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2024 DIGILAW 1739 (GUJ)

Rajkot Municipal Corporation Through Municipal Commissioner v. S. N. Enviro-Tech Pvt. Ltd.

2024-08-20

PRANAV TRIVEDI, SUNITA AGARWAL

body2024
ORDER : (PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI) 1. By way of present appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the “Act”), the appellant begs to challenge the legality, validity and propriety of the judgment and order dated 29.05.2023 passed by the learned Commercial Court, Rajkot (for short the “Commercial Court”) in Civil Misc. Application No. 33 of 2022, preferred under Section 34 of the Act. 2. The factual matrix which led to the filing of the present appeal under Section 37 of the Act is that the appellant – original respondent is a statutory local authority governed under the provisions of The Gujarat Provincial Municipal Corporation Act, whereas, the respondent, is a Company registered under the Companies Act, and engaged in the business of ‘Turnkey Execution and Development of Environmental and Infrastructure Projects’ related to water and Sewage Treatment Plants. 2.1. It is the case of the appellant that the appellant intended to design, build and commissioning a project of 44.5 MLD Sewage Treatment Plant (STP) based on conventional activated slugged process at Madhapar, District : Rajkot. The appellant also intended to give contract for operation and maintenance of the said plant for a period of three years to the highest bidder. Pursuant thereto, bids were invited in the year, 2012 through E-tender process and in the said process, the respondent being the highest bidder, was awarded the work. Thereafter, in the month of March, 2013, an agreement was entered into between the appellant and the respondent for the STP project. 2.2. In pursuance to the agreement, the respondent commenced the work. However, a dispute arose between the parties and in the wake of such dispute between the parties, the appellant terminated the agreement on 07.12.2020 and the respondent was also blacklisted. As far as the order of blacklisting is concerned, same is pending adjudication before this Court. However, being aggrieved by the order of termination dated 07.12.2020, the respondent initiated arbitration proceedings under Section 11 of the Act by way of preferring writ petition being IAAP No. 139 of 2020. This Court vide order dated 29.10.2021 appointed the learned Arbitrator to resolve the dispute between the parties and the Arbitral Tribunal presided by sole Arbitrator came to be constituted. 2.3. Thereafter, the arbitration proceedings were initiated, which culminated into Arbitration Case No. 12 of 2021. This Court vide order dated 29.10.2021 appointed the learned Arbitrator to resolve the dispute between the parties and the Arbitral Tribunal presided by sole Arbitrator came to be constituted. 2.3. Thereafter, the arbitration proceedings were initiated, which culminated into Arbitration Case No. 12 of 2021. The Arbitral Tribunal by way of award dated 01.10.2022, allowed the claim of the respondent along with 9% interest on various heads. Being dissatisfied with the award passed by the Arbitral Tribunal, the appellant preferred an application under Section 34 of the Act being Civil Misc. Application No. 33 of 2022 before the Commercial Court. The Commercial Court by way of order dated 29.05.2023 rejected the application preferred by the appellant under Section 34 of the Act. Hence, the present appeal is preferred under Section 37 of the Act. 3. We have heard Mr. Prakash Jani, learned Senior Advocate assisted by Mr. Nishant Lalakhiya, learned advocate for the appellant and learned advocate Mr. Rajesh Ranjan, assisted by Mr. Rutul Desai, learned advocate appearing for the respondent. 4. Mr. Prakash Jani, learned Senior Advocate has taken three-fold contentions. The first contention is with regard to the findings given by the learned Arbitrator at issue no. 8 which is at page ’156’ of the paper-book. Mr. Prakash Jani, learned Senior Advocate has contended by that the findings given by the Arbitral Tribunal are without any reason, and the learned Arbitrator has just given breakup of payment towards the Running Account Bill and interest as well as retention of amount. There is no finding with regard as to why such amount has to be paid towards the Running Account Bill nos. 27, 28 and 29. Therefore, issue no. 8 is decided against the appellant without any cogent reason or finding and thereby creates perversity. Mr. Prakash Jani, learned Senior Advocate has raised second contention that even the Commercial Court in the impugned order under Section 34 of the Act has passed an order on a different tangent and has not considered the perversity of the award passed by the Arbitral Tribunal. Therefore, manifestly, the order passed by the Commercial Court below application under Section 34 of the Act also suffers from error of law. The third and last bone of contention is with regard to the dismissal of the counter claim of the appellant, which issue was answered in issue no. 13. Therefore, manifestly, the order passed by the Commercial Court below application under Section 34 of the Act also suffers from error of law. The third and last bone of contention is with regard to the dismissal of the counter claim of the appellant, which issue was answered in issue no. 13. It has been submitted that there are no clear cut findings as to why the counter claim of the appellant is rejected and on the said aspect, the award is a non-speaking award. 4. Having considered the submissions made by the learned counsels for the parties and having perused the material on record, it transpires that the main two-fold contentions raised by Mr. Jani, learned Senior Advocate is with regard to issue nos. 8 and 13. Insofar as issue no. 8 is concerned, it pertains to outstanding payment to be made on the basis of Running Account Bill towards works carried out. However, if it is perused carefully, the Arbitral Tribunal has answered the issue on core controversy between the parties in issue nos. 3, 4, 6 and 10. These issues addresses the main controversy as to whether the respondent – original claimant is able to prove that they have run and commissioned the STP as well as operated and maintained the plant. The Arbitral Tribunal had given cogent finding and reasons while answering the issues affirmatively in favour of the respondent – claimant. Once that is done, issue no. 8 which relates to outstanding payment becomes a consequential issue. Therefore, there is no merits in the contention of Mr. Prakash Jani, learned Senior Advocate in respect of issue no. 8. The Arbitral Tribunal’s clear cut finding is given after observing the material on record that the claimant i.e. the respondent has not only successfully completed the project, but has also completed the project in the year 2017 and has successfully maintained the Sewage Treatment Plant for a period of more than three years. In the wake of such clear findings given on issue nos. 3, 4, 6 and 10 which were answered in favour of the respondent for the payment towards Running Account Bills, the same were consequential. Therefore, the appellant cannot agitate that there was no finding with regard to issue no. 8. As far as issue no. In the wake of such clear findings given on issue nos. 3, 4, 6 and 10 which were answered in favour of the respondent for the payment towards Running Account Bills, the same were consequential. Therefore, the appellant cannot agitate that there was no finding with regard to issue no. 8. As far as issue no. 13 is concerned, which relates to counter claim of the appellant, and that the said controversy has been decided by giving clear cut findings in issue nos. 3, 4, 6 and 10. Thus, the contentions raised by Mr. Jani, learned Senior Advocate becomes redundant and the same cannot be considered. 4.1. As regards the controversy with regard to impugned order dated 29.05.2023 is concerned, the same cannot be said to be perverse and we do not find any infirmity with the award passed by the Arbitral Tribunal. Thus, the contentions raised by Mr. Jani, learned Senior Advocate fails. 5. 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 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. As far as Section 34 is concerned, the position is wellsettled 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.” 28. 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 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”. 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. 29. 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. 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. 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. 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]” 6. In MMTC Ltd. (supra), the 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. 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.” 7. 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.” 7. 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 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. 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. 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. 8. Considering the law laid down by the 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 counsel 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. 9. 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. Consequently, the connected Civil Application for stay also stands disposed of.