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4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

Gujarat High Court 4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

C/FA/618/2017

CAV JUDGME

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

FOR APPROVAL AND SIGNATURE:

FIRST APPEAL

With FIRST APPEAL NO. 778 of 2017

NO. 618 of 2017

HONOURABLE MR.JUSTICE M.R. SHAH

Sd/−

and HONOURABLE MR.JUSTICE B.N. KARIA =========================================

Sd/−

1

Whether Reporters of Local Papers may be allowed to see Yes the judgment ?

 

2 To be referred to the Reporter or not ?

3 Whether their Lordships wish to see the fair copy of the judgment ?

4 Whether this case involves a substantial question of law as

to

the

interpretation of

the

Constitution of

India or

any order made thereunder ?

=====[========================================

GUJARAT MINERAL DEVELOPMENT CORPORATION LTD SIMPLEX INFRASTRUCTURE LIMITED

============================================= Appearance:

Defendant(s)

Versus

Appellant(s)

FIRST APPEAL No.618 of 2017 MR. S.N. SOPARKAR, LD. SR ADV WITH GURSHARAN H VIRK, ADVOCATE for the Appellant(s) No. 1 MR. PERCY C KAVINA, LD. SR ADV WITH MS. GARIMA MALHOTRA WITH MR.BHASH H MANKAD, CAVEATOR for the Defendant(s) No. 1 FIRST APPEAL No.778 of 2017 MR. PERCY C KAVINA, LD. SR ADV WITH MS. GARIMA MALHOTRA WITH MR.BHASH H MANKAD for the appellant MR. S.N. SOPARKAR, LD. SR ADV WITH GURSHARAN H VIRK, ADVOCATE for the defendant ============================================= CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE B.N. KARIA

Date : 09 /06/2017 CAV JUDGMENT HC-NIC Page 1 of 53 Created On Sun Aug 13 04:15:17 IST

2017 (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.0.

As both these appeals arise out of the impugned judgment and order passed by the learned

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

Commercial Court, Ahmedabad passed in Commercial Civil Miscellaneous Application No.

52 of 2016, one preferred by the original applicant and another by the

original respondent, both these appeals are decided and disposed of together by this common judgment and order.

2.0. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Commercial Court, Ahmedabad passed in Commercial Civil Miscellaneous Application No. 52 of 2016, passed under Section 34 of the Arbitration Act, the original respondent − Gujarat Mineral Development Corporation Limited (hereinafter referred to as "the GMDC") has preferred present First Appeal No. 618 of 2017 under Section 13(1) of the Commercial Court Act r/w Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as "Arbitration Act") [.

2.1. Feeling aggrieved and dissatisfied with the impugned judgment

learned Commercial Court, Ahmedabad passed in Commercial Civil Miscellaneous Application No. 52 of 2016, passed under Section 34 of the Arbitration Act, the original applicant − Simplex Infrastructure Limited (hereinafter referred to as "SIL") has preferred present First Appeal No. 778 of HC-NIC Page 2 of 53 Created On Sun Aug 13 04:15:17 IST 2017 2017 under Section 13(1) of the Commercial Court Act r/w Section 37(1)(c) of the Arbitration and Conciliation Act, 1996.

and order passed by the

3.0. The

facts

leading

to

the

present

First

Appeals

in nutshell are as under:

3.1. That the GMDC invited and issued tender notice for execution of general, civil and architectural work for 2 x 125 MW Akrimota Thermal Power Project. That the said contract came to be awarded to the original applicant − SIL vide letter of intent dated 27.11.2001. That the work order came to be issued by the GMDC on dated 07.02.2002. That total estimated value of the work was Rs.5,80,71,292/− with firm price and no escalation clause. That as per the clause 4.0 of the work order / contract time was essence of the contract and the entire work was required to be completed within 22 months from the date of issuance of letter of intent. It also further provided tow months grace period and as per the said clause, the accepted rates will be valid for a further period of two months grace period. Since the letter of intent was issued on 27.11.2001, the work was to be completed by 27.11.2003 including two months' grace period. That according to the SIL, there was a delay on the part of the GMDC in releasing drawing works and due to non providing the fronts / drawings and details of drawings by the GMDC from the very beginning, the construction could not be completed within the time prescribed in the work order. According to the SIL, prior to schedule completion date, SIL wrote a letter dated 23.10.2003 giving notice of its HC-NIC Page 3 of 53 Created On Sun Aug 13 04:15:17 IST 2017 intention to claim compensation for the work which may be

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

executed beyond the contract period in the form of escalation and extra costs and

raised

pertaining to the escalation and extra costs. According to the SIL, after a period of one year of the schedule date of completion, the work order came to be amended by the GMDC vide its letter dated 24.11.2004 and the value of the work almost reached double from rs. 5,80,71,292/− to Rs. 10,78,21,292/−. According to the SIL, vide its reply dated 24.11.2004 to the GMDC, SIL expressed its intention with regard to the conditions stipulated in the amendment that the rates would be firmed and no escalation would be allowed, which was not acceptable to the SIL as it was

practically impossible to execute the work at the rate determined prior thereto. That thereafter, the SIL completed the work on 30.09.2006. Since the request of the SIL seeking the payment of escalation and over stay were

pursuant

thereto,

SIL

seven

periodical

bills

not

considered

by

the

GMDC

and

GMDC failed to make payment towards escalation and additional costs, the dispute arose

between the parties and therefore, SIL invoked the arbitration. The Arbitral Tribunal came to be constituted consisting of sole Arbitrator. The SIL submitted the statement of claim before the Arbitrator as under:

(1)Claim for an amount of Rs.6,87,014/ on account of work done as mentioned in the 28th RA/final bill;

(2) Claim for an amount of Rs.1,28,30,519/on account of escalation;

(3)

Claim

for

an

amount

of

Rs.2,01,16,402/towards

extra

costs incurred due to overstay;

HC-NIC Page 4 of 53 Created On Sun Aug 13 04:15:17 IST 2017 (4) Claim for an amount of Rs.76,36,090.52 towards service tax; (5) Claim for an amount of Rs.10,00,000/towards damages for mental agony;

(6) Claim for an amount of Rs.20,00,000/towards damages on account of loss of reputation;

(7) Claim for an amount of Rs.7,50,000/towards costs of arbitration; and (8) Claim for interest on the claim amount at the rate of 18% p.a. from the due date till the date of realization.

3.2. That the learned Tribunal disallowed the claim nos. 3,4,5,6 and 7 i.e. claim with respect to escalation and extra costs; damages towards mental agony; loss of reputation and cost of arbitration.

3.3. Feeling aggrieved and dissatisfied with the award passed by the learned Arbitrator in disallowing the claim nos. 3,4,5,6 and 7, SIL submitted the application before the learned District Court under Section 34 of the Arbitration Act being Civil

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

Miscellaneous Appeal No. 1018 of 2012. That on establishment of Commercial Court at Ahmedabad under the provisions of

Commercial Court Act, the said Section 34 application came to be transferred to the Commercial

Court,

which

was

numbered

as

Commercial Civil Miscellaneous Application No. 52 of 2016. That the SIL claimed following reliefs in the application under Section 34 of the Act;

"(a) modify/set aside the impugned award dated HC-NIC Page 5 of 53 Created On Sun Aug 13 04:15:17 IST 2017 December 9, 2011 to the extent it relates to the rejection of the applicant's claims for escalation and extra costs incurred on account of overstay at the Project as contained in paragraphs 13 to 27 and the last paragraph of the Award;

(b)

escalation and extra costs incurred on account of overstay at the Project on the basis of the materials

on record along with interest thereon at the rate of 12% p.a. from the due date till the date

allow

the

Applicant's

aforesaid

claims

for

of

realization as determined by the Ld. Arbitrator in paragraph 32 of the Award;

OR remit the matter to a different arbitrator with experience in construction matters for fresh adjudication of the Applicant's claims for escalation and extra costs incurred on account of overstay at the Project; "

3.4. That

the

said

Commercial

Miscellaneous

Application was vehemently opposed by GMDC.

3.5. That by impugned judgment and order the learned Judge Commercial Court, Ahmedabad has partly allowed the Section 34 application and has quashed and set aside the award declared by the learned Arbitrator with respect to the claim no.3 i.e. claim for escalation and has allowed the entire claim no.3 as per the Claim Statement lodged before the learned Sole Arbitrator. Rest of the award declared by the learned Arbitrator in disallowing the claim nos. 4,5,6 and 7 came to be confirmed by the learned Judge, Commercial Court, Ahmedabad.

3.6. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Commercial Court, Ahmedabad in so far as allowing the claim no.3 i.e. claim for HC-NIC Page 6 of 53 Created On Sun Aug 13 04:15:17 IST 2017 escalation, the original opponent GMDC has preferred present First Appeal No.618 of 2017.

3.7. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Commercial Court, Ahmedabad in so far as confirming rest of the award passed by the learned Arbitrator disallowing the claim nos. 4, 5, 6 and 7, the SIL has preferred present First Appeal No.778 of 2017.

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

4.0. Shri S.N.Soparkar, learned Senior Advocate has appeared on behalf of the original opponent− GMDC and Shri Percy Kavina, learned Senior Advocate has appeared on behalf of the SIL in respective appeals.

First Appeal No. 618 of 2017 5.0. Shri S.N. Soparkar, learned counsel appearing on behalf of the GMDC has vehemently submitted that in the facts and circumstances of the case the learned Commercial Court has materially erred in modifying the award declared by the learned sole Arbitrator and in allowing the claim no.3 i.e. claim with respect to escalation, which was disallowed by the learned Arbitrator and that too, in exercise of powers under Section 34 of the Arbitration Act.

