TaxTMI 
TaxTMI 
2025 (9) TMI 1842
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion (Civil) No. 2706 of 2024, assails the Judgment dated 27.09.2023 in ARBA (ICA) No. 1 of 2023 (hereinafter, "Impugned Judgment") by Division Bench of the High Court of Orissa (hereinafter, "High Court"), moved under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter, "1996 Act") read with Section 13 of the Commercial Courts Act, 2015 by the sole Respondent herein, being, GMR Kamalanga Energy Limited (hereinafter, "GMRKE Limited"). 3. Vide the Impugned Judgment, the appeal was allowed to the effect that Judgment dated 17.06.2022 in ARBP (ICA) No. 1 of 2021 as passed by the Single Judge of the High Court under Section 34 of the 1996 Act (hereinafter, "Section 34 Judgment") was set aside along with the Award dated 07.09.2020 (as corrected on 17.11.2020) (hereinafter, "Arbitral Award"), both of which were rendered in favour of the sole Petitioner herein being SEPCO Electric Power Construction Corporation (hereinafter, "SEPCO"). This was done through framing of the following issues by the Division Bench of the High Court: "A. Whether the Tribunal interpreted the contractual provisions correctly in assessing that issuance of contractual notices is a cond....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elation to the said Unit 4 was suspended by GMRKE Limited in August 2011. 6. Subsequently, owing to delays in the Project, parties met at Jinan City, People's Republic of China. This led them to agree and execute the Minutes of Meeting dated 07.11.2012 (hereinafter, "Jinan Agreement"). 7. As numerous disputes are said to have arisen between the parties, SEPCO went on to demobilize from the sites of construction of the concerned Project midway, around January 2015. Following all the apparent disagreements, SEPCO is said to have issued a Notice of Dispute dated 30.03.2015 against GMRKE Limited. This was followed by Notice of Arbitration dated 08.06.2015 by SEPCO leading to constitution of an arbitral tribunal comprising three members (hereinafter, "Arbitral Tribunal"). 8. The status of the aforesaid agreements, at the time of beginning of the arbitration between the parties was as follows: a. CWEETC Agreement as amended by Amendment No. 1 to the CWEETC Agreement dated 26.05.2009, Amendment No. 2 to the CWEETC Agreement dated 31.05.2010, Amendment No. 3 to the CWEETC Agreement dated 15.02.2011, and Amendment No. 4 to the CWEETC Agreement dated 04.04.2013 (hereina....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cts, and the resulting financial entitlements under the Amended EPC Agreements. As to their Jinan Agreement, while SEPCO was held to have been granted extension of time, there was no substitution of the original dates of the milestones. Therein, with saving of the financial entitlements of the parties, claims pre-dating the said agreement were observed to have been settled. As to the considerations for possession of land, its access and security thereof, breaches were ascribed to GMRKE Limited, including their failure to erect a boundary wall within a reasonable timeframe, as stipulated, and denial on their part to SEPCO for non-exclusive access to the Project site. While these lapses on the part of GMRKE Limited were observed not to invariably postpone the overall progress of the project, the Arbitral Tribunal observed that disturbances caused by the villagers in the area and deficiencies vis-à-vis handing over the project site caused delays which ought to be compensated. 12. Referencing the technical obligations, GMRKE Limited was held liable for their further failure to provide SEPCO with coal and fuel oil, which was compliant and in the requisite quantity. This was ob....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l as legal errors on behalf of the Arbitral Tribunal. 17. Elaborating, it contended that the CWEETC Agreement stood modified by the Arbitral Tribunal to the effect that the parties had waived the need to issue contractual notices, despite an express provision, being Section 25.5.3 of the Amended CWEETC Agreement, establishing otherwise. Moreover, the Arbitral Tribunal had erred in placing reliance upon GMRKE Limited's email dated 18.03.2012 to observe the aforesaid and estopping them from seeking contractual notices, notwithstanding that the said email was merely to rescind the Notice of Suspension dated 07.03.2012 by SEPCO, that too only when GMRKE Limited had established Letters of Credit of USD 12,660,000 (US Dollars 12 Million Six Hundred and Sixty Thousand only) and USD 11,450,000 (US Dollars 11 Million Four Hundred and Fifty Thousand only). 