Reliance Media Works Limited v. Nishant Construction Pvt. Ltd.
2024-07-01
PRANAV TRIVEDI, SUNITA AGARWAL
body2024
DigiLaw.ai
JUDGMENT : Pranav Trivedi, J. 1. The instant First Appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “the Act”), challenging the judgment and order dated 30.01.2021 passed by the Judge, Commercial Court, City Civil Court, Ahmedabad (hereinafter referred as to “the Commercial Court) in Commercial Civil Misc. Application No.26 of 2018, wherein the Commercial Court rejected the application preferred by the appellant under Section 34 of the Act. 2. The facts leading to the filing of the appeal is that the appellant and the respondent entered into a Memorandum of Understanding (MoU) for development of Multiplex Theaters on land situated at Survey No. 46 admeasuring 7010 square meters of Vejalpur TPS No. 4 situated at Regency Center, Near Prahlad Nagar, Satellite Road, Ahmedabad on 01.02.2008. As per the clauses of the MoU and subsequently the contract, there were reciprocal promises for performance. It was the case of respondent that as per the clauses contained in the contract, particularly clauses iv, v(a) etc., the responsibility for performance of certain obligations was on the appellant and its Architects. This was mainly with respect to drawings certified by the Architect of the appellant and the designs. Therefore, it was the case of the respondent that the designs, layouts, specifications, etc. were not done by the appellant and that has resulted into delaying fulfilling the promises of the contract. 2.1 Similarly, it was the case of the appellant that the respondent had entered into a contract with Aditya Birla Ltd. for taking the Mall on lease and they entered into MOAT dated 01.03.2008 and as per said agreement, Aditya Birla Limited for the remaining portion of the Mall, which was to be taken on lease. There were dispute between the respondent and Architects of Aditya Birla Group, which has resulted into termination of the contract and during the pendency of the dispute between the respondent and Aditya Birla Group, the whole structure of Mall was demolished. With such cross allegations, the dispute was referred to the Arbitrator. Subsequent to the dispute, being referred to the Arbitrator, the statement of claims, written statements, oral evidences, documentary evidences, etc. were filed by the respective parties, even a counter claim also came to be preferred by the present appellant.
With such cross allegations, the dispute was referred to the Arbitrator. Subsequent to the dispute, being referred to the Arbitrator, the statement of claims, written statements, oral evidences, documentary evidences, etc. were filed by the respective parties, even a counter claim also came to be preferred by the present appellant. By way of award dated 19.12.2017, the learned Sole Arbitrator allowed all the claims of the respondent, whereas counter claim of the appellant came to be rejected. 2.2 Being aggrieved by the award dated 19.12.2017, passed by the learned Sole Arbitrator, the appellant herein preferred an application under Section 34 of the Act. By way of order dated 30.01.2021, the application preferred by the appellant came to be dismissed. This order of dismissal in the application under Section 34 of the Act is assailed in the present appeal. 3. We have heard Mr. Shalin Mehta, learned senior advocate with Mr. Harsheel D. Shukla, learned advocate for the appellant and Mr. Saurabh Soparkar, learned senior advocate with Mr.Umesh D. Shukla, learned senior advocate with Mr. Manav Mehta, learned advocate for the respondent. 4. Mr. Shalin Mehta, learned senior advocate has submitted that the conclusion drawn and findings arrived at by the learned Sole Arbitrator are patently illegal. Patent illegality can be violation of substantive law, violation of any provisions of the Act and violation in terms of the contract or the finding may be perverse. So If the appellant is able to show that there was only one view, which is possible, then the Court may set aside the award as well as the order passed by the learned Sole Arbitrator passed below under Section 34 application. Mr. Mehta, learned senior advocate for the appellant has further submitted that the learned Sole Arbitrator grossly erred in coming to a conclusion that the appellant was responsible for breaching the obligations and respondent was not responsible for any breach at all for any obligation on his part. Such observation is patently illegal. 4.1 Mr. Mehta, learned senior advocate has further submitted that to observe that the award was patently illegal, the documents have to be looked into. It is true that this reappreciation of evidence would be prohibited, but at the same point of time, to appreciate that the award and its patent illegality, the document can be looked into. In wake of such submission, Mr.
