Arbitration and Conciliation Act, 1996: Post award interest on the interest amount awarded – Held: Can be granted by Arbitrator.
Arbitration and Conciliation Act, 1996: s.34 – Jurisdiction under, Scope – Held: Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under s.34(2)(b)(ii).
Arbitration: 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 other.
Arbitration: Arbitral award – Scope of interference by courts – Held: Courts should not interfere with an award merely because an alternate view on facts and interpretation of contract exists. Deeds and Documents: Whether in the instant case, the Memorandum of Undertaking (MoU) dated 10 th February, 1992 merged into the Implementation Agreement dated 22nd August, 1997 – Held: As admitted by State, the MoU was mentioned as “Appendix A” in the second recital of Implementation Agreement which itself demolished the plea taken by the State that the Arbitral Tribunal and the Appellate Court have erred in returning a finding that the MoU dated 10th February, 1992 did not merge into the Implementation Agreement dated 22nd August, 1997 – The view is reinforced on a reading of the definition of the word “Agreement” as used in Clause 2.2 of the Implementation Agreement which clearly stated that the word “Agreement” wherever used in the Implementation Agreement, shall include all its appendices and annexures – The MoU having been described by the parties as Appendix A to the Implementation Agreement, would have to be treated as having merged with the Implementation Agreement for all effects and purposes.
Disposing of the appeals, the Court
HELD: 1. As the judgment in the case of S.L. Arora, on which reliance has been placed by the Division Bench of the High Court of Himachal Pradesh, has since been overruled by a threeJudge Bench of this Court in the case of Hyder Consulting (UK) Ltd., the findings returned by the Appellate Court in the impugned judgment to the effect that the Arbitral Tribunal is not empowered to grant compound interest or interest upon interest and only simple interest can be awarded in favour of UHL on the principal amount claimed, is quashed and set aside. As a result, the findings returned in para 54(a) of the impugned judgment insofar as it relates to grant of the interest component, are reversed while restoring the arbitral award on the above aspect in favour of UHL. [Para 6][8-E-G]
2. The very fact that the State admits to having executed the MoU with UHL on 10th February, 1992 and the said MoU has been mentioned as “Appendix A” in the second recital of the Implementation Agreement, itself demolishes the plea taken by the State that the Arbitral Tribunal and the Appellate Court have erred in returning a finding that the MoU dated 10th February, 1992 did not merge into the Implementation Agreement dated 22nd August, 1997. The said view is reinforced on a reading of the definition of the word “Agreement” as used in Clause 2.2 of the Implementation Agreement which clearly states that the word “Agreement” wherever used in the Implementation Agreement, shall include all its appendices and annexures. The MoU having been described by the parties as Appendix A to the Implementation Agreement, would have to be treated as having merged with the Implementation Agreement for all effects and purposes. In the light of the said recitals and clauses of the Implementation Agreement, this Court endorses the findings returned in para 47 of the impugned judgment, wherein it has been held that a plain reading of the second recital read with Clause 2.2 of the Implementation Agreement suggested that the MoU has merged with the Implementation Agreement and, therefore, the disputes that were referable to arbitration under the Implementation Agreement in terms of Clause 20, were to include disputes arising under the MoU, even though the latter document did contain a separate arbitration clause. [Para 10] [10-B-F]
3. All the points of dispute between the parties regarding performance of the contractual obligations including claims for damages and expenses incurred by UHL either arising from the MoU dated 10th February, 1992, or under the Implementation Agreement dated 22nd August, 1997, were referable to arbitration in accordance with Clause 20 forming a part of the Implementation Agreement. [Para 11][11-B-C]
4. The second plea taken by the State is that the Appellate Court has erred in setting aside the order of the Single Judge and restoring the findings of the Sole Arbitrator on the aspect of pre-mature termination of the Implementation Agreement on the part of the State well before expiry of the prescribed period. [Para 12][11-D]
