TaxTMI 
TaxTMI 
2019 (4) TMI 2195
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....4 itself reads 'APPLICATION FOR SETTING ASIDE ARBITRAL AWARD'. Be that as it may, a legal proceeding which is in the nature of recourse against an arbitral award, is being assigned the nomenclature 'Original Petition' in the Registry of this Court and therefore, instant proceedings are being referred to as 'O.P', for the sake of convenience and clarity. 3 Sole Petitioner before this Court in instant O.P is a juristic person, i.e., a private limited company, which goes by the name 'Chennai Bunkering Terminal Private Limited' and the same shall hereinafter be referred to as 'Contractor' for the sake of clarity and convenience. Lone Respondent before this Court is the 'Board of Trustees, Chennai Port Trust' and respondent shall hereinafter be referred to as 'Port Trust' for the sake of convenience and clarity. 4 It is necessary to set out short facts for appreciating this order and the same is done under the caption 'Factual Matrix' infra. 5 FACTUAL MATRIX : (a) Port Trust with a view to develop Barge handling facility at Chennai Port through private sector participation issued a tender in January 2012, inviti....
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....id contract' for the sake of convenience and clarity. As mentioned supra, this Court is informed that said contract is on BOT basis, 'BOT' again is an abbreviation and it stands for 'Build Operate Transfer'. Contractor expressed certain concerns and an Expert committee was appointed to go into such concerns. (e) It is also not in dispute, as mentioned supra, that the Contractor was given a 'Detailed Project Report' ('DPR' for brevity). Post said contract, claimant realised that the volume of business at Port Trust does not match the projections in the DPR. This led to the contractor submitting a revised layout dated 08.12.2014 which was marked as Ex.C.7 before AT. This revised layout which shall hereinafter be referred to as 'modified plan' for the sake of convenience and clarity became the trigger for this lis as the Port Trust expressed apprehension about the modified plan. (f) Thereafter, both parties, namely Contractor and Port Trust agreed to appoint an Expert in accordance with Clause 19.2 of said contract and the Expert gave a report dated 24.6.2015 which is Ex.C.10 before AT. While Port Trust raised several objections for th....
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.... loss of revenue. This claim was made by Port Trust stating that if the Contractor had commenced construction activities from the date of environment clearance, said project would have been completed and operations could have been commenced from September, 2015. According to Post Trust, from September 2015, it would have started earning land lease charges and revenue share from said project. This did not happen and this is the basis for counter claim. (l) As counter claim had been made by the Port Trust, the Contractor filed a rejoinder dated 24.1.2017 and a separate reply also dated 24.1.2017 being reply to the counter claim. This completed the pleadings before AT. 18 issues framed by predecessor sole arbitrator, who then constituted the AT, were recast and 7 issues were framed on 02.01.2018. Those 7 issues read as follows (1) Whether the claimant/respondent violated any terms of concession agreement dated 30.03.2013 entered into between the parties and if so, what are the violations? (2) Whether the termination of contract made by the respondent is valid? (3) Whether the claimant is entitled to all or any of the claims made by it in its claim stateme....
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....he ground on which the impugned award is assailed in the instant O.P fits into section 34(2)(b)(ii) read with clause (ii) of Explanation 1 and Section 34(2-A) of A and C Act. If this is translated into grounds on which instant O.P is predicated, they are (a) that the impugned award is in conflict with public policy of India as it is in contravention with fundamental policy of Indian law and (b) that the impugned award is vitiated by patent illegality appearing on the face of the award. (c) In this regard, it is to be noted that both sides had no disagreement that the date of commencement of arbitral proceedings is one of the dates between 29.9.2016 and 03.10.2016. 29.09.2016 (Ex.C.22 before AT) is the letter by which port trust nominated an arbitrator and sought the consent of contractor. In other words, in this notice dated 29.9.2016 (Ex.C.22), port trust made a request for arbitral dispute to be referred to arbitration. To this, contractor sent a reply dated 03.10.2016 (Ex.C.23 before AT), wherein and whereby contractor consented for the sole arbitrator nominated / suggested by port trust. A perusal of the language in which section 21 of A and C Act is couched makes it c....
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....1.00 PM in Madras High Court Arbitration Centre, since the parties have already filed their pleadings, documents and also the proof affidavit of CW1, it was decided to list the matter on 20.12.2017 for cross-examination of CW1. In the second sitting held on 20.12.2017, the documents filed by both sides were marked. The learned counsel appearing for the respondent submitted that there is no cross-examination of CW1 and there is also no oral evidence on behalf of the respondent. Hence, the matter was listed on 02.01.2018 to put forth arguments by he learned counsel for claimant and on 08.01.2018 for the arguments of the learned counsel for respondent ..... " (f) It was submitted on behalf of the Contractor / petitioner that though an Expert was examined as C.W.1 by the Contractor in its capacity as claimant before AT and though a detailed proof affidavit was filed, Port Trust did not even choose to cross examine the Expert. More importantly, notwithstanding this position besides aforesaid reference to C.W.1 and his deposition vide proof affidavit, there is no reference to C.W.1 or to Expert evidence anywhere in the impugned award, is learned senior counsel's say. In othe....