It is true that this reappreciation of evidence would be prohibited, but at the same point of time, to appreciate that the award and its patent illegality, the document can be looked into. In wake of such submission, Mr. Mehta, learned senior advocate has drawn attentions towards internal page 60' of the award and page 427 & 429' of the paper-book. It was contended by Mr. Mehta, learned senior advocate that it is not the case that the appellant has lost interest in the project. As a matter of fact, the last communication between the parties was made by the appellant. Therefore, the finding of the learned Arbitral Tribunal that the appellant has not responded is perverse. There are several communications that has exchanged between the parties and it was the appellant who had made the last communication. It was further submitted by Mr. Mehta, learned senior advocate that the Tribunal has erred in observing that the Multiplex sale date and the commercial operations date are not sacrosanct and time is not of the essence of the contract. Such finding is a faulty and perverse finding. It was further submitted that the Tribunal has recorded that the appellant is responsible for delaying the project by not giving proper drawings etc. However, at the same point of time, the learned Arbitrator records that Architect from both the sides were looking for solution of the issue. Therefore, this situation cannot co-exist. In the wake of such finding, the Arbitral Tribunal cannot come to a conclusion that time was not of essence of the contract. Therefore, the finding recorded by the learned Arbitral Tribunal is perverse. 4.2 Mr. Mehta, learned senior advocate has further submitted that the learned Arbitral Tribunal has come to a wrong conclusion that the appellants were not interested in the project due to the dispute of the respondent with Aditya Birla Group. The communication between the parties are looked into. It cannot be observed that the appellant terminated his contract because Aditya Birla Group terminated the contract with respondent. Such finding is perverse. It was further submitted that there were issues with regard to environmental clearance for which the appellant could not have been proceeded. 5. Per contra, Mr. Saurabh Soparkar, learned senior advocate appearing for the respondent has submitted that 30.04.2009 was the date when the commercial operations were required to be started by the appellant.
Such finding is perverse. It was further submitted that there were issues with regard to environmental clearance for which the appellant could not have been proceeded. 5. Per contra, Mr. Saurabh Soparkar, learned senior advocate appearing for the respondent has submitted that 30.04.2009 was the date when the commercial operations were required to be started by the appellant. The appellant has not adhered to such date. Further the obligation of the respondent were dependent on the obligations of the appellant herein which were to provide drawings. Once they had not done so by not providing drawings and sketches, the delay was attributable to the appellant. It was further submitted that there are clear cut evidences, which shows that the appellant had not provided the designs despite repeated reminders. Further, there is discussion on whether time was of the essence of the contract. Once the learned Arbital Tribunal has come to the conclusion that time was not the essence of the contract, then the delay has to be attributable to the appellant herein. It was further submitted that if at all the environmental clearance and other requisite permissions were causing delay, then there was no communication by appellant to ask the respondent to get said clearances done. If time was not of the essence of the contract, then the appellant could have called upon the respondent to get the clearances done instead of unilaterally terminating the contract. Therefore, the completion of project on 30.04.2009 was due to the appellant’s fault and not for the fault of the respondent and therefore, the termination was invalid. It was further submitted that the appellant lost the interest due to the dispute with Aditya Birla Group and therefore, terminated the contract. The respondent has demanded compensation for a loss spanning ten years, but the learned Tribunal awarded loss to the tune of three years only, as the property was put to gainful use thereafter. Therefore, the learned Arbitrator has taken a considered view. Therefore, unless it is found that the finding of learned Arbitrator is to be perverse, or something that shocks the conscience of this Court then there would be no need to interfere.
