State Highways Authority of Jharkhand v. Intercontinental Consultants & Technocrats Pvt. Ltd
2025-02-12
DEEPAK ROSHAN, M.S.RAMACHANDRA RAO
body2025
DigiLaw.ai
JUDGMENT : M.S. Ramachandra Rao, C.J. 1. This Commercial Appeal is preferred under Section 13 of the Commercial Courts Act, 2015 challenging the judgment dt. 16.03.2024 of Additional Judicial Commissioner-III-cum-Presiding Officer, Commercial Court, Ranchi (for short ‘the Commercial Court’) passed in Commercial Arbitration Case No. 04/2022. 2. By the said judgment the Commercial Court has upheld the Award dt. 14.12.2021 of the Arbitral Tribunal and dismissed the application under Section 34 of the Arbitration and Conciliation Act, 1996 (in short ‘the Act’) filed before the said Court by the appellant/applicant/State Highway Authority of Jharkhand. 3. Admittedly, the appellant had entered into an agreement with the respondent in collaboration with another for providing consultation services relating to the Second Jharkhand State Road Project (ABD Funded). This agreement called the ‘Time-Based Contract Agreement’ was initiated on 02.11.2016 and the contract stipulated a revised price of US$ 29,58,300.00 plus Indian Rs.30,60,60,750.00 for the execution, completion of works, and rectification of defects, inclusive of provisional sum and contingencies but exclusive of local indirect taxes. 4. Following the issuance of a notice to proceed on 16.11.2016, work officially commenced on 01.12.2016. The duration of the contract was set at 50 months including a two month pre-construction period and the subsequent 12 month defects and liabilities period starting from the effective date of the contract. 5. The appellant terminated the contract on 05.06.2018 allegedly due to breach of contract by the respondent. 6. The disputes were referred to an arbitrator. Before the learned arbitrator, the respondent raised 9 claims while the appellant raised counter claims. 7. The decision of the Arbitral Tribunal along with 10 claims passed in the Award is as under: Claim No. Contractor’s claim Amount Respondent’s Assessment & Counter claim Tribunal Assessment INR USD INR USD SOC 1 -- -- Claim Rejected Claimant’s Claim is upheld -- -- SOC 2 6,44,67,031 4,66,205 Claim Rejected 6,44,67,031 4,66,205 SOC 3 2,26,49,000 Claim Rejected 2,26,49,000 SOC 4 6,27,41,094 6,39,208 Claim Rejected 6,27,41,094 6,39,208 SOC 5 68,00,000 Claim Rejected Rejected -- -- SOC 6 1,03,42,664 82,156 Claim Rejected 1,01,35,810 80,500 SOC7 27,79,516 9,11,386 Claim Rejected 40,68,680 -- SOC8 65,22,000 65,22,000 Sub Total 16,95,01,305 88,98,955 17,05,83,615 11,85,913 SOC9 12% interest on the above sum 12% interest on the above sum 13 Interest for INR=10 % Compounded and for USD=8% compounded per year 2,42,04,177 1,68,269 Counter claim of the respondent Disallowed Total 19,47,87,92 13,54,182 8.
The appellant questioned the same before the Commercial Court on several grounds and the respondent refuted the said grounds. The judgment of the Commercial Court 9. The Commercial Court first considered the scope of Section 34 of the Act and referred to the judgments cited by both the parties on the said aspect. It took the view that an application under Section 34 of the Act is not an appeal and the evidence cannot be re-appreciated as in an appeal. It also recognized that there are limited grounds specified in Section 34 of the Act for setting aside an arbitral Award, and after quoting Section 34 of the Act, framed the question as to “whether the Award given by the Arbitrator is against the Public Policy of India with its explanation or it is hit by the grounds mentioned under Section 34 of the Act?” 10. While dealing with Claim 1 which related to setting aside the illegal termination of contract by the appellant through a letter dt. 05.06.2018, which the Arbitral Tribunal had accepted, the Commercial Court gave a finding that the respondent had fulfilled the deliverables on the work front; in consultancy contracts, not all personnel need to be deployed at the initial stage and they are mobilized as necessary according to the work requirements; and the Arbitrator had noted that intermittent staff were deployed at appropriate intervals and that their deployment was approved by the respondent. 11. Regarding the allegation of delay in submitting the draft inception report, it noted that the Arbitrator had observed that submission of the said report was not mandatory according to the appellant’s letter dt. 24.07.2017; that the appellant had not raised any objection at the time of its delivery; and that the termination of the contract could have been under Clause 19 of the General Conditions of Contract. 12. After discussing the terms of the contract and the findings of the Arbitral Tribunal and also Clause 19 of the General Conditions of Contract, the Commercial Court held that the Tribunal had succinctly analysed the issue of termination of the contract and rightly held that such termination was incorrect, improper and illegal. It also gave a finding that the appellant failed to show that the findings of the Arbitral Tribunal on this aspect warrant interference under Section 34 of the Act. The consideration by this Court 13.