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....itted that irrationality / perversity should be tested on the time honoured Wednesbury principle of reasonableness. A mere perusal of the impugned award reveals clearly that it does not pass the muster of Wednesbury principle of reasonableness as the impugned award has been passed without any reference whatsoever to the evidence of C.W.1, though the entire arbitration is clearly a techno commercial arbitration. It was reiterated and emphasised that this is not a case of no evidence. It was submitted that it was not a case of wrong appreciation of evidence either. It was submitted that in a techno commercial arbitration when an Expert was examined and when it is clearly noticed, more so when evidence is uncontroverted (Port Trust chose not to cross examine C.W.1), it is a clear case of irrationality / perversity to pass an award without making any reference whatsoever to the evidence of C.W.1. (j) Besides this, it was pointed out by learned senior counsel for petitioner that in answering issue No.1, which pertains to whether contractor or Port Trust violated the terms of said contract, AT has returned a finding vide impugned award that both parties have not violated conditi....
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.... Industries Limited Vs. Oil and Natural Gas Corporation Limited [(2010) 11 SCC 296]; and (ii) S.R. Tewari Vs. Union of India [(2013) 6 SCC 602]. (o) With regard to Sumitomo and S.R. Tewari cases, in the considered opinion of this Court, what can be culled out from Sumitomo and S.R. Tewari is that Hon'ble Supreme Court has held that a finding can be held a considered opinion of this court, if an adumbration of the same is to be made, the same will read as follows : (i) Findings have been arrived at by ignoring or excluding relevant materials; (ii) Findings have been arrived at by taking into consideration irrelevant / inadmissible materials; (iii) When the finding is against the weight of evidence; (iv) When the finding so outrageously defying the logic as to suffer from the vice of irrationality; (v) When a finding is rendered on the basis of no evidence; and (vi) When a thoroughly unreliable evidence, which no reasonable person would act upon, is the basis for the findings. (p) This Court has also noticed that S.R. Tewari case arises under Service law. Therefore, this Court is aware that while dra....
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....one without resorting to review on the merits of the dispute. (s) This takes us to the contention raised by Mr. P. Saravanan, learned standing counsel for Port Trust. Learned standing counsel for Port Trust submitted that the contractor has not mentioned any specific ground/s on which impugned order is being assailed and the O.P merely says that it is under section 34 of A and C Act. (t) With regard to the scope of section 34, learned standing counsel pressed into service a recent judgment of Hon'ble Supreme Court rendered on 18.02.2019 in MMTC Ltd. Vs. Vedanta Ltd. Besides, MMTC Ltd. Vs. Vedanta Ltd., learned standing counsel also pressed into service an earlier judgment of Hon'ble Supreme Court in P.R. Shah, Shares & Stock Brokers (P) Ltd. v. B.H.H. Securities (P) Ltd., reported in (2012) 1 SCC 594 : AIR 2012 SC 1866. The scope of section 34 as explained by Hon'ble Supreme Court is to the effect that a O.P under section 34 is not an appeal. It has also been clarified that violation of public policy includes violation of fundamental policy of Indian law which in turn would cover compliance with statute and judicial precedents and adoption of judicial ....
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....y or the other about the evidence of C.W.1. AT has neither said that it is acceptable nor has it said that it is not acceptable. In other words, AT has completely ignored and excluded the evidence and returned a finding, i.e., without a whisper about evidence of C.W.1 (x) It was also argued on behalf of Port trust that novation cannot be thrust on port trust. In the considered opinion of this Court, it is not a case of thrusting novation on port trust. It is the question of examining the most viable option, more so when it is on PPP module and BOT basis. It is a techno commercial arbitration. Nothing prevented Port trust from cross examining C.W.1 and demonstrating that the modified plan is completely unnecessary or unworkable. It is to be noted that port trust had not even objected to C.W.1 being examined, though a point is now being raised for the first time in this regard by pressing into service section 92 of the Evidence Act. In the light of section 19 of A and C Act, the law is well settled that Evidence Act is not applicable to arbitration proceedings. However, principles of evidence / deposition apply and therefore even if AT had held that C.W.1's evidence is b....
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....hich is obvious / conspicuous and not detected by applying an inferential process. In this view of the matter, the submission made on behalf of the Contractor / petitioner that in the impugned award, the AT returning a finding that both parties, i.e., contractor and Port Trust have not violated the terms of the said contract and thereafter, negativing contractor's prayer that termination notice is bad comes across as a patent illegality on the face of the award. In other words, when there is a clear and categoric finding, particularly by way of answering issue No.1 that both parties to the lis, namely contractor and Port Trust have not violated the said contract, the termination of the said contract on the alleged ground of breach cannot be sustained. In the considered opinion of this court, no process of inference is required to come to this conclusion. A mere reading of impugned award of AT reveals that termination of a contract on the ground of breach has been sustained after holding that both contracting parties have not violated the terms of contract. It is so patent and so conspicuous that it appears on the face of the award. It is made clear that it is not a case of erro....
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.... that issues such as damages may flow as a sequittur legal course if the impugned award is set aside. Therefore, in the light of the order dated 27.04.2018 made by this Court, suffice to hold that contractor will be entitled to take recourse to legal remedies and legal avenues that may follow as a sequittur to impugned award being set aside. (ad) There is one another perspective of the whole matter which was examined by this Court. This court examined whether there is possibility of bringing into play sub-section (4) of section 34 of A and C Act. This would be by way of giving AT an opportunity to resume the arbitral proceedings to examine the evidence of C.W.1 and give its finding, so that it eliminates the perversity / irrationality ground. In the instant case, if such a course is adopted, it can at best eliminate only the perversity / irrationality ground as AT can be given an opportunity to resume arbitral proceedings, return a finding regarding the evidence of C.W.1. With regard to patent illegality appearing on the face of the award ground, the same cannot be eliminated as that would tantamount to embarking upon a review which will do violence to and militate against....