Therefore, the learned Arbitrator has taken a considered view. Therefore, unless it is found that the finding of learned Arbitrator is to be perverse, or something that shocks the conscience of this Court then there would be no need to interfere. Even the judgment of the lower court below in application under Section 34 proceeds on the same premises and therefore, in the humble submissions of the respondent that there is no question of upsetting the award of the learned Arbitrator or the order passed by the learned court below in application under Section 34. 5.1 Mr. Soparkar, learned senior advocate appearing for the respondent has relied upon following judgments:- (i) McDermott International Inc versus Burn Standard Co. Ltd. reported in (2006) 11 SCC 181 . (ii) Swan Gold Mining Limited versus Hindustan Copper Limited reported in 2015 (5) SCC 739 . (iii) Associate Builders versus DDA reported in (2015) 3 SCC 49 . (iv) UHL Power Company Limited versus State of Himachal Pradesh reported in (2022) 4 SCC 116 . (v) Ssangyong Engineering & Const. Company Limited versus NHAI reported in (2019) 15 SCC 131 . 5.2 Mr. Soparkar, learned senior advocate has submitted that the award is well considered and detailed, and that the view taken by the learned Arbitrator is the correct one. In Section 34 and even more so now in Section 37, the test is not whether the view is correct, but whether it is so perverse as to offend the conscience of the court in order to set aside the award. Therefore, unless the appellant goes beyond that stage, the appeal may be dismissed. 6. We have heard learned advocates appearing for the respective parties and perused the documents on record. In the present case, the first contention taken by the appellant was that the multiplex could not be completed by 30.04.2009 due to the appellant's breach. It was contended that height of the projector room was a major issue due to which, the seating would be reduced. Such issue could not have been attributed to the appellant. In context of the same, the Tribunal has given a clear-cut finding that the appellant had abandoned the contract in 2010, further the time was not of essence of the contract and there was no fixed timeline as to when the constructions were to be completed.
Such issue could not have been attributed to the appellant. In context of the same, the Tribunal has given a clear-cut finding that the appellant had abandoned the contract in 2010, further the time was not of essence of the contract and there was no fixed timeline as to when the constructions were to be completed. There are categorical findings to the effect that the appellant had abandoned the project due the litigation qua the other floors with Aditya Birla Group and the defendant, the appellant had lost interest in the project. There is a clear-cut finding by the learned Arbitral Tribunal on such aspect. Therefore, the submissions made by Mr. Shalin Mehta, learned senior advocate to the effect that perusal of the communication would suggest that the appellant had not abandoned the project or he had not lost interest in the project is nothing but reappreciating the evidence which has already been appropriated by the learned Tribunal. Therefore, we find no perversity with the distinction drawn by the learned Arbitral Tribunal. In wake of such observations, the contentions as raised by Mr. Mehta, learned senior advocate are meritless. 7. Having gone through the order passed the Commercial Court, the reasons given therein and on appreciation of the findings led by the parties, we do not find any good ground to interfere with the award noticing the scope of interference under Section 37 of the Act. 8. We may note the decision of the Apex Court in UHL Power Company Limited vs. State of Himachal Pradesh reported in [ (2022) 4 SCC 116 ], wherein the Hon'ble Apex Court has held that the jurisdiction conferred on the Courts under Section 34 of the Arbitration Act is fairly narrower, when it comes to the scope of exercise of powers under Section 37 of the Arbitration Act. Noticing its earlier decision in MMTC Ltd. vs. Vedanta Ltd., reported in [ (2019) 4 SCC 163 ], it was noticed that the reasons for vesting such a limited jurisdiction on the Courts in exercise of powers under Section 34 of the Act, 1996, have been explained therein in para ‘11’ as under :- “11.
Noticing its earlier decision in MMTC Ltd. vs. Vedanta Ltd., reported in [ (2019) 4 SCC 163 ], it was noticed that the reasons for vesting such a limited jurisdiction on the Courts in exercise of powers under Section 34 of the Act, 1996, have been explained therein in para ‘11’ 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 reasonableness. Furthermore, “patent illegality” itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.” 9. By referring to various decisions of the Apex Court, it was noticed from para Nos. ‘18’ to ‘21’in UHL Power Company Limited (supra) that it has been held time and again by the Hon'ble Apex Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the Arbitrator proceeds to accept one interpretation as against the others. The construction of the terms of contract is primarily is 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. It was further noted that when the Court is applying “ ’public policy test’ to the arbitration award, it does not act as a court of appeal and consequentially, errors on facts cannot be corrected”.
It was further noted that when the Court is applying “ ’public policy test’ to the arbitration award, it does not act as a court of appeal and consequentially, errors on facts cannot be corrected”. A possible view by the learned Arbitrator on facts has necessarily to pass muster as the Arbitrator is the ultimate master of the quality and quantity of evidence to be relied upon when he delivers his arbitral award. Thus, the award based on little evidence or on evidence which does not measure up in quantity to a trained legal, would not be held to be involved on this score. 10. The requirement is that the Arbitral Tribunal must decide in accordance with the terms of the contract, but if the test is that arbitral tribunal must decide in accordance with the terms of the contract, but if term of the contract is construed in reasonable manner within the award ought not to be set aside on the ground of unreasonableness only. It was further noticed in paragraph Nos. 20 and 21 as under :- “20. In Dyna Technologies (P) Ltd. (supra), the view taken above has been reiterated in the following words: “25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.” 21. An identical line of reasoning has been adopted in South East Asia Marine Engg. & Constructions Ltd.[SEAMAC Limited] V. Oil India Ltd. and it has been held as follows: “12. It is a settled position that a court can set aside the award only on the grounds as provided in the Arbitration Act as interpreted by the courts. Recently, this Court in Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1 : 2019 SCC OnLine SC 1656 laid down the scope of such interference. This Court observed as follows : (SCC pp. 11-12, para 24) 24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts.