5.1. It is further submitted by Shri Soparkar, learned counsel for the GMDC that while passing the impugned judgment and order insofar as allowing the claim no.3 which was disallowed by the learned Arbitrator, the learned Commercial Court has exceeded in its jurisdiction under Section 34 of the Arbitration Act.

HC-NIC Page 7 of 53 Created On Sun Aug 13 04:15:17 IST 2017 5.2. It is further submitted by Shri Soparkar, learned counsel for the GMDC that though the Arbitrator had nowhere held GMDC solely responsible for delay, the learned Commercial Court has materially erred in holding that such was the finding of the Arbitrator.

5.3. It is further submitted by Shri Soparkar, learned counsel for the GMDC that while passing the impugned judgment and order, the learned Commercial Court has substituted its own view for an entirely possible view of the Arbitrator.

5.4. It is further submitted by Shri Soparkar, learned counsel for the GMDC that even

learned

Commercial

Court

has

substituted

the

standard

of

evidence

and

has

re−appreciated the evidence which is not permissible while considering the application under Section 34 of the Arbitration Act.

5.5. It is further submitted by Shri Soparkar, learned counsel for the GMDC that as such learned Commercial Court has passed the impugned order and has exercised the jurisdiction as if learned Commercial Court was exercising the appellate jurisdiction over the award declared by the learned Arbitrator. It is further submitted by Shri Soparkar, leaned counsel for the GMDC that as per the catena of decisions of the Hon'ble Supreme Court as well as this Court, in exercise of powers under Section 34 of the Arbitration Act is not siting as an Appellate Court over the award.

5.6. It is further submitted by Shri Soparkar, learned counsel for the GMDC that learned Commercial Court has as such allowed the HC-NIC Page 8 of 53 Created On

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vs Simplex Infrastructure Limited on 9 June, 2017

Sun Aug 13 04:15:17 IST 2017 claim no.3 and has decided the matter on equity and fairness and has ignored the contract altogether.

5.7. It is further submitted by Shri Soparkar, learned counsel for the GMDC that the learned Commercial Court has as such caused a novation of contract at the stage of adjudication of disputes, which is not permissible.

5.8. It is further submitted by Shri Soparkar, learned counsel for the GMDC that

learned Commercial Court has materially erred in not properly appreciating the fact that as per the contract between the parties and as per the terms and conditions of the work order, there was no provision for escalation even for the period beyond the time prescribed under the contract, more particularly, with respect to the extended period of time. It is further submitted by Shri Soparkar, learned counsel for the GMDC that therefore, though the escalation was alien to the contract, the learned Commercial Court has awarded escalation in violation of contractual provisions.

5.9. It is further submitted by Shri Soparkar, learned counsel for the GMDC that

though in the award learned sole Arbitrator though not given any findings that the delay was attributable to GMDC and though even Simplex did not make such allegation in its correspondence, learned Commercial Court has materially erred in coming to the conclusion that delay was attributable to the GMDC.

5.10. It

Sun Aug 13 04:15:17 IST 2017 counsel for the GMDC that as per the catena of decisions of the

is

vehemently

submitted

by

Shri

Soparkar,

learned HC-NIC Page 9 of 53 Created On

Hon'ble

Supreme

Court

as

well

as

this

Court

the

scope

of

judicial

intervention

while

considering

the

application

under

Section

34

of

the Arbitration

Act

is

very

narrow

and

the

merits,

factual

findings,

reasonings,

consideration

of

evidence

and

the

final

view

taken

by

the learned

Arbitrator

are

not

required

to

be

interfered

with

by

the

Court in exercise of powers under Section 34 of the Arbitration Act.

5.11.

It is vehemently submitted by Shri Soparkar, learned counsel for the GMDC

that

Section

37 of the Act is co−terminus with

the narrow

scope

and limited expanse

of the

power of

the Commercial Court under Section 34 of the Act.

5.12. It is vehemently submitted by Shri Soparkar, learned counsel

for

the

GMDC

that

in

the

present

case

though

not permissible

and

while

allowing

the

claim

no.3

with

respect

to

escalation,

the

learned

Commercial

Court

has

re−appreciated

the

evidence and

as

such

has

passed

an

order

on

equity

and

fairness

ignoring the contractual provisions.

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

5.13. Shri Soparkar, learned counsel for the GMDC has

heavily relied upon the decision of the Hon'ble Supreme Court in the case of Associate Builders v. Delhi Development Authority,

reported in (2015) 3 SCC 49 in support his elaborate submissions with respect

ambit of judicial intervention by the Court, while exercising the powers under Section

34 of the Arbitration Act. Shri Soparkar, learned Counsel for the GMDC has

also relied upon the decision of the Hon'ble Supreme Court in the case of NHAI v. ITD Cementation India Ltd. reported in (2015) 14 HC-NIC Page 10 of 53 Created On Sun Aug 13 04:15:17 IST 2017 SCC 21 as well as another decision of the Hon'ble Supreme Court in the case of Swan Gold Mining Ltd. v.Hindustan Copper Ltd. reported in (2015) 5 SCC 739. He has also relied upon the decision of the Division Bench of the Delhi High Court in the case of Puri Construction Pvt. Ltd. & Ors. v. Larsen & Toubro Ltd. & Anr. rendered in FAO (OS) 21/2009.

to scope and

5.14. It is vehemently submitted by Shri Soparkar, learned counsel

for

the

GMDC

that

as

the

view

taken

by

the

learned Arbitrator was correct view and even if the Commercial Court was

of

learned

the award declared by the learned Arbitrator with respect to the claim no.3 − claim for escalation.

the

opinion

that

the

another

is

not

view

is

possible,

in

rigors

in

in

that

the

case

finding

also,

of

Commercial

Court

justified

5.15. It is vehemently submitted by Shri Soparkar, learned counsel for the GMDC that the

learned Commercial Court has

materially erred in allowing the claim for escalation by treating the computation rendered by SIL

as

a

valid

computation,

without

either calling upon GMDC to rebut the computation, or verifying the authenticity of the claim or manner of computation, or appreciating the evidence based on which the claim appears to have been allowed. It is submitted that, therefore, the learned Commercial Court has erred in summarily granting a claim and reversing the reasoned view of the Arbitrator.

5.16. It is vehemently submitted by Shri Soparkar, learned

counsel for the GMDC that while allowing the escalation claim, the learned Commercial Court

has

not

properly

appreciated

the HC-NIC Page 11 of 53 Created On Sun Aug 13 04:15:17 IST

2017

following facts and events.

(1). Prior issuance of the Work Order by GMDC to Simplex, the issue of escalation already stood decided;

(2). Simplex had, originally, vide its letter dated 21.07.2001 submitted its bid with an escalation clause for work done beyond the contractual date of completion;

(3).

GMDC,

vide

its

letter

dated

10.08.2001,

categorically

rejected

any

provision

for

escalation

and

requested

Simplex

to

submit

a

bid

4 Whether This Case Involves A

with firm rates without escalation;

vs Simplex Infrastructure Limited on 9 June, 2017

(4). Simplex

respect

had,

therefore,

and

by

of

escalation

had

its

letter

dated

18.08.2001, withdrawn

clearly submitted to firm contractual rates;

its

deviation

in

(5). Therefore, the work order dated 07.02.2002 was awarded to Simplex. Clause 3 of the Work

prices

Order (pg. 19) clearly mandated that

the

under

the

contract

were

firm

and

no

escalation

firm (without escalation) without any upper ceiling limit;

would be allowed. It was also clarified that the rates would remain

(6). The letters dated 23.10.2003 (pg. 25) and 17.08.2004 (pg.

30) addressed by Simplex demanded escalation. However, it is

pertinent to note that Simplex has never alleged any delay on part of GMDC. These letters,

therefore, use the phrase "

different reasons not attributable to us

adduced nor correspondence addressed by Simplex to contend that any delay was attributable to GMDC;

However, no evidence is

due

to

".

HC-NIC Page 12 of 53 Created On Sun Aug 13 04:15:17 IST 2017 (7). Even during course of argument before this Hon'ble Court, Simplex does not contend that delay was ONLY attributable to GMDC. Therefore, at best, the case of Simplex is that delay was allegedly attributable to both parties. However, there is no evidence in support of the said baseless contention of Simplex;

(8). By its letter dated 24.11.2004 (pg. 31) and 22.02.2007 (pg.

38), GMDC categorically rejected Simplex's demand for escalation and clearly, in no uncertain terms, stated that the rates under the contract would remain firm;

(9). Even otherwise, neither the Hon'ble Arbitrator nor the Hon'ble Commercial Court have engaged into the exercise of computing the claims or verifying their authenticity or arithmetic accuracy;

(10) Inasmuch as issue no. 1 (liquidated damages of Rs. 5,39,106/−) is concerned,

Simplex has attempted to utilise the Arbitrator's direction to GMDC to refund the said

amount

in

its

favour. However, it is pertinent to note that the issue of refund of

liquidated damages (LD) has no bearing on the other issues for the following reasons:

(10.1). The Arbitrator did not reject GMDC's claim for LD on merits.

(10.2). It was only on account of GMDC's procedural lapse in not issuing a notice upon Simplex (as is the statutory requirement under section 74 read with section 55 of the Contract Act) that

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vs Simplex Infrastructure Limited on 9 June, 2017

GMDC was required to refund the amount so deducted by GMDC HC-NIC Page 13 of 53 Created On Sun Aug 13 04:15:17 IST 2017 as per the prescriptions under the Contract.

5.17. Shri Soparkar, learned counsel for the GMDC has further submitted that even otherwise while exercising the powers under Section 34 of the Arbitration Act learned Commercial Court was only empowered to set aside the award and could not have modified the award.