It also gave a finding that the appellant failed to show that the findings of the Arbitral Tribunal on this aspect warrant interference under Section 34 of the Act. The consideration by this Court 13. On this point, though the learned Advocate General tried to contend that the reasoning of the Arbitral Tribunal cannot be sustained in the light of the grounds mentioned in Section 34 of the Act, and that the Commercial Court erred in accepting the findings of the Arbitrator as regards the validity of the termination of the contract by the appellant on 05.06.2018, after perusing the impugned judgment of the Commercial Court, we are unable to agree with the said submission. 14. On this aspect, the Commercial Court has considered in detail the pleadings of the parties, the terms of the contract, the correspondence exchanged between the parties and has given cogent reasons for agreeing with the Arbitral Tribunal on Claim 1. 15. As regards claim no.1, it rightly held that none of the contentions raised by the learned Advocate General on behalf of the appellant would fall within the grounds indicated in Section 34 of the Act for interfering with the Arbitral Award. 16. The learned Advocate General further contended that the appellant did not get adequate opportunity before the learned Arbitrator to make submissions on account of the fact that the arbitration commenced by submission of the statement of claim by the respondent on 23.10.2020 at the time when novel corona virus -19 pandemic was in vogue, and that the Arbitrator was based in Nepal for the most part of the hearing. This plea does not impress in as much as the statement of defence was filed by the appellant before the Arbitrator on 21.07.2021 and rejoinder was filed by the respondent on 11.08.2021 by which time the pandemic was on the wane, and there was no impediment for the parties to participate in the arbitration proceedings which concluded admittedly on 14.12.2021. 17. The other plea raised by the learned Advocate General on behalf of the appellant that certain invoices were disputed but the Arbitral Tribunal held them to be valid without any proper application of mind is also without merit.
17. The other plea raised by the learned Advocate General on behalf of the appellant that certain invoices were disputed but the Arbitral Tribunal held them to be valid without any proper application of mind is also without merit. The Arbitral Tribunal had pointed out that it found no ground or evidence to agree with the appellant, and that there was no evidence or justification to say that the invoices were manufactured and concocted or to say that the invoices are not authentic or baseless. A finding was also recorded by the Arbitral Tribunal that invoices submitted from time to time do not seem to have been refused by the appellant at any time during the contract’s progress. 18. Therefore we uphold the decision of the Commercial Court in so far as it confirmed the finding of the arbitral tribunal in the award as regards claim no.1. 19. However, we find from the judgment of the Commercial Court that when it considered other claims i.e. Claims 2 to 9, it seems to have simply referred to the contentions of the appellant, the response of the respondent and the findings of the Tribunal on such claims and had abruptly concluded without any discussion/reasoning that no case is made out for setting aside the Award. 20. The cryptic manner in which it dealt with these claims made by the respondent before the Arbitrator leaves much to be desired. As the first Court considering the application under Section 34 of the Act, the Commercial Court is expected to deal a little more in detail and give adequate reasons for it’s conclusion on these claims within the scope of Section 34 of the Act. 21. Therefore, we deem it appropriate to set aside judgment dt. 16.03.2024 of the Additional Judicial Commissioner-III-cum-Presiding Officer, Commercial Court, Ranchi passed in Commercial Arbitration Case No. 04/2022, only with regard to findings made by it on Claims 2 to 9 made by the respondent which had been allowed by the Arbitral Tribunal in favour of the respondent. 22. For the aforesaid reasons and to the extent of it’s findings on claims 2-9, the judgment dt.
22. For the aforesaid reasons and to the extent of it’s findings on claims 2-9, the judgment dt. 16.3.2024 of the Commercial Court in Commercial Arbitration case no.04/2022 is set aside; the matter is remitted back to the Commercial Court to hear both sides and pass a fresh judgment only as regards Claims 2 to 9 made by the respondent before the Arbitral Tribunal. The Commercial Court shall pass a fresh order after hearing both sides within three months from the date of receipt of a copy of this order. 23. It is made clear that this Court has not expressed any opinion on the findings of the Arbitral Tribunal as regards Claim 2 to 9. No costs. 24. Pending Interlocutory Application, if any, stands disposed of