This Court observed as follows : (SCC pp. 11-12, para 24) 24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.” 13. It is also settled law that where two views are possible, the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning. This Court in Dyna Technologies (2019) 20 SCC 1 : 2019 observed as under : “25. Moreover, umpteen number of judgments of this Court have categorically held that the Court should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.” [emphasis supplied]” 11. In MMTC Ltd. (supra), the Hon'ble Apex Court on the scope of interference with an order made under Section 34, as per section 37, has held that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. The relevant para 14 in MMTC Ltd. (supra) be noted :- “As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34.
The relevant para 14 in MMTC Ltd. (supra) be noted :- “As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such 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.” 12. In Project Director, National Highways No. 45E and 220 National Highways Authority of India vs. M. Hakeem and Another reported in [ (2021) 9 SCC 1 ], the Hon'ble Apex Court while considering the question of scope of the powers of the Courts under Section 34 of the Act, 1996 to set aside the award of the Arbitrator including the power to modify such award, considered its earlier decision in MMTC (supra) to record that it is settled that the Section 34 proceedings does not contain any challenge on the merits of the award. It was held that Section 34 of the Arbitration Act, 1996 vary from being in the nature of appellate provisions. It provides only for setting aside the awards only on very limited grounds, as contained in Sub-sections (2) and (3) of Section 34. The recourse to the Court against arbitral award may be made only by application for setting aside such award in accordance with Sub-sections (2) and (3). It was observed that Section 34 of the Act, 1996 is modelled on the UNCITRAL Model Law on International Commercial Arbitration, 1985, under which no power to modify the award is given to the Court hearing a challenge to an award. Statutory scheme under Section 34 of the Act, 1996 is in keeping with the UNCITRAL Model Law and legislative policy of minimal judicial interference in arbitral awards. Referring to the decision of the Apex Court in McDermott International Inc. vs. Burn Standard Co.
Statutory scheme under Section 34 of the Act, 1996 is in keeping with the UNCITRAL Model Law and legislative policy of minimal judicial interference in arbitral awards. Referring to the decision of the Apex Court in McDermott International Inc. vs. Burn Standard Co. Ltd. reported in [ (2006) 11 SCC 181 ], it was noticed that 1996 Act makes provisions for supervisory role of the Courts in the review of the arbitral award only to ensure fairness. Interference of the Courts is envisaged in few circumstances only, like in case of fraud or bias of the Arbitrator, violation of principles of natural justice etc.. The Courts cannot correct the terms of the Arbitrator. It can only quash the awards leaving the parties to begin with the arbitration again, if it so desires. The scheme of the provisions, namely Sections 34 and 37 of the Act, 1996, thus, aims at keeping supervising role of the Courts at minimum level and this can be justified, as the parties to the agreement make a conscious decision to exclude the Court’s jurisdiction by opting for arbitration as they prefer expeditious and finality over by it. It was, thus, held that there can be no doubt that given the law laid down by the Apex Court, Section 34 of the 1996 Act cannot be held to include within it a power to modify the award. 13. Considering the law laid down by the Hon'ble Apex Court in the matter of scope of interference under Sections 34 and 37 of the Act, 1996, as noted herein-before, it is not possible for us to draw alternative view to interfere in the award passed by the learned Arbitrator on the arguments made by the learned senior advocate for the appellant. There is hardly any ground for us to interfere with the arbitral award in the given facts and circumstances of the instant case. 14. In the aforesaid view, the challenge to the arbitral award as also to the orders passed by the Court under Section 34 of the Act, 1996 is found devoid of merits. The appeal stands, accordingly, dismissed. 15. Consequently, the connected Civil Application for stay also stands disposed of.