In support of his above submissions, Shri Soparkar, learned counsel for the GMDC has heavily relied upon the decision of the Hon'ble Supreme Court in the case of McDermott International Inc. v.Burn Standard Co. Ltd., (2006) 11 SCC 181 as well as decision of the Bombay High Court in the case of Pushpa P. Mulchandani & Ors. v. Admiral Radhakrishan Tahiliani & Ors. rendered in Appeal No. 981/2001 dated 4.10.2007; decision of the Allahabad High Court in the case of U.P. State Handloom Corporation v. Asha Lata Talwar & Anr. reported in (2009) 76 ALR 233 as well as decision of the Delhi High Court in the case of Puri Construction Pvt. Ltd. & Ors. v. Larsen & Toubro Ltd. & Anr. rendered in FAO (OS) 21/2009 dated 30.04.2015.

5.18.

It is vehemently submitted by Shri Soparkar, learned counsel

for

the

GMDC

that

neither

the

Arbitrator

nor

the Commercial Court have engaged into the exercise of computation

of the claim for escalation.

5.19. It is submitted that the basis of escalation claim is neither certified by GMDC, nor verified by any judicial forum. That the manner of computation or the content and basis of the HC-NIC Page 14 of 53 Created On Sun Aug 13 04:15:17 IST 2017 calculation has never been subjected to judicial scrutiny, and rightly so, since the contract did not provide for escalation in the first place. It is submitted that therefore, learned Commercial Court has erred in allowing a claim that was completely unverified.

5.20. It is vehemently submitted by Shri Soparkar, learned counsel for the GMDC that the learned Arbitrator arrived at a conclusion that since SIL did not become eligible to

claim escalation or extra−cost in the first place, inter alia, on account of lack of evidence

establish its said claims, the question of engaging into the exercise of computing the said claims was unnecessary and redundant. Therefore, the learned Arbitrator had no occasion to consider the escalation claim on merits and more particularly with respect to the computation made by the SIL of escalation claim.

to

5.21. It

as

such

is

vehemently

submitted

by

Shri

neither

learned

Commercial Court

Soparkar,

learned counsel

for

while

exercising

the

powers

the

GMDC

that

under

Section

34

of

the

Arbitration

Act

nor

even

this

Court

while

exercising

the

power

under

Section

37

of

the

Arbitration

Act

can

remand

the

matter

to

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

the learned Arbitrator to consider the escalation claim on merits afresh.

5.22. It is vehemently submitted by Shri Soparkar, learned counsel for the GMDC that as such the issue of remanding the matter was considered by the learned Commercial Court, however both the parties refused for remanding the matter to the learned Arbitrator and therefore, the matter is not required to be remitted HC-NIC Page 15 of 53 Created On Sun Aug 13 04:15:17 IST 2017 to the learned Arbitrator. It is submitted that even otherwise remanding the matter to the learned Arbitrator by the Court while exercising the powers under Section 34 of the Arbitration Act is wholly impossible as once the learned Arbitrator has declared the award thereafter the learned Arbitrator becomes the functus officio.

5.23. Shri Soparkar, learned counsel for the GMDC has further submitted that it would be pointless to remit the matter back to the Commercial Court as the Commercial Court cannot adduce additional evidence in the present matter, lack of which is the reason for even considering remittance in the first place.

5.24. It is further submitted that even otherwise the SIL cannot be permitted to have second innings in the matter wherein it could fill in the blanks, produce additional evidence, and remove all obstacles, to make a fresh claim for escalation and over−stay.

Making above submissions and relying upon the above decisions, it is requested to allow the Appeal preferred by the

learned

GMDC and quash and set aside the impugned judgment and order passed

Commercial Court in so far as allowing claiming no.3 while modifying the award declared by the learned Arbitrator.

by

the

First Appeal Nos. 618 of 2017 & 778 of 2017 6.0. Shri P.C. Kavina, learned counsel for the original applicant − SIL has vehemently submitted that in the facts and circumstances of the case, the learned Commercial Court has not committed any error in modifying the award declared by the learned Arbitral HC-NIC Page 16 of 53 Created On Sun Aug 13 04:15:17 IST 2017 Tribunal thereby granting claim of escalation to original applicant.

6.1. It is further submitted by Shri Kavina, learned counsel for the SIL that it is an

admitted position that was to be completed

it was the obligation of the GMDC to provide drawings / fronts. However, SIL was not provided with the fronts/ drawings / details of drawings by GMDC from the very beginning. As a consequence, the construction plan was jeopardized from the very beginning and the execution of the work was delayed. It is submitted that SIL

as per the work order / contract between the parties the work

by 27.11.2003 including two months grace period. It is submitted that

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vs Simplex Infrastructure Limited on 9 June, 2017

wrote various letters to GMDC from time to time, requested for use of the drawings and work fronts and pointing out the delay on the part of the GMDC. However, GMDC never replied to such letters or otherwise controverted the delay alleged by the SIL. It is submitted that thus, the GMDC accepted that SIL was not responsible for the delay.

6.2. It is further submitted by Shri Kavina, learned counsel for the SIL that as such vide communication dated 17.08.2004 the SIL categorically informed GMDC that it is going to raise the escalation bills as per the formula which was provided at the time of bid offer. It is submitted that pursuant thereto SIL raised 7 periodical bills for escalation and two interim bills for extra costs. It is submitted the despite the above, the GMDC maintained the complete silence and the work was accepted by the GMDC without protest or demur.

It is submitted that after about one year from the schedule HC-NIC Page 17 of 53 Created On Sun Aug 13 04:15:17 IST 2017 date of completion, the original work order came to be amended vide GMDC's letter dated 24.11.2004 and the value of the work was almost doubled from Rs. 5,80,71,292/− to Rs.10,78,71,292/−. It is submitted that the said letter contained a standard clause providing that the prices shall remain firm and no escalation shall be allowed. It is submitted that the aforesaid letter of the GMDC was replied to by the SIL on the very same day i.e. 24.11.2004, wherein it was categorically mentioned that condition stipulated in the amendment that the rates are firm and no escalation will be allowed is not acceptable as it was practically impossible to execute the work at fixed rates. It is submitted that therefore, SIL requested GMDC to make payments for the work executed beyond the contractual completion period as per the escalation formula already submitted by the SIL. It is submitted that communication dated 24.11.2004 was neither replied by the GMDC nor rejected the escalation and extra costs bills submitted by SIL. It is submitted that in fact the GMDC continued to accept the work from SIL without any demur or protest and also through its various representatives assured SIL that GMDC would look into the matter and make provision for appropriate payments and requested SIL to continue execution of work. It is submitted that the aforesaid is evident from the letter dated

2007 22.2

meeting held between the representatives of the parties on the said date. It is submitted that with respect to escalation and overstay, it was submitted that these points will be taken into consideration during the contract closure along with penalty, liquidated damages etc. as per contract. It is submitted that at that time even the SIL replied to HC-NIC Page 18 of 53 Created On Sun Aug 13 04:15:17 IST 2017 the said letter vide its letter dated 6.3.2007 stating that the points of penalty and liquidated damages raised by GMDC were

issued by the GMDC wherein it had recapitulated the discussions in a

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vs Simplex Infrastructure Limited on 9 June, 2017

unwarranted, irrelevant and against the spirit of the contract, since the work had already been completed to GMDC's satisfaction. It is submitted that thereafter also in various communications / letters addressed by SIL, the SIL mentioned about assurance given by the GMDC that pending issues will be looked into after completion of work and receipt of final bill duly certified by GMDC's project office. It is submitted that the SIL completed the work on 30.09.2006. It is submitted that therefore, considering the aforesaid facts and circumstances of the case when the learned Commercial Court has modified the award declared by the learned Arbitrator and has awarded escalation / claim, the same is not required to be interfered with by this Court in exercise of powers under Section 37 of the Arbitration Act.

6.3. It is further submitted by Shri Kavina, learned counsel for the SIL that the bills raised by the SIL about escalation price were as per the formula already submitted by the SIL, which were never disputed by the GMDC and the escalation bills were as per the formula and as per actual expenses incurred, the learned Commercial Court has rightly awarded entire claim no.3 as per the statement of claim submitted by the SIL. It is further submitted that for the aforesaid as such no further evidence was required to be led and the formula suggested by SIL was already on record and the claim submitted by the SIL with respect to the escalation was as per the formula already submitted by the SIL.

HC-NIC Page 19 of 53 Created On Sun Aug 13 04:15:17 IST 2017 6.4. It is further submitted by Shri Kavina, learned counsel for the original applicant that in the facts and circumstances of the case, as the learned Arbitrator ignored the evidence on record and thereby rejected the claim of the claimant with respect to escalation and learned Commercial Court is justified in interfering with the award passed by the learned Arbitrator in exercise of powers under Section 34 of Act.

6.5. Shri Kavina, learned counsel for the SIL has submitted that the considering the aforesaid

facts and circumstances and the material on record, the decision of the Hon'ble Supreme Court in the case of McDermott International Inc. v.Burn Standard Co. Ltd., (2006) 11 SCC 181 and the decision of the Delhi High Court in the case of Puri Construction Pvt. Ltd. & Ors. v. Larsen & Toubro Ltd. & Anr. rendered in FAO (OS) 21/2009 shall not be applicable to the facts of the case on hand.

6.6.

Shri

,

learned

counsel

for

the

SIL

has

heavily

relied

upon

the

decision

of

the

Madras

High

Court

in

the

case

of

Gaytri

Vs.

ISG

Novasoft

Technologies

Ltd.

rendered

in

MANU/TN/2293/2014

in

support

of

his

submission

that

in

the

facts

and

circumstances

of

the

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

case, the learned Commercial Court has rightly modified the award declared

by

the

learned

Tribunal

in

exercise

of

powers

under Section 34 of the Arbitration Act.