18. The preceding contentions are referred to further contend that it is therefore that the Arbitral Tribunal barred GMRKE Limited from raising the defence vis-à-vis lack of contractual notices on behalf of SEPCO in connection with their claims, namely, Grid Synchronisation, Fuel Oil, Coal, and Unit Characteristics Test- P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oraneously to the proceedings before the Arbitral Tribunal. Allegations which are raised in relation to Section 18 and Section 34 Sub-section 2 Clause (a) sub-clause (iii) of the 1996 Act are unsupported by any evidence and therefore, mere allegations cannot be allowed to establish bias and discrimination on the part of the Arbitral Tribunal. 23. Referring to paragraph 191 of the Arbitral Award, the Single Judge in its Section 34 Judgment highlighted that the Arbitral Tribunal had acknowledged the contention by GMRKE Limited that claims of SEPCO, as raised in the said context, were untenable owing to the absence of contractual notices as per the Amended CWEETC Agreement. It is to settle the said proposition, Single Judge observed, the Arbitral Tribunal went on to determine whether notice was a condition precedent as per the terms therein in paragraphs 199 and 200 of the Arbitral Award, and it was observed that while numerous sections of the Amended CWEETC Agreement, namely, Sections 4.3.5, 4.11.1.1, 4.11.2.1, and 4.11.3.1, explicitly established it to be a condition precedent, different provisions were invoked in the instant case. 24. It further acknowledged that the claim of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Court vide ARBA (ICA) No. 1 of 2023, the latter, while considering the first issue raised before it, being, whether the tribunal interpreted the contractual provisions correctly in assessing that issuance of contractual notices is a condition precedent? If so, then can the condition of issuance of notice be waived and whether a party can claim estoppel consequent thereto?, determined it through a two-fold path. 29. Firstly, it answered whether the condition of issuance of contractual notices can be waived? On this, reliance was placed on the Indian Contract Act, 1872 (hereinafter, "ICA 1872") for analytical clarity, as it was postulated as per Section 62 thereof that if the contracting parties agree to substitute a new contract or, for that matter, rescind or alter the original one, the original contract no longer needs to be performed. Emphasis has been laid on "agreement", requiring consensus ad idem [Agreement as to the same thing], as well as a clear declaration of willingness to alter. In its juxtaposition, Section 63 of the ICA 1872 codifies the English principle, according to which, it allows the promise to unilaterally waive or remit performance, extend the term, or acce....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iver when interpreting commercial instruments. In these cases, the arbitral mandate is limited to the terms of the agreement. 33. Secondly, the Division Bench dealt with whether the parties can claim estoppel in the given circumstances. Herein, it was observed in the Impugned Judgment that the legal maxim allegans contraria non est audiendus [A person who alleges contradictory facts is not to be heard], being the foundation of the Doctrine of Estoppel, forbids raising of contradicting claims by the parties, especially when such a reliance results in detriment. Taking support from the decision of this Court in Pratima Chowdhury v. Kalpana Mukherjee and Another [(2014) 4 SCC 196], it clarified that estoppel by conduct necessitates an existing and unambiguous fact as legislated through Section 115 of the erstwhile Indian Evidence Act, 1872, and also fairness, and exclusion of truth. Moreover, the decisions of this Court in Provash Chandra Dalui and Another v. Biswanath Banerjee and Another [1989 Supp (1) SCC 487] and B.L. Sreedhar and Others v. K.M. Munireddy (Dead) and Others [(2003) 2 SCC 355] had explicitly distinguished estoppel from waiver, with the latter being an intentional....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of payments to subcontractors and the acclaimed settlement agreements being hearsay, more than INR 200 Crores were awarded. This was, the Division Bench of the High Court observed, clearly a jurisdictional error on part of the Arbitral Tribunal in contravention to the principles laid down in the decisions of this Court in Oil & Natural Gas Corporation Ltd. v. Saw Pipes Ltd. [(2003) 5 SCC 705], and Associated Engineering Co. v. Government of Andhra Pradesh and Another [(1991) 4 SCC 93] and decision to this effect by High Court of Delhi in Mecamidi S.A. v. Flovel MG Holdings Private Limited and Another [2019 SCC OnLine Del 9414]. 38. The ensuing contention was to ascertain that the agreements excluded the common law right of termination, such as acceptance of repudiatory breaches. Herein, the Division Bench of the High Court elaborated that the termination rights were "comprehensive and exclusive" under Section 4.16 of the Amended CWEETC Agreement. However, by ignoring Section 16.3.1 and thereby revising the agreement, the Arbitral Tribunal erroneously observed in paragraphs 961 to 963 of the Arbitral Award that common law termination remedies survived. This is a direct contraven....