5. A plain reading of Clauses 4.1(a) and (b) leaves no manner of doubt that UHL was required to commence construction of the project within a period of one year from the effective date only after obtaining a techno-economic clearance from CEA and an environmental clearance from the Government of India, Ministry of Environment and Forests. However, it was agreed by the parties that since obtaining of the relevant clearances referred to above and under Clause 16.8 of the Agreement whereunder the State was required to discharge certain obligations, were not entirely in the hands of UHL, in the event of any delay beyond a period of three months reckoned from the effective date, the stipulated period of one year contemplated in the Implementation Agreement could be extended, but not beyond the additional period of twelve months. In the light of the aforesaid clauses of the Implementation Agreement, the submission made by the State that, under all circumstances, the Implementation Agreement had to be executed within a period of one year and since the provision for extension beyond one year was applicable only to the conditions contemplated in Clause 4.1(a) and (b) and not to those stipulated in Clause 4.1(c) to (g), is found to be unmerited and is turned down. When the parties to the Implementation Agreement were ad idem that the period of one year available to UHL to commence the construction activity was to be reckoned after the major requirements prescribed in Clause 4.1 could be obtained, then any argument sought to be advanced to segregate the obligations under different sub-heads of Clause 4.1 only to lay the blame at the door of UHL when the requisite clearances were to be obtained by the State Government from the Central Government and Centralized Authorities, is devoid of merits, besides being completely unreasonable and illogical. [Para 13][12-D-H; 13-A]
6. This Court also accepts as correct, the view expressed by the Appellate Court that the Single Judge committed a gross error in re-appreciating the findings returned by the Arbitral Tribunal and taking an entirely different view in respect of the interpretation of the relevant clauses of the Implementation Agreement governing the parties inasmuch as it was not open to the said Court to do so in proceedings under Section 34 of the Arbitration Act, by virtually acting as a Court of Appeal. [Para 14][13-B-C]
7. As it is, the jurisdiction conferred on Courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an Appellate Court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed. [Para 15][13-C-D]
MMTC Limited v. Vedanta Limited (2019) 4 SCC 163 : [2019] 3 SCR 1023; K.Sugumar v. Hindustan Petroleum Corporation Ltd. (2020) 12 SCC 539; Dyna
Technologies (P) Ltd. v. Crompton Greaves Ltd. (2019)
20 SCC 1; Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam Limited (2019) 7 SCC 236 : [2019] 8SCR 728; McDermott International Inc. v. Burn Standard Co. Ltd. And Others (2019) 20 SCC 1; Rashtriya Ispat Nigam Ltd. V. Dewan Chand Ram Saran (2006) 11 SCC 181 : [2012] 4 SCR 1; South East Asia Marine Engg. & Constructions Ltd. [SEAMAC Limited] v. Oil India Ltd. 2020 (5) SCC 164 : [2020] 5 SCC 164 – relied on.
8. In the instant case, the interpretation of the relevant clauses of the Implementation Agreement, as arrived at by the Sole Arbitrator, are both, possible and plausible. Merely because another view could have been taken, can hardly be a ground for the Single Judge to have interfered with the arbitral award. In the given facts and circumstances of the case, the Appellate Court has rightly held that the Single Judge exceeded his jurisdiction in interfering with the award by questioning the interpretation given to the relevant clauses of the Implementation Agreement, as the reasons given are backed by logic. [Para 21][17-C-D]
9. The decision of the Appellate Court is upheld that has restored the findings returned in the arbitral award dated 05th June, 2005 to the effect that the State of Himachal Pradesh had proceeded to terminate the Implementation Agreement before expiry of the prescribed period which could have been extended up to 24 months, reckoned from the “effective date”. In the instant case, the State of H.P. had terminated the Implementation Agreement five months prior to the stipulated period by adopting a distorted interpretation of Clause 4 of the Implementation Agreement, which was impermissible. [Para 22][17-E-F] State of Haryana v. S.L. Arora and Co.(2010) 3 SCC
690 : [2010] 2 SCR 297 – held overruled.
Hyder Consulting (UK) Ltd. V. Governor, State of Orissa through Chief Engineer (2015) 2 SCC 189 : [2014]
14 SCR 1029 – followed.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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