 

Making

above

submission

and

relying

upon

the

above decision,

it

is

requested

to

dismiss

the

appeal

preferred

by

the GMDC.

 

HC-NIC Page 20 of 53 Created On Sun Aug 13 04:15:17 IST 2017 7.0. Now, so far as appeal preferred by the SIL (First Appeal No.

778 of 2017) challenging the impugned judgment and order passed by the learned Commercial Court in dismissing the Commercial

Civil Miscellaneous Application No. 52 of 2016 preferred by the SIL insofar as

award declared by the sole Arbitrator with respect to other claims are concerned, it is vehemently submitted by Shri Kavina, learned counsel for the original applicant that in the facts and circumstances of the case the learned Commercial Court has materially erred in confirming the award declared by the learned sole Arbitrator insofar as rejecting the other claims (except claim no.3).

confirming the

7.1. It is further submitted by Shri Kavina, learned counsel for

order passed by

extra costs due to overstay) erroneously upholds the decision of the learned

regard, which is unreasoned. It is submitted that there is no reference to copious evidence.

the

SIL

that

the

impugned

the

learned Commercial Court to the extent it relates to claim no.4 (claim for

Tribunal

in

this

7.2. It is further submitted by Shri Kavina, learned counsel for the SIL that the Arbitral award to the extent it relates to claim no.4 is against the substantive law of India and is therefore, violative of Section 28(1)(a) of the Arbitration Act and therefore, was liable to be set aside/ modified under Section 34 of the Act. It is submitted that learned Commercial Court has failed to give any reasons whatsoever as to why the observations of the learned Arbitrator with regard claim no.4 are required to be upheld.

7.3. It is further submitted by Shri Kavina, learned counsel for the HC-NIC Page 21 of 53 Created

On Sun Aug 13 04:15:17 IST 2017 SIL that both the learned Arbitrator and the Commercial Court have erroneously held that in the instant case, the delay is not attributable only to the GMDC and claimant (SIL) was also responsible for delay in certain cases. It is submitted that there is no any material on record that SIL is even partially responsible for the delay. It is submitted that on the contrary, the SIL placed on

record various uncontroverted letters pointing out the delay on the part of the GMDC.

7.4.

the SIL that while observing herein above, the learned Arbitrator as well as learned Commercial Court have failed to appreciate and / or consider the series of letters by the SIL to GMDC wherein SIL time and again brought to the notice of GMDC that the work is being suffered and delay is caused due to

It

is

further

submitted

by

Shri

Kavina,

learned

counsel

for

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

non−supply of drawings/fronts on part of GMDC. It is submitted that said letters were neither rebutted nor protested on receipt by GMDC. It is submitted that even the same were neither controverted by documentary or oral evidence even during the course of Arbitration.

7.5. It is further submitted by Shri Kavina, learned counsel for

the original applicant that as such while dealing with the claim of escalation, learned Commercial

Court after

taking

into consideration the various letters by SIL to GMDC, rightly held that

the delay has been caused by reasons attributable to GMDC. It is submitted that therefore, once the learned Commercial Court has HC-NIC Page 22 of 53 Created On Sun Aug 13 04:15:17 IST 2017 come to the conclusion that the delay was caused by GMDC, the natural corollary is that the entire period of overstay was due to reasons attributable to GMDC and therefore SIL is entitled to expenditure incurred during the entire period of overstay.

7.6. It is further submitted by Shri Kavina, learned counsel for

the SIL that both learned Arbitral Tribunal and learned Commercial

Court failed to appreciate that SIL under the head of overstay has

sought reimbursement of expenses as per actuals and which were unavoidably

only on account of overstay for completion of work for GMDC such as labour Charges, Insurance renewal charges. It is submitted that therefore, when the expenses incurred were unavoidable and a natural consequence of extension of work beyond contract period, the question of SIL proving any efforts to mitigate the expenses did not arise. It is submitted that therefore, learned Commercial Court has materially erred in upholding the observation made by the learned Arbitrator with respect to claim no.4.

incurred by SIL

7.7. It is further submitted by Shri Kavina, learned counsel for

the original applicant that learned Arbitrator has materially erred in observing that as three other construction works were being carried on by SIL at the same site and there is no independent reliable evidence to show that only on account of this contract Simplex had to incur further cost. It is submitted that while observing the above, both, the learned Arbitrator and the learned Commercial Court have completely overlooked the voluminous documents filed by SIL in support of its claim for extra costs and HC-NIC Page 23 of 53 Created On Sun Aug 13 04:15:17 IST 2017 have not considered the various heads of extra costs claimed by SIL which show that certain claims made by SIL such as towards renewal of bank guarantees & insurance policy and head office

overheads would not be affected by the fact that SIL was executing three other contracts at the same site.

7.8. It is further submitted by Shri Kavina, learned counsel for

the SIL that as such in the present case the GMDC in its written statement filed before the learned Arbitrator in relation to the claim for extra costs due to overstay admitted

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

that sum of Rs. 31,58,299.55 was due and payable towards extra costs. It is submitted that therefore, in view of such admission by the GMDC, the same ought to have been considered by the learned Arbitrator and learned Commercial Court.

7.9. Shri Kavina, learned counsel for the SIL has submitted that as such by not allowing the claim no.4 with respect to the extra costs due to overstay, both, the learned Arbitrator as well as learned Commercial Court have disregarded the contractual terms operating between the parties. It is submitted that clause no.4 of the order dated February 7, 2002 provides that "prices are firm and no escalation will be allowed during the currency of the contract period". It is submitted that therefore, necessary corollary of the same is that if SIL was required to undertake any work beyond the contract period on account of reasons not attributable to SIL, the prices would not be considered fixed. It is submitted that in such a

situation the fixed price clause or no−escalation clause would not survive nor would be binding on SIL. It is submitted that clause 4 of HC-NIC Page 24 of 53 Created On Sun Aug 13 04:15:17 IST 2017 the work order provides that the entire work shall be completed within a period of twenty two (22) calendar months but the accepted rates will be

valid for a further two (2)

period. It is submitted that letter of intent was issued on November 27, 2001 and thus, the tender rates were valid for a period of twenty four (24) months from the said date, i.e. up to November 27, 2003. It is submitted that therefore, both the learned Arbitrator as well as learned Commercial Court have completely ignored the aforesaid contractual terms.

months'

grace

8. Now, so far as submission on behalf of the GMDC that while exercising powers under Section 34 of the Arbitration Act, the Commercial Court has no jurisdiction to re−appreciate the evidence on record and / or finding recorded by the learned Arbitrator is concerned, Shri Kavina, learned counsel for the original applicant − SIL has submitted that it is a settled law where a finding is based on no evidence; or Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or ignored vital

evidence in arriving at a decision, such decision would necessarily be perverse and therefore,

the

Court

in

exercise

of

powers under

Section 34 of the Arbitration Act will be justified in interfering with such a perverse decision.

8.1. Now, so far as submission on behalf of the GMDC that assuming the Court under

Section

34

of

the

Act

Court

can

appreciate the evidence, however it has power to either accept the award or set aside the award, but the Court cannot pass a decree, but the parties shall have recourse to fresh arbitration is concerned, HC-NIC Page 25 of 53 Created On Sun Aug 13 04:15:17 IST 2017 it is submitted by Shri Kavina, learned counsel for the SIL that by such contention GMDC seeks to narrow the scope of jurisdiction of

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

the Courts under Section 34 of the Act to merely either act as a Court of Approval or Dis−approval; to accept the award as it is or set it aside the same and nothing more. It is submitted that if the

aforesaid contention of the GMDC is accepted, the same would lead to anomalous situations and

would

nothing

be

less

than

a

catastrophe of justice. It is submitted that in a case if the Arbitrator rejects all the claims of a party and the Court under Section 34 of the Act, only sets aside the award and as it could not modify the same, the party shall have to be relegated back for fresh arbitration and the said process would continue until the Party gets the desired result. It is further submitted that further the matter would have to be sent to a new Arbitral Tribunal as the old Arbitral Tribunal would have become functus officio after rendering the award. It is submitted that therefore, if the contention of the GMDC is accepted, it would render the very recourse under Section 34 of the Act otiose and redundant. It would further defeat the very purpose of having a cost effective and speedy alternate dispute resolution by way of Arbitration.

8.2. It is submitted that even the words "set aside" used in Section

34 of the Act need to be given "purposive interpretation" so as to envisage that the power to set aside or confirm the Arbitral award brings within its fold, the power to undo the miscarriage of justice caused by a perverse award or an award vitiated by the grounds mentioned in Section 34 since the intention of the legislature cannot be interpreted to mean that Courts are to turn a blind eye HC-NIC Page 26 of 53 Created On Sun Aug 13 04:15:17 IST 2017 despite the perversities and patent illegalities of an order challenged before it. It is submitted that if such a narrow interpretation is given effect to then the entire purpose behind having a recourse of Section 34 of the Act shall be rendered futile and would be nothing but a mere recourse on paper.

8.3.

Shri

Kavina,

learned

counsel

for

the

SIL

has

submitted

that

even in the present case Section 55 and 70 of the Contract Act shall squarely be applicable.

8.4.

Shri

Kavina,

learned

counsel

for

the

SIL

has

submitted

that

due to following facts the case of the SIL squarely falls within the provisions of Section 55, Part III of the Contract Act:

"(a) Simplex putting GMDC at notice of its intention to claim escalation and additional costs for overstay due to the delays vide its letter dated October 23, 2003 as well as its subsequent letter dated August 17, 2004 and various bills for escalation and additional costs raised by Simplex; (b) no protest on part of GMDC to such letters and bills, (c) no reply to the letter of Simplex refusing to accept the letter dated 24.11.2004 addressed by GMDC (d) further acceptance of work without any demur, and (v) assurances / studied silence on the part of

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

GMDC makes it apparent that the case of Simplex falls within Section 55 of the Contract Act and GMDC is liable to pay Simplex the escalation and extra costs claimed by it."