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing that the decision of the Arbitral Tribunal on waiver was based on scant or no evidence, it was still affirmed by wrongly placing reliance on Mr Rao's email dated 18.03.2012, and further observed that the Arbitral Award did not "shock the conscience" in accordance with Associate Builders (supra), thereby refusing to interfere under Section 34 of the 1996 Act. It was therefore alleged by GMRKE Limited that this alleged error of waiver of notice had struck at the root of the issue of prolongation costs arising from suspension of the Unit 4. The Division Bench further observed that Section 12 Sub-Section 3 read with Section 13 of the 1996 Act mandated a prompt challenge on alleged bias by the Arbitral Tribunal within 15 days. Accordingly, citing the decision of House of Lords in Porter v. Magill [[2002] 2 AC 357 : [2001] UKHL 67] and of this Court in N.K. Bajpai v. Union of India and Another [(2012) 4 SCC 653], both the forums rightly ruled that belated claims of bias were unsustainable. 41. Fifthly, the Division Bench of the High Court determined that in light of the above, whether the orders of the Single Judge and the Arbitral Tribunal have "shocked the conscience of this....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d seven propositions. 45. Learned Senior Advocate on behalf of SEPCO, while contending of the scope for interference under Section 34 of the 1996 Act, placed reliance on decision by a 3-Judge Bench of this Court in Renusagar Power Co. Ltd. v. General Electric Co. [1993 Supp 3 SCR 22 : 1994 Supp (1) SCC 644] to assert that a mistake of fact or law by the arbitrator, for that purpose, does not call for an interference of the courts to set aside such an award and moreover, a mere contravention of law does not attract the bar of public policy. Further supporting the applicability of the Renusagar (supra) on India seated arbitral awards, reliance was placed on Saw Pipes (supra). 46. Referencing another 3-Judge Bench decision of this Court in Oil and Natural Gas Corporation Limited v. Western Geco International Limited [(2014) 9 SCC 263], which was pronounced before the 246th Law Commission Report could be given effect to, it was asserted that an award would be adjudicated to be contrary to the "fundamental policy of Indian law" if there's a violation of doctrine of audi alteram partem [Hear the other side], judicial approach has not been followed by the arbitrator, or the award fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the appeals as are not required to be placed for admission are entitled to be admitted as a matter of course. The decision was explained by the Division Bench of the Bombay High Court. We are inclined to extract and reproduce the following passages from the judgment of the Bombay High Court in S.P. Khanna case [1976 Tax LR 1740 (Bom)] : (Tax LR pp. 1741-42, paras 6-7) 'In the constitution of such appeal and its procedure, the stage of admission, like the one of final hearing after issue of notice, appears to us as inherent. Matters are placed for admission with a view to enable the Court to apply its mind to controversy and to find out whether the order questioned calls for reconsideration by the higher court. This is usually done by giving hearing to the party-appellant. It is implicit that at that stage the Court may adjudicate by finding against the petitioning appellant and upholding the order impugned. Such adjudication at the stage of admission of appeal is part of the jurisdiction of the appellate court and we have doubt whether that jurisdiction could be affected if it is explicitly granted by the statute by framing a rule of procedure. Placing the matters for admissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3 of the Act the appellate court is powerless at the stage of admission to find out the merit of the appeal or is disabled from rejecting it though it may be worthless. It is well settled that possible logical extensions from the ratio of a judgment surely are not part of the ratio itself and it is hazardous to apply precedents in that manner.' We agree with this statement of law." 50. Thirdly, asserting on the scope of interference under the Section 37 of 1996 Act, it is contended that the scope under this section is narrower than that of Section 34 of the 1996 Act and the court while exercising its power under Section 37 of the 1996 Act, must only ascertain that the court under Section 34 of the 1996 Act did not exceed its jurisdiction, citing decisions of this Court in MMTC Limited (supra), Reliance Infrastructure Limited v. State of Goa [(2024) 1 SCC 479], and a 3-Judge Bench decision in UHL Power Company Limited v. State of Himachal Pradesh [(2022) 4 SCC 116]. 