counterclaim by the learned Arbitrator. Our findings, so far as reasons given by the learned Arbitrator in rejecting the counterclaim is concerned, is the same for which we decline to interfere with the claims allowed in the award. In such circumstances, this appeal fails. 11. The connected application (I.A. No.9630 of 2018) shall also stand disposed of, as we have dismissed the main appeal. 12. There shall be no order as to costs.