8.5. It is further submitted by Shri Kavina, learned counsel for the original applicant−SIL that even assuming though not admitting that Section 55 of the Contract Act does not apply, as the work HC-NIC Page 27 of 53 Created On Sun Aug 13 04:15:17 IST 2017 executed by the SIL under the a commercial contract and the same was executed with no intention of same being a gratuitous act, considering Section 70 of the Contract Act, for the work executed by the SIL beyond the contractual period and with a specific notice of claiming compensation in the form of escalation and extra−costs, the SIL will be entitled to escalation price as well as extra costs due to overstay.

Making above submissions and relying upon the following decisions, it is requested to dismiss the appeal preferred by the GMDC and allow the appeal preferred by the SIL and modify the award declared by the learned Arbitrator rejecting the other claims and consequently to allow other claims including claim no.3.

(1). General Manager, Northern Railways & Anr. V. Sarvesh Chopra reported in (2002) 4 SCC 45.

(2). K.N.

Sathyapalan

V. State

of Kerala reported

in

(2007) 13 SCC 43.

(3). P.M. Paul V. Union of India reported in 1989 Suppl(1) SCC

368. (4).

Food Corporation of India V. A.M. Ahmed and Co reported in (2006) 13 SCC 779.

First Appeal No. 618 of 2017 9.0. Heard length.

the

learned

advocates

for

the

respective

parties

at

HC-NIC Page 28 of 53 Created On Sun Aug 13 04:15:17 IST 2017 9.1. At the outset, it is required to be noted that present First Appeal is an appeal under Section 37 of the Arbitration Act, challenging the impugned judgment and order passed by the learned Commercial Court, Ahmedabad, by which, learned Commercial Court in exercise of powers under Section 34 of the Arbitration Act has partially modified the award passed by the learned Arbitral Tribunal and has allowed the claim for escalation in favour of the SIL, however has confirmed the rest of the award declared by the learned Arbitral Tribunal confirming the award declared by the learned Arbitral Tribunal confirming the award declared by the learned Arbitral Tribunal rejecting other claims.

9.2. At this stage, it is required to be noted that before the learned Arbitral Tribunal and as per the statement of claim submitted by the SIL, the SIL claimed as under:

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

Sr No. Particulars

Amount (Rs)

1 Liquidated Damages

5,39,106/−

2 Claim under RA Bill NO. 28

6,87,014/−

3 Escalation

1,28,30,519/−

4 Extra Cost on account of overstay

1,36,64,532/−

5 Payment of Service Tax.

76,36,090.52

6 Mental Agony

10,00,000/−

7 Loss of Reputation

20,00,000/−

8 Interest (at 18%)

9 Cost

That the learned Arbitral Tribunal rejected all the claims. In

an application submitted by the SIL submitted before the learned HC-NIC Page 29 of 53 Created On Sun Aug 13 04:15:17 IST 2017 Commercial Court, submitted under Section 34 of the Arbitration Act, by impugned judgment and order, the learned Commercial Court has allowed the claim no.3 i.e. with respect to the escalation and confirmed the award declared by the learned Tribunal with respect to claim no.4 viz. extra costs on account of overstay. At this stage, it is required to be noted that so far as claim nos. 5 to 9 are concerned and the SIL challenged the award declared by the

learned Arbitral Tribunal rejecting the claim nos. 3 and 4 i

claim with respect to extra costs on account of overstay. As observed herein above, by impugned judgment and order, the learned Commercial Court has allowed the

claim no.3 in toto i.e. Rs. 1,28,30,519/− and view of the learned Arbitrator has been reversed.

e

with respect to escalation and

By

impugned

judgment

and

order,

the learned Commercial Court has confirmed the award declared by the Arbitral Tribunal with respect to the claim no.4 viz. extra costs on account of overstay. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Commercial Court in allowing the claim no.3 i.e. escalation and reversing the view of the learned Arbitrator, the GMDC has preferred present First Appeal No. 618 of 2017. Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the learned Commercial Court in confirming the award declared by the learned Arbitral Tribunal in rejecting claim no.4 viz. extra costs on account of overstay, the SIL has preferred present First Appeal No. 778 of 2017.

10. Therefore, the first and foremost thing which is required to be considered is the scope and ambit of the learned Commercial HC-NIC Page 30 of 53 Created On Sun Aug 13 04:15:17 IST 2017 Court under Section 34 of the Arbitration Act and the scope and ambit of present First Appeals under Section 37 of the Arbitration Act.

10.1. In

(Supra) the Honble Supreme Court had an occasion to consider the

recent decision in the case of Associate Builders

the

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

scope

Arbitration Act and when in exercise of powers under Section 34 of the Arbitration Act the findings of fact recorded in the arbitral award can be interfered with by the Court. In

and

ambit

of

challenge

to

the

award

under

Section 34 of the

the aforesaid decision,

the

Honble

Supreme

Court

had

also

an

occasion

to

consider the grounds on which the arbitral award may be assailed. In the aforesaid decision, it is observed and held that it is only when the award is in conflict with the public policy of India as prescribed in Section 34(2)(b)(ii) of the Arbitration Act, that the merits of an arbitral award are to be looked into under certain specified circumstances. In paragraph nos.13 to 17 the Honble Supreme Court has observed and held as under;

13. In as much as serious objections have been taken to the

Division Bench judgment on the ground that it has ignored the parameters laid down in a series of judgments by this Court as to the limitations which a Judge hearing objections to an arbitral award under Section 34 is

subject

to,

we

deem

it necessary to state the law on the subject.

14. Section 34 of the Arbitration and Conciliation Act reads as follows− "34. Application for setting aside arbitral award.−(1) Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with sub−section (2) and sub−section (3).

(2) An arbitral award may be set aside by the Court only if−

(a) the party making the application furnishes proof that− HC-NIC Page 31 of 53 Created On Sun Aug 13 04:15:17 IST 2017

(i) a party was under some incapacity; or

(ii) The arbitration agreement is not valid under

failing any indication thereon, under the law for

the law to which the parties have subjected it or, the time being in force; or

(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of

the

submission to arbitration:

Provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, only that part of the arbitral award which contains decisions on matters not submitted to arbitration may be set aside; or

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

(v) the composition of the arbitral tribunal or the

agreement of the parties, unless such agreement which the parties cannot derogate, or, failing such or

arbitral procedure was not in accordance with the was in conflict with a provision of this Part from agreement, was not in accordance with this Part;

(b) the Court finds that−

(i) the subject−matter of the dispute is not capable of settlement by arbitration under the law for the time being in force, or

(ii)

the

arbitral

award

is

in

conflict

with

the

public policy of India.

Explanation.−Without prejudice to the generality of sub−clause (ii), it is hereby declared, for

the

avoidance

of

any

doubt,

that

an

award

is

in

conflict

with

the

public

policy

of

India if

the

making

of

the

award

was

induced

or

affected

by

fraud or corruption or was in violation of Section 75 or Section 81.

HC-NIC Page 32 of 53 Created On Sun Aug 13 04:15:17 IST 2017 (3) An application for setting aside may not be made after three months have elapsed from the date on which the party

making that application had received the arbitral award or, if

Section 33, from the date on which that request had been disposed of by the arbitral tribunal:

a request had been made under

Provided that if the Court is satisfied that the applicant was

prevented by sufficient cause from

making the application within the said period of three months it may entertain the application within a further period of thirty days, but not thereafter.

(4) On receipt of an application under sub−section (1), the Court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award."

15. This Section in conjunction with Section 5 makes it clear

that

Arbitration and Conciliation Act, 1996 can be set aside only on grounds mentioned under

an

arbitration

award

that

is

governed

by

part

I

of

the

Section

34 (2)

and

(3),

and

not otherwise. Section 5 reads as follows:

"5. Extent of judicial intervention.−Notwithstanding anything contained in any other law for the time being in force, in matters governed by this Part, no judicial authority shall intervene except where so provided in this Part."

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

16. It is important to note that the 1996 Act was enacted to replace the 1940 Arbitration Act in order to provide for an arbitral procedure which is fair, efficient and capable of meeting

the

needs

of

arbitration; also to provide that the

tribunal gives reasons for an arbitral award; to ensure that the tribunal remains within the limits of its jurisdiction; and to minimize the supervisory roles of courts in the arbitral process.

17. It will be seen that none of the grounds contained in sub− clause 2 (a) deal with the merits of the decision rendered by an arbitral award. It is only when we come to the award being in

conflict with the public policy of India that the merits of an arbitral award are to be looked

into under certain specified

circumstances.

HC-NIC Page 33 of 53 Created On Sun Aug 13 04:15:17 IST 2017 What can be said to be against the public policy of India has been discussed by the Honble Supreme Court in the said decision.

At this stage, it is required to be noted that it is not the case on behalf of the appellants that the award declared by the learned Arbitral tribunal is in conflict with the public policy of India. Under the circumstances, the same is not required to be dealt with any further.

Thereafter, the Honble Supreme Court has considered the fourth head namely patent illegality. While considering what can be said to be patent illegality the Honble Supreme court has observed in paragraph nos.40 to 45 as under;

Patent Illegality

40.We now come to the fourth head of public policy namely, patent illegality.