51. Furthermore, on its proposition that estoppel is an exception, rather a safeguard, to the "No Oral Modification" clause(s), learned Senior Advocate sought support from the majority opinion of 5- Ju....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s: "A contract may contain a clause setting out the circumstances and conditions upon which one party shall have the right to terminate by reason of the other party's breach. Such a clause may make clear that a particular term is a condition of the contract so that the rules of termination for breach of condition, discussed above, will then apply. [Union Eagle Ltd. vs. Golden Achievement Ltd .; [1997] AC 514] But the clause may be drafted more generally to provide a remedial regime (including the right for the innocent party to terminate the contract) for breach of contract in specified circumstances [Lombard North CEntral ple v. Butterworth; [1987] QB 527], and it may refer to a standard of breach which is different from that which gives rise to the right to terminate at common law-such as where the breach is 'material', which has been held to cover breaches which are less than 'fundamental', but where it is more than trivial or minimal.[Dalkia Utilities Services Plc v Celtech International Ltd; EWHC 63 (Comm)] The party seeking to rely on such a clause must establish strictly that the clause entitles it to terminate in relation to the breach which has....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... verbatim text of the provisions of Section 34 of the 1996 Act posits the wisdom of the legislature hence: "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- (i) a party was under some incapacity, or (ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for 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 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n 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. (5) An application under this section shall be filed by a party only after issuing a prior notice to the other party and such application shall be accompanied by an affidavit by the applicant endorsing compliance with the said requirement. (6) An application under this section shall be disposed of expeditiously, and in any event, within a period of one year from the date on which the notice referred to in sub-section (5) is served upon the other party." 58. Modelled on Article 34 of the UNCITRAL Model Law on International Commercial Arbitration, 1985, Section 34 of the 1996 Act provides for a recourse to a court against an arbitral award and thereby allows for moving of an application for setting aside arbitral awards. Numerous authors have reiterated that the 1996 Act onl....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., an interference is mandated in a situation wherein any perversity so-identified in the arbitral award goes to the root of the matter and there is no alternative interpretation to allow such an arbitral award to sustain in the eyes of law. While observing to the aforesaid effect, a 3-Judge Bench of this Court in Dyna Technologies Private Limited v. Crompton Greaves Limited [(2019) 20 SCC 1] also spelt out that an interference should not be done merely because an alternative view on facts and interpretation of contract exists. 62. In M. Hakeem (supra), this Court observed that when courts exercise their powers under Section 34 of the 1996 Act, they have a limited ability to set aside an award, as and when any of the grounds laid down by the statute under Section 34 are triggered or fulfilled. It also clarified such a power does not include the power of the courts to modify an arbitral award. The Division Bench therein observed as follows: "16. What is important to note is that, far from Section 34 being in the nature of an appellate provision, it provides only for setting aside awards on very limited grounds, such grounds being contained in sub-sections (2) and (3) of S....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or typographical errors, and any other errors of similar nature, owing to the principle of actus curiae neminem gravabit [An act of the Court shall prejudice no man]. However, the majority opinion, authored by Chief Justice Sanjiv Khanna (as he then was) on his behalf and three others (including both of us), therein observed that the authority to modify an arbitral award is restricted and should only be used in case of well-defined, precise conditions while establishing standards for the use of a court modifying such an award and clarifying import facets thereof. 