It must be remembered that under the explanation to

section

34 (2)

(b), an

award is said to be

public policy of India if the making of the award was induced or affected by fraud or corruption. This ground is perhaps the earliest ground on which courts in England set aside awards under English

law. Added to this ground (in 1802) is the ground that an arbitral award would be

in

conflict

with

the

set

aside

if there

were

an

error

of

law

the

Denning

by

arbitrator.

in

This

R

is

v.

explained by Lord

Northumberland Compensation Appeal Tribunal. Ex Parte Shaw.,

1952 1 All ER 122 at page 130:

Justice

"Leaving now the statutory tribunals, I turn to the awards of the arbitrators. The Court of King's Bench never interfered by certiorari with the award of an arbitrator, because it was a private tribunal and not subject to the prerogative writs. If the award was

not

4 Whether This Case Involves A

made

a

rule

of

vs Simplex Infrastructure Limited on 9 June, 2017

court,

the

only

course

available to an aggrieved party was to resist an action on the award or to file a bill in equity. If the award was made a rule of court, a motion could be made to the court to set it aside for misconduct of the arbitrator on the ground that it was procured by corruption or other undue means: see the statute 9 and 10 Will. III, c. 15. At one time an award could not be upset on the ground of error of law by the arbitrator because that could not be said to be misconduct or undue means, but ultimately it was held in Kent v. Elstob, (1802)

3 East 18, that an award could be set aside for error of law HC-NIC Page 34 of 53 Created On Sun Aug 13 04:15:17 IST 2017 on the face of it. This was regretted

by

Williams,

J.,

well established."

in

Hodgkinson v. Fernie, (1857) 3 C.B.N.S. 189, but is now

41. This, in turn, led to the famous principle laid down in Champsey Bhara Company v. The Jivraj Balloo Spinning and Weaving Company Ltd., AIR 1923 PC 66, where the Privy Council referred to Hodgkinson and then laid down:

"The law on the subject has never been more clearly stated

than

in the

case

of

Hodgkinson

v.

Fernie

(1857) 3 C.B.N.S. 189.

by

Williams,

J.

"The law has for many years been settled, and remains so at this day, that, where a cause or matters in difference are referred to an arbitrator a

lawyer or a layman, he is constituted the sole and final judge of all questions

both of law and of fact

where the award is the result of corruption or fraud, and one other, which though it is to be regretted, is now, I think firmly established viz., where the question of law necessarily arises on the face of the award or upon some paper accompanying and forming part of the award. Though the propriety of this latter may very well be doubted, I think it may be considered as established."

The only exceptions to that rule are cases

"Now the regret expressed by Williams, J. in Hodgkinson v. Fernie has been repeated by more than one learned Judge, and it is certainly not to be desired that the exception should be in any way extended. An error in law on the face of the award

means, in their Lordships' view, that you can find in the award or a

actually incorporated thereto, as for instance, a note appended by the arbitrator stating the reasons for his judgment, some legal proposition which is the basis of the award and which you can then say is erroneous. It does not mean that if in a narrative a reference is made to a contention of one party that opens the door to seeing

document

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

first what that contention is, and then going to the contract on which the parties' rights depend to see if that contention is sound. Here it is impossible to say, from what is shown on the face of the award, what mistake the arbitrators made. The only way that the learned judges have arrived at finding what the mistake was is by saying: "Inasmuch as the Arbitrators awarded so and so, and inasmuch as the letter shows that then buyer rejected the cotton, the HC-NIC Page 35 of 53 Created On Sun Aug 13 04:15:17 IST 2017 arbitrators can only have arrived at that result by totally misinterpreting Cl.52." But they were entitled to give their own interpretation to Cl. 52 or any other article, and the award will stand unless, on the face of it they have tied themselves down to some special legal proposition which then, when examined, appears to be unsound. Upon this point, therefore, their Lordships think that the judgment of Pratt, J was right and the conclusion of the learned Judges of the Court of Appeal erroneous."

This judgment has been consistently followed in India to test awards under Section 30 of the Arbitration Act, 1940.

42. In the 1996 Act, this principle is substituted by the 'patent illegality' principle which, in turn, contains three sub heads − 42.1 (a) a contravention of the substantive law of India would result in the death knell of an arbitral award. This must be understood in the sense that such illegality must go to the root of the matter and cannot be of a trivial nature. This again is a really a contravention of Section 28(1)(a) of the Act, which reads as under:

"28. Rules applicable to substance of dispute.−(1) Where the place of arbitration is situated in India,−

(a)

in

an

arbitration

other

than

an

international

commercial

arbitration,

the

arbitral

tribunal

shall

decide

the

dispute

submitted

to

arbitration

in

accordance

with

the

substantive

law

for

the

time

being in force in India;"

42.2 (b) a contravention of the Arbitration Act itself would be regarded as a patent illegality− for example if an arbitrator gives no reasons for an award in contravention of section 31(3) of the Act, such award will be liable to be set aside.

42.3 (c) Equally, the third sub−head of patent illegality is really a contravention of Section 28 (3) of the Arbitration Act, which reads as under:

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

"28. Rules applicable to substance of dispute.− (3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction."

This last contravention must be understood with a caveat. An arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set HC-NIC Page 36 of 53 Created On Sun Aug 13 04:15:17 IST 2017 aside on this ground. Construction of the terms of a contract is primarily 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.

43. In McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181, this Court held as under:

"112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. (See Pure Helium India (P) Ltd. v. ONGC [(2003) 8 SCC 593] and D.D. Sharma v. Union of India [(2004) 5 SCC 325]).

113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award."

44. In MSK Projects (I) (JV) Ltd. v. State of Rajasthan, (2011) 10 SCC 573, the Court held:

"17. If the arbitrator commits an

construction of the contract, that is an error within his jurisdiction. But if he wanders outside the contract and deals with matters not allotted to him,

error

in

the

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

he commits

is admissible in such cases because the dispute is not

error.

a

jurisdictional

Extrinsic

something which arises under

evidence

or in relation to the contract or dependent on the construction of the

contract or to be determined within the award. The ambiguity of the award can,

in

such

cases,

be

resolved

by

admitting

extrinsic

evidence.

The

rationale of

this

rule

is

that

the

nature

of

the

dispute

is something which has to be determined outside and

independent

of what appears in the award. Such a jurisdictional error needs to be proved

by evidence extrinsic to the award.

(See

Gobardhan

Das

v.

Lachhmi Ram [AIR 1954 SC 689], Thawardas Pherumal v. Union of India

[AIR 1955 SC 468], HC-NIC Page 37 of 53 Created On Sun Aug 13 04:15:17 IST 2017 Union of India v. Kishorilal Gupta & Bros. [AIR 1959 SC 1362], Alopi Parshad & Sons Ltd. v. Union of

Chintamanrao Balaji [AIR v. General Electric Co.

India [AIR 1960 SC 588], Jivarajbhai Ujamshi Sheth v. 1965 SC 214] and Renusagar Power Co. Ltd. [(1984) 4 SCC 679 : AIR 1985 SC 1156] )."

45. In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306, the Court held:

"43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a

possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and

substitute its view in

place of the interpretation accepted by the arbitrator.

44.

summarized in para 18 of the judgment of this Court in SAIL v. Gupta Brother Steel Tubes Ltd. [(2009) 10 SCC 63: (2009) 4 SCC (Civ) 16] and which has been referred to above. Similar view has been taken later in Sumitomo Heavy Industries Ltd. v. ONGC Ltd. [(2010) 11 SCC 296: (2010) 4 SCC (Civ) 459] to which one of us (Gokhale, J.) was a party. The observations in para 43 thereof are instructive in this behalf.

The

legal

position

in

this

behalf

has

been

45. This

[(2010) 11 SCC p. 313)

construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make

para

43

reads

296

:

as

follows:

4

(Sumitomo

(Civ)

case

,

SCC

(2010)

SCC

459]

The umpire has considered the fact situation and placed a

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn. [(2009) 5 SCC 142 : (2009) 2 SCC (Civ) 406] the Court while considering challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to HC-NIC Page 38 of 53 Created On Sun Aug 13 04:15:17 IST 2017 take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding."

10.2. Applying the law laid down by the Hon'ble Supreme Court in the aforesaid decisions, this Court is required to examine and / or consider whether the learned Commercial Court is justified in modifying the award declared by the learned Arbitral Tribunal and in allowing the claim no.3 i.e. claim with respect to the escalation which was rejected by the learned Tribunal, in exercise of powers under Section 34 of the Arbitration Act ? This Court is also required to consider whether in the facts and circumstances of the case learned Commercial Court is justified in rejecting Section 34 application in so far as confirming the award declared by the Arbitral Tribunal rejecting the claim no.4 i.e. claim with respect to extra costs on account of overstay ?

11. Now, so far as the claim no.3 with respect to escalation price is concerned, at the outset, it is required to be noted that in the contract/ agreement / work order, it was specifically mentioned that prices are "firm and no escalation will be allowed during the currency of the contract period." However, subsequently SIL insisted for escalation price even at the time when the period of contract was extended. However, GMDC did not agree for the same and therefore, SIL at the relevant time did not pursue their insistence for escalation clause. It is true that thereafter the SIL continued the work and complete the work within the extended HC-NIC Page 39 of 53 Created On Sun Aug 13 04:15:17 IST 2017 period. It is also true that subsequently when the SIL submitted the invoices, the same were with escalation price as per formula earlier suggested by it but was not accepted by the GMDC. However, it was the case on behalf of the SIL that in the communication dated

22.02.2007 the GMDC agreed to consider their claim of escalation

price. It appears that entire claim of the escalation by the SIL was

based on the premise that GMDC did not object to their letter dated

17.08.2004 written by the SIL and that if allowed the claimant to

proceed with the work. It was also the case on behalf of the SIL

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

that officer of the GMDC assured that the escalation price would be

paid. However, in absence of any specific evidence with respect to time and

name of the officer

by

whom

such

representation

was

made and in absence of any evidence led by SIL with respect to such assurance, learned Arbitrator did not accept the case of the SIL. At this stage, it is required to be noted that as such SIL had not

led any oral evidence. From the reasons and the findings recorded by learned Arbitral Tribunal,

it

appears

that

the

learned

Arbitral

Tribunal rejected the claim no.3 i.e. claim with respect to escalation on the ground that (1) Claim not supported by documentary evidence; (2) GMDC specifically denied escalation; (3) No evidence / corroborative as regards delinquent or officer of the GMDC (4) Section 55 of the Indian Contract Act shall not be applicable.

11.1. However, the learned Commercial Court has reversed the finding recorded by the learned Arbitral Tribunal by observing that parties had chosen not to lead any ocular evidence and therefore, the submission on behalf of the GMDC that document in question have not been proved by the SIL by way of leading oral HC-NIC Page 40 of 53 Created On Sun Aug 13 04:15:17 IST 2017 evidence do not find any force. However, it is required to be noted that by the aforesaid conduct, the requirement of proving case was not done away and still the SIL was required to prove its case by leading evidence. Under the circumstances, learned Commercial Court has materially erred in reversing the finding recorded by the learned sole Arbitrator and that too in exercise of powers under Section 34 of the Arbitration Act.

11.2. Now, so far as the letter dated 22.02.2007 which was heavily relied upon by the SIL and in which, according to the SIL, the

GMDC stated that question of escalation will be considered by it, it is required to be noted that

in

the

said

communication

dated

22.02.2007 there does not appear to be any such assurance given by the GMDC to consider the claim regarding escalation. What is stated is that "Mr. U.B.Singh has also raised points regarding escalation & over run of contract. It is informed that during contract closure these points alongwith penalty, liquidated damages etc. as per contract will be taken in consideration as per the Contract". The learned Arbitrator has observed that the communication/ letter dated dated 22.02.2007 cannot be said to be acceptance of escalation price. However, the learned Commercial Court has reversed the finding recorded by the learned Arbitral Tribunal in relation to the letter dated 22.02.2007 by observing that "even assurances given by the responsible and authorized representative of the respondent cannot be given a go− bye as it emerges from the correspondence appears to have been HC-NIC Page 41 of 53 Created On Sun Aug 13 04:15:17 IST 2017 find force and, therefore, no cogent reasons even has been adduced by the respondent for not believing the same." From the aforesaid,

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

it appears that learned Commercial Court has therefore, materially erred in reversing the finding recorded by the learned Arbitrator in relation to the letter dated 22.02.2007 and in considering and / or treating the letter dated 22.02.2007 addressed by the GMDC to Simplex as acceptance of claim in relation to escalation.

11.3. It is required to be noted that the SIL heavily relied upon Section 55 of the Indian Contract Act as well as Section 62 of the Indian Contract Act.

Now, so far as reliance placed upon the 3rd part of the Section 55 of the Contract Act is

at the outset, it is required to be noted that in the facts and circumstances

narrated herein above, Section 55, more particularly, 3rd part of Section 55 shall not be applicable and / or of any assistance to the SIL. Merely because, time to complete the work was extended by the GMDC, the SIL shall not be entitled to compensation for any loss occasioned by the non performance of the promise at the time of agreement. At this stage, it is required to be noted that as such learned Arbitrator did not go into the merits, on who was responsible for delay.

concerned,

11.4. Now, so far as reliance placed upon Section 62 of the Contract Act is concerned, Section 62 shall be applicable in a case

where there was novation of contract and the original contract is entirely substituted. When new

contract

comes

into

effect

the original contract need not be performed at all. This was not the

HC-NIC Page 42 of 53 Created On Sun Aug 13 04:15:17 IST 2017 case in the instant case. In the original contract only, the GMDC granted extension of time. Therefore, the reliance upon Section 62 of the Contract Act was absolutely misplaced.

Considering the aforesaid facts and circumstances, it appears that learned Commercial Court has materially erred in reversing

the finding recorded by the learned Arbitral Tribunal in relation to the escalation. The learned Commercial Court has exceeded its jurisdiction in exercising the powers under Section

34 of

the Arbitration Act as an Appellate Court, which is not permissible.

11.5. Even otherwise, the impugned judgment and order passed by the learned Commercial Court in allowing the claim no.3 in toto and that too in exercise of powers under Section 34 of the Arbitration Act, cannot be sustained. Whatever the claim was made by the claimant so stated in the statement of claim, the same has been allowed by the Commercial Court. It is required to be noted that as such SIL did not lead any oral evidence and therefore, did not prove the claim and computation by leading evidence, its claim in relation to escalation. At this stage, it is required to be noted that as such GMDC specifically denied the claim no.3 and even computation of claim no.3. Therefore, the same was required to be

4 Whether This Case Involves A

proved by leading evidence, by SIL.

vs Simplex Infrastructure Limited on 9 June, 2017

11.6. At this stage, it is required to be noted that in fact during the course of the hearing, even the learned Commercial Court directed, rather requested learned counsel for both the parties to avail the scope of Section 34(4) of the Arbitration Act, instead of seeking remittance of award under Section 16 of the Old Arbitration Act.

HC-NIC Page 43 of 53 Created On Sun Aug 13 04:15:17 IST 2017 However, the same was not accepted by the learned counsel for the respective parties and they requested for disposal of the application under Section 34 of the Arbitration Act in accordance with law. At this stage, it is required to be noted that even learned counsel for the SIL submitted that while exercising the powers under Section 34(4) of the Arbitration Act both the issue pertaining to escalation and extra costs incurred on account of overstay be referred to the Arbitrator. However the same was not amenable to the learned counsel for the GMDC. Even the similar request was made by Shri Kavina, learned counsel for the SIL to remand the matter to the learned Arbitrator, which is vehemently opposed by learned counsel for the GMDC. Learned counsel for the GMDC has vehemently submitted that remanding the matter to the learned Arbitrator, by the Court in exercise of powers under Section 34/ 37 of the Arbitration Act is not permissible. It is submitted by Shri Soparkar, learned counsel for the GMDC that once the learned Arbitrator declares the award, thereafter learned Arbitrator becomes functus officio and thereafter he has no authority to continue with the arbitration proceedings.

11.7. Even otherwise it is required to be noted that there are no such powers of remand vested with the Court exercising the powers either under Section 34 or Section 37 of the Arbitration Act. The only power the Court possesses is under Section 34(4) of the Arbitration Act, which is the repository of power invested in the Court. Section 34(4) of the Arbitration reads as under:

HC-NIC Page 44 of 53 Created On Sun Aug 13 04:15:17 IST 2017 (4). On receipt of an application under sub−section (1), the court may, where it is appropriate and it is so requested by a party, adjourn the proceedings for a period of time determined by it in order to give the arbitral tribunal an opportunity to resume the arbitral proceedings or to take such other action as in the opinion of arbitral tribunal will eliminate the grounds for setting aside the arbitral award."

11.7.1 Considering the aforesaid provision it is amply clear that the Court can defer the hearing of the application filed under Section 34 of the Arbitration

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

Act setting aside the award on a

written request made by a party to the arbitration proceedings to facilitate the Arbitral Tribunal by resuming the arbitration proceedings or to take such other action as in the opinion of the Arbitral Tribunal will eliminate the grounds for setting aside the Arbitral Award. The quintessence for exercising the the power under this provision is that the Arbitral Award has not been set aside. The challenge to the said award has been set up under Section 34 of the Arbitration Act about the deficiencies in the Arbitral Award which may be curable by allowing the Arbitral Tribunal to take such measures which can eliminate the grounds for setting aside the Arbitral Award. No power has been invested by the Parliament in the Court to remand the matter to the Arbitral Tribunal except to adjourn the proceedings for the limited purpose

mentioned in sub−section (4) of section 34. The view which we are expressing

the decision of the Hon'ble Supreme Court in the case of McDermott International Inc. vs. Burn Standard Ltd. reported in (2006) 11 SCC 181.

is supported by

HC-NIC Page 45 of 53 Created On Sun Aug 13 04:15:17 IST 2017 11.7.2 Even considering sub−section (4) of Section 34 of the Arbitration Act, the limited discretion available to the Court under sub−section (4) of Section 34 can be exercised only upon a written application made in that behalf by a party to the arbitration proceedings. Even such a request can be made before formally setting aside the award. Before formally setting aside the award, if the party to the arbitration proceedings fails to request the Court to defer the proceedings pending before it, then it is not open to a party to move an application under sub−section (4) of Section 34 of the Arbitration Act. As observed hereinabove, consequent to disposal of the main proceedings under Section 34 of the Arbitration Act by the Court, it would become functus officio. Therefore, the limited remedy available under Section 34(4) of the Arbitration Act is required to be invoked by the party to the arbitration proceedings before the award is set aside by the Court.

At this stage it is required to be noted that in the present case even without any formal application by either of the parties to the arbitration proceedings, the learned Commercial Court gave an option to the original applicant to go before the Arbitral Tribunal under section 34(4) of the Arbitration Act. That however, the parties refused to the said suggestion and requested the Court to pass the order on merits. Therefore, now, it is not open for the original applicant − SIL to request to remand the matter to the learned Arbitral Tribunal.

Under the circumstances, the request made by Shri Kavina, learned counsel for the SIL to remand the matter to the Arbitrator, HC-NIC Page 46 of 53 Created On Sun Aug 13 04:15:17 IST 2017 canot be accepted.

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

11.8. Now, so far as reliance placed upon the decision in the case of A.M. Ahmed and Co (supra) relied upon by Shri Kavina, learned counsel for the SIL is concerned, at the outset, it is required to be noted that in the said decision it was specific finding recorded by

the learned Arbitrator that there was a delay in execution of the contract due to the conduct of

Food

Corporation

of

India

and

therefore, Corporation was liable for the consequence of the delay

viz. increase in statutory wages. It is required to be noted that in the present case there is no such finding given by the learned Arbitrator and / or even learned Commercial Court that the delay was attributable to the GMDC. The learned Arbitrator specifically observed that in the facts and circumstances of the case, it is not necessary to go into the merits of the rival contention as regards the reasons of delay attributable to whom. Despite the above, learned Commercial Court has observed that GMDC never appeared to have fulfilled its obligation of providing drawings and work fronts in time resulting in delay in completion of the project. Even in the reasoning assigned while disposing of the claim no.1, the learned Commercial Court has observed that delay is not attributable to the claimant only. Therefore, what was required to be thereafter considered was whether who was responsible for the delay and to what extent was again required to be considered. As

observed herein above, the learned Arbitrator did not go into the merits of

as regards reasons of delay attributable to whom. Under the circumstances, the aforesaid decision shall not be applicable to the facts of the case on hand.

the rival contention

HC-NIC Page 47 of 53 Created On Sun Aug 13 04:15:17 IST 2017 11.9.

Now, so far as reliance placed upon the decision in the case of K.N.Sathyapalan (supra) relied

upon

noted that in the case before the Hon'ble Supreme Court there was absence of of any price escalation clause in the original agreement and even there was absence of specific prohibition to the contrary in the supplemental agreement. In the instant case, in the original

agreement there is specific price escalation clause and it is stated

that there shall not be any escalation allowed and price will remain firm.

subsequent correspondence also, GMDC never agreed for price escalation even at the time when period of contract was extended. Under the circumstances, the decision shall not be applicable to the facts of the case.

by

Shri

Kavina,

learned counsel for the SIL is concerned, at the outset, it is required to be

Even

in

the

12.

of the opinion that learned Commercial Court has materially erred in allowing claim no.3 which

In

view

of

the

above

and

for

the

reasons

stated

above,

we

are

was

rejected

by

the

learned Arbitrator,

by

reversing

the

finding

recorded

by

the

learned Arbitrator,

while

exercising

the

powers

under

Section

34

of

the

Arbitration Act.

Under

the

circumstances,

Appeal

preferred

by

the

GMDC being First Appeal No. 618 of 2017 deserves to be allowed and is accordingly allowed.

4 Whether This Case Involves A

First Appeal No. 778 of 2017

vs Simplex Infrastructure Limited on 9 June, 2017

13. Now, so far as First Appeal No. 778 of 2017 preferred by the SIL against the impugned

judgment

learned Commercial Court dismissing the application under Section

34 of the Arbitration Act and confirming the award declared by the HC-NIC Page 48 of 53 Created

On Sun Aug 13 04:15:17 IST 2017 learned Tribunal rejecting the claim no.4 i.e. claim with respect to extra costs on account of overstay is concerned, at the outset, it is required to be noted that as such there are concurrent findings of fact recorded by the learned Arbitrator as well as learned Commercial Court. Therefore, the present Appeal which will be under Section 37 of the Arbitration Act is concerned, the Court would have very limited scope and the jurisdiction. As observed and held by the Hon'ble Supreme Court as well as this Court in catena of decisions, against the order passed by the learned Arbitrator even the first Court exercising the power under Section

34 of the Arbitration Act would have very limited scope and the jurisdiction and as observed

herein above, the Court while considering the application under Section 34/37 of the Act is not

sitting as an Appellate Court against the award declared by the learned Arbitrator.

and

order

passed

by

the

The

scope

and

exercise

of

jurisdiction

by

this

Court in exercise of powers under Section 37 of the Arbitration Act by this Court will be co−terminus with the scope of Section 34 of the Act and therefore,

unless

and

until

the

case

is

made

out

for

interference as per law laid down by the Hon'ble Supreme Court in the case of Associate Builders (supra), this Court would not be justified in interfering with the findings recorded by the learned Arbitrator, confirmed by the learned Commercial Court.

13.1. It is required to be noted that so far as claim no.4 i.e. with respect to extra costs on account of overstay is concerned, it

was the case on behalf of the SIL that as the SIL had to remain on the site for the period

beyond

contract, on account of which, it had to incur extra costs. The same HC-NIC Page 49 of 53 Created

On Sun Aug 13

came to be negatived and / or rejected by the learned Arbitrator by

giving specific finding that the SIL has failed to justify the claim by proving (1) that the entire

period of overstay

reasons attributable to the respondent; and (2) the SIL had made all possible efforts

the

date

of

completion

of

the

04:15:17

was

IST

to

2017

the

due

to

mitigate

the

expenses

which

it

might

have

incurred on account of overstay. Even the SIL also failed to prove by way of producing cogent proof to show that during this entire

period of overstay only on account of this contract work, it had to incur further costs in addition thereto to show that the extra expenses were incurred by the claimant during

the

period

of

overstay.

The

learned

Arbitrator

while

considering

the

aforesaid

claim specifically observed that at the very site where the particular contract work was carried out, there were three other construction works which were being carried on by the SIL. Even, SIL failed to

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

adduce any cogent evidence to prove the payment made towards maintenance of the site machinery, manpower engaged and the payment made by them. Therefore, in absence

of any cogent evidence on record, the learned Arbitrator rightly rejected the said claim. The aforesaid has been confirmed by the learned Commercial Court. Considering the aforesaid facts and circumstances of the case and the findings recorded by the learned

Arbitrator recorded while rejecting the claim no.4 i.e. with respect to claim on account

of

extra

costs

incurred

due

to

overstay,

it

cannot be said that the same deserve any interference of this Court in exercise of powers under Section 37 of the Arbitration Act. We are in complete agreement with the view taken by the learned Arbitrator as well as learned Commercial Court.

HC-NIC Page 50 of 53 Created On Sun Aug 13 04:15:17 IST 2017

14. Now, so far as submission made by Shri Kavina, learned counsel for the SIL that in fact in the written statement of defence filed by the GMDC of 30.01.2010 before the learned Arbitrator, the GMDC admitted the claim in part, in respect to the amount payable

by the GMDC to SIL towards extra costs/ overstay is concerned, at the outset, it is required to be noted that as such no such submissions were made either before the learned Arbitrator or before the learned Commercial Court. Even considering, the written statement of the SIL before the Commercial Court submitted by the GMDC it does not appear that there was any such admission. It is required to be noted that in the original written statement filed by the GMDC, the GMDC had denied the claim of

overstay in toto. In fact, further written statement, which according to the SIL there is

admission, it appears that the same was submitted to display the arithmetic and logical inaccuracy in SIL's calculation and the same cannot be said to be in any way admission on the part of the GMDC.

an

14.1. As rightly observed by the learned Arbitrator as well as learned Commercial Court merely because the SIL continued to carry on the work after a period of 22 months, the SIL is not entitled to compensation for the overstay. The SIL was required to prove that the overstay was due to the delay on the part of the GMDC and that SIL was required to be adduced cogent evidence with respect to the actual claim and the expenditure incurred.

14.2. Now, so far as reliance placed upon Section 70 of the Contract Act is concerned, assuming that Section 70 of the Contract HC-NIC Page 51 of 53 Created On Sun Aug 13 04:15:17 IST 2017 Act may be applicable in that case also, even while

claiming compensation, the SIL was required to prove that entire period of overstay was due to the reasons attributable to the GMDC, that the SIL made all possible efforts

to

mitigate

the

expenses

which

it

might have incurred on account of overstay. Importantly even, SIL was required to prove by producing cogent evidence the actual

4 Whether This Case Involves A

vs Simplex Infrastructure Limited on 9 June, 2017

expenses / costs incurred/ made towards maintenance of the site machinery, manpower engaged and the payment made to them.

14.3. Considering the aforesaid facts and circumstances and

the reasoning given by the learned Arbitrator as well as learned Commercial Court, we see no reason to interfere with the impugned judgment and order passed by the learned Commercial Court confirming the award declared by the learned Arbitrator with respect to claim no.4 i.e. with respect to extra costs on account of overstay. We are in complete agreement with the view taken by the learned Arbitrator as well as learned Commercial Court.

14.4. Under the circumstances, the present First Appeal No. 778 of 2017 preferred by deserves to be dismissed and is accordingly dismissed.

the

SIL

15. In view of the above and for the reasons stated above, First Appeal No. 618 of 2017 preferred by the GMDC is hereby allowed and the impugned judgment and order passed by the learned Commercial Court, Ahmedabad dated 28.12.2016 in

Commercial Civil Miscellaneous Application No. 52 of 2016 is hereby quashed and set aside in so far as modifying the award declared by the learned Arbitrator and allowing the

claim no.3

with respect to HC-NIC Page 52 of 53 Created On Sun Aug 13 04:15:17 IST 2017

escalation.

15.1.

In

view

of

the

above

and

for

the

reasons

stated

above,

First Appeal No. 778 of 2017 is hereby dismissed and the impugned judgment and order passed

by

learned

Commercial Civil Miscellaneous

the

Commercial

the

Court,

Ahmedabad dated 28.12.2016 in

52

by

of

2016

rejecting Section 34

Arbitrator

the

learned

with

Application

award

No.

application

respect to claim no.4 − with respect to extra costs on account of overstay is hereby confirmed.

and

confirming

declared

In the facts and circumstances of the case, there shall be no order as to costs.

Sd/−

Sun Aug 13 04:15:17 IST 2017

(M.R. SHAH, J.) Sd/−

(B.N. KARIA, J.) Kaushik HC-NIC Page 53 of 53 Created On