64. Firstly, the Court upheld the power of a court as granted by Section 34 Sub-Section 2 Clause (a) Sub-Clause (iv) of the 1996 Act to sever the "invalid" sections of an award from the "valid" ones. The concept of kompetenz-kompetenz [Power to decide on its own jurisdiction] is consistent with the aforesaid idea as iterated and discussed in Part II of the decision. While discussing the concept of power of a court to sever an award, it clarified that it is not always available, particularly in situations wherein the legitimate and the invalid portions of an award are inextricably intertwined, rendering partial annulment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt, in UHL Power Company Limited (supra) while holding that the learned Single Judge of the concerned High Court had exceeded his jurisdiction through interference with the arbitral award, explicated the reasons of such narrow scope of powers of a court under Section 34 of the 1996 Act. Referencing extensively on other decisions of this Court, namely, MMTC Limited (supra), K. Sugumar and Another v. Hindustan Petroleum Corporation Limited and Another [(2020) 12 SCC 539], Dyna Technologies (supra), and Parsa Kente Collieries (supra), it laid down that the courts do not sit in appeal over arbitral awards, therefore, the jurisdiction of the concerned courts is confined to specific grounds as laid down under Section 34 of the 1996 Act, for instance, violation of public policy, patent illegality, or misconduct. Furthermore, it is based on the principle of party autonomy and the need to uphold the finality of an arbitral award. Concluding, it iterated that when the parties have, through conscious decision- making, opted for arbitration as an alternative means of dispute mechanism, the courts ought to refrain from reappreciation of evidence or substitution of interpretation(s), unless the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the court should be restricted to the bare minimum. Interference will be justified only in cases of commission of misconduct by the arbitrator which can find manifestation in different forms including exercise of legal perversity by the arbitrator.' 18. It has also been held time and again by this Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned arbitrator proceeds to accept one interpretation as against the other. In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. [(2019) 20 SCC 1], the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been highlighted thus : (SCC p. 12, para 24) '24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant....
X X X X Extracts X X X X
X X X X Extracts X X X X
....trained legal mind would not be held to be invalid on this score. 9.2. Similar is the view taken by this Court in NHAI v. ITD Cementation India Ltd. [(2015) 14 SCC 21 : (2016) 2 SCC (Civ) 716], SCC para 25 and SAIL v. Gupta Brother Steel Tubes Ltd. [(2009) 10 SCC 63 : (2009) 4 SCC (Civ) 16], SCC para 29.' (emphasis supplied)" 69. Now, it is opportune to refer to the provision of Section 37 of the 1996 Act with that of the scope of Section 34 to reiterate and postulate the jurisprudence of interference, which reads thus: "37. Appealable orders .- (1) Notwithstanding anything contained in any other law for the time being in force, an appeal shall lie from the following orders (and from no others) to the Court authorised by law to hear appeals from original decrees of the Court passing the order, namely :- (a) refusing to refer the parties to arbitration under section 8; (b) granting or refusing to grant any measure under section 9; (c) setting aside or refusing to set aside an arbitral award under section 34. (2) An appeal shall also lie to a Court from an order of the arbitral tribunal .- (a) accepting the plea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ion 34 of the Act, a Division Bench exercising jurisdiction under Section 37 of the Act cannot reverse an award, much less the decision of a Single Judge, on the ground that they have not given effect and voice to all clauses of the contract. This is where the Division Bench of the High Court committed an error, in re-interpreting a contractual clause while exercising jurisdiction under Section 37 of the Act. In any event, the decision in Radha Sundar Dutta v. Mohd. Jahadur Rahim [AIR 1959 SC 24], relied on by the High Court was decided in 1959, and it pertains to proceedings arising under the Village Chaukidari Act, 1870 and Bengal Patni Taluks Regulation of 1819. Reliance on this judgment particularly for interfering with the concurrent interpretations of the contractual clause by the Arbitral Tribunal and Single Judge under Section 34 of the Act is not justified." 72. A juxtaposition of this provision with the jurisprudence of the Code of Civil Procedure, 1908 instantiates it to function akin to a second appeal under the latter. While the initial probe is initiated during a recourse under Section 34 of the 1996 Act, and if it further affirms the award, a court exercising the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....relevant to the Dispute. 21.4.5 The arbitral proceedings shall be conducted in the English language. xxx xxx xxx 21.4.7 The arbitral award shall be final and binding upon the Parties and enforceable by any court having jurisdiction for this purpose. The arbitral award may be enforced against the Parties to the arbitration proceeding or their assets wherever they may be found and a judgment upon the arbitral award may be entered in any court having jurisdiction." 74. It is also apposite to refer to Section 25.2 of the Amended CWEETC Agreement, which stipulates as follows: "25.2 Choice of Law 25.2.1 Governing law This Agreement shall be governed by and construed in accordance with the laws of England. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to this Agreement. 25.2.2 Contracts (Rights of Third Parties) Act 1999 Save as expressly provided for in terms hereof, this Agreement does not create any right under the Contracts (Rights of Third Parties) Act 1999 which is enforceable by any person." 75. An examination of the Arbitration Agreement indicates that with the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rounds for challenge and the law in India thereof. Significant reliance was placed by SEPCO on the decision of this Court in Ssangyong Engineering (supra), as also relied upon by the Impugned Judgment. 79. Clarifying on the distinction between the seat of arbitration and venue of arbitration proceedings, observations of this Court in Enercon (India) Limited and Others v. Enercon Gmbh and Another [(2014) 5 SCC 1] reiterates that when a seat of arbitration is India, it would only be the courts of India that would have exclusive jurisdiction to determine any disputes pertaining to the process of arbitration thereof. 80. While being betwixt and between the determination of the applicable law, it is prudent to refer to Section 28 Sub-Section 1 Clause (b) Sub-Clause (i) of the 1996 Act, which is reproduced below: "28. Rules applicable to substance of dispute .- xxx xxx xxx (b) in international commercial arbitration,- (i) the arbitral tribunal shall decide the dispute in accordance with the rules of law designated by the parties as applicable to the substance of the dispute;" 81. Through a holistic appreciation of the Section 28 Sub-Section (1) Clause ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....erms, provisions or covenants. 25.5.3 Without prejudice to Section 4.2 and the issue of any Variation Order, no variation, amendment, supplement, modification or waiver of this Agreement shall be effective unless in writing and signed by or on behalf of each Party." 85. Moving on to the issue of notice between the parties vis-à-vis the apparent waiver and/or application of estoppel, it is pellucid from the perusal of the paragraph 226 of the Arbitral Award that the Arbitral Tribunal had rejected the contention raised on behalf of SEPCO that the condition precedent for allegedly mandatory contractual notices stood waived by the parties in March 2010. Despite this, and without it being raised on behalf of SEPCO, the Arbitral Tribunal placed reliance on the Jinan Agreement and the concerned emails from March 2012 that the condition for contractual notices was waived. GMRKE Limited was never given an opportunity to exhibit evidence to this effect. This observation on behalf of the Arbitral Tribunal amounted to modification of the terms of the contract. 86. We are in agreement with the submissions made by GMRKE Limited to the said effect through their aspect of rel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itral Tribunal as well as the Single Judge of the High Court were mistaken to grant relief to SEPCO, upholding the assumed waiver of the mandate of notice despite explicit provisions of the Amended CWEETC Agreement to the otherwise effect. 89. Moreover, the issue of waiver also juxtaposes itself to the mandate of Section 28 Sub-Section 3 of the 1996 Act, which ought to be additionally scrutinized. 90. The 1996 Act, through the mandate of Section 28 Sub-Section 3, casts an explicit duty on a tribunal to resolve disputes in accordance with the terms of the contract and accepted business practices. For context, the bare provision reads as follows: "28. Rules applicable to substance of dispute .- xxx xxx xxx (3) While deciding and making an award, the arbitral tribunal shall, in all cases, take into account the terms of the contract and trade usages applicable to the transaction." 91. Numerous precedents laid down by this Court have often emphasised that an arbitrator lacks the power to deviate from or to reinterpret the terms of the contract while making an award. The awards must be within the parameters of the agreement entered between the parties.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y, before entering the tender process, entered the contract after mitigating the risk of such an increase. If the purpose of the tender was to limit the risks of price variations, then the interpretation placed by the Arbitral Tribunal cannot be said to be possible one, as it would completely defeat the explicit wordings and purpose of the contract. There is no gainsaying that there will be price fluctuations which a prudent contractor would have taken into margin, while bidding in the tender. Such price fluctuations cannot be brought under Clause 23 unless specific language points to the inclusion. 31. The interpretation of the Arbitral Tribunal to expand the meaning of Clause 23 to include change in rate of HSD is not a possible interpretation of this contract, as the appellant did not introduce any evidence which proves the same." 94. Further clarification of this proposition is brought about through observations of this Court in a further decision by 3-Judge Bench in Union of India and Others v. Bharat Enterprise [2023 SCC OnLine SC 369] wherein it was underlined that the existence and powers of an arbitrator are a creature of the agreement between the parties, and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ciding a question otherwise than in accordance with the contract. He cannot say that he does not care what the contract says. He is bound by it. It must bear his decision. He cannot travel outside its bounds. If he exceeded his jurisdiction by so doing, his award would be liable to be set aside. As stated by Lord Parmoor : [Attorney-General for Manitoba v. Kelly, (1922) 1 AC 268, 276 : 1922 All ER Rep 69] (AC p. 276) 'It would be impossible to allow an umpire to arrogate to himself jurisdiction over a question which, on the true construction of the submission, was not referred to him. An umpire cannot widen the area of his jurisdiction by holding, contrary to the fact, that the matter which he affects to decide is within the submission of the parties.' Evidence of matters not appearing on the face of the award would be admissible to decide whether the arbitrator travelled outside the bounds of the contract and thus exceeded his jurisdiction. In order to see what the jurisdiction of the arbitrator is, it is open to the court to see what dispute was submitted to him. If that is not clear from the award, it is open to the court to have recourse to outside sou....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., Limited [(1933) AC 592 : 1933 All ER Rep 616] and M. Golodetz v. Schrier [(1947) 80 Ll L Rep 647] .] 96. Examining the principles involved, a reference to decisions under the Arbitration Act, 1940, may also be apprised through the decision of a 3-Judge Bench of this Court in Allen Berry and Co. Put. Ltd. v. Union of India, New Delhi [(1971) 1 SCC 295] wherein this Court considered the proper scope of judicial review of arbitral awards and iterated that a court has the right to review documents that are specifically included in an award while reviewing it. However, as also observed in some cases, the courts, especially in the United Kingdom, have travelled farther and set aside the awards in which the contracts have merely been referred in passing, and apparently were incorrectly incorporated, forming the foundation of a verboten award. 97. Moreover, as referred, the King's Bench invalidated an award in Landauer v. Asser [[1905] 2 KB 184] because the arbitrator had misconstrued the provisions of the insurance contract. A similar position was adopted by the House of Lords in Absalom (F.R.) Ltd. v. Great Western (London) Garden Village Society Ltd. [[1933] AC 592], where t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....liance of the contractual provisions. It is to be also noted that the Single Judge of the High Court had rejected the contention of GMRKE Limited to the effect of assumption of arguments raised by SEPCO and the discriminatory treatment of the parties thereof by the Arbitral Tribunal in a cursory manner. Furthermore, while dealing with the contention of waiver of notice vis-à-vis the provisions of the Amended CWEETC Agreement, it despite acknowledging insufficiency of material on record to conclude the right to estoppel under common law or the assumed oral waiver of notice, observed that same cannot still be a ground for interference. 102. Secondly, dealing with claims the extent of claims of SEPCO post its termination, especially to seek 5 percent of the contractual price upon completion of the tests, it is appropriate to refer to the relevant portions of the conditions laid down in the Amended CWEETC Agreement, which are read as follows: 6.1.5 Reliability Run 6.1.5.1 Reliability Run is to be conducted only after successful completion of the Initial Operation and have to be successfully completed prior to the commencement of the Unit Characteristics Test....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the test is deemed to have been successfully completed in accordance with this Section 6.1. 6.1.6 Unit Characteristic Tests 6.1.6.1 The Unit Characteristic Tests are to be carried out to demonstrate compliance of the respective Unit or the Power Station, as the case may be, with the required functional capabilities as per the agreed parameters and will be conducted in accordance with and as particularly described in the Technical Specifications. 6.1.6.2 Unit Characteristic Tests would be deemed to have been successfully completed only after the Owner has agreed in writing to a satisfactory test report or the test is deemed to have been successfully completed in accordance with Section 6.1.4.6(iv) and the Technical Specifications. 6.1.7 Performance Guarantee Test 6.1.7.1 General conditions for Performance Guarantee Test The Performance Guarantee Test would be conducted to determine the level of achievement of the Performance Guarantees for the purpose of Take Over of the respective Units or the Power Station, as the case may be. The Performance Guarantee Test for the Power Station shall be successfully completed alongwith the Per....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8, which reads: "18. Equal treatment of parties .- The parties shall be treated with equality and each party shall be given a full opportunity to present his case." 105. When a party is unable to analyse, comment or argue on a contention raised by the other party, it will certainly be deemed as a breach of natural justice and thereby, also a violation of the most fundamental notions of justice. Henceforth, the arbitral award is required to be set aside by the courts under Section 18 and Section 34 Sub- Section 2 Clause (a) Sub-Clause (iii) of the 1996 Act. Such an observation derives its weight from the examination by this Court in Ssangyong Engineering (supra), especially in its paragraphs 34, 36, 37 and 46. Even the decision in Associate Builders (supra), while dealing with the head of "fundamental policy of Indian law" recognizes audi alteram partem as a fundamental juristic principle recognized under Section 18 and Section 34 Sub-Section 2 Clause (a) Sub-Clause (iii) of the 1996 Act. 106. Furthermore, reproving on the distinguished treatment of the parties by the tribunal therein, this Court in Narinder Singh and Sons v. Union of India [(2022) 18 SCC 690], observ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....It clearly fails the test of perversity and is incomprehensible and not compatible with the basic notions of justice in this country. 110. Now, we shall move to opine on whether the issue of suspension and cancellation of Unit 4 was determined correctly by the Arbitral Tribunal? 111. On this, first and foremost, it is to be necessarily iterated that this Arbitral Award is violative of the very principles and notions of natural justice altogether, beginning from the discriminatory treatment of the parties as to non-consideration of arguments by GMRKE Limited or even assumption of specific arguments that were not raised at all before the Arbitral Tribunal. Such a circumstance does not merit of warrant a severance of the said Arbitral Award for any issue that was raised and determined by the Arbitral Tribunal. Therefore, we hold that since the Arbitral Award has failed to stand the test while being placed in juxtaposition to the grounds under Section 34 of the 1996 Act, it is a futile and merely academic exercise to delve into the issue re: suspension and cancellation of Unit 4 or any other specific contention on merits for that matter, as such a determination would, technically....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Award. 115. Having answered all the above issues, it is apparent that the Arbitral Award is not good in law, and it would be at the cost of reiterating the above-stated examination by us to hold that the Arbitral Award is not liable to be restored in the concerning circumstances. 116. The Division Bench of the High Court, after considering all the material placed on record and particularly the relevant statutory provisions and the law laid down on the issue by this Court, has found the award to be one which shocked the conscience of the court. The Division Bench, after considering various aspects, has held that the Arbitral Award was in violation of the fundamental policy of the Indian law, the principles of natural justice and most basic notions of justice thereby shocking the conscience of the court. It is to be noted that though it has specifically been assailed by the GMRKE Limited before the Single Judge that the Arbitral Tribunal had awarded certain claims in favour of SEPCO, which were neither pleaded nor argued by it and that the Arbitral Tribunal had modified the contract between the parties by holding in favour of SEPCO that there was a due waiver of notice and thou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....leted the Performance Guarantee Test for Unit 1. It has been found by the learned Division Bench that the Arbitral Tribunal had come to a finding that the Unit Characteristic Test for Unit 1 had failed. The Division Bench found that the successful completion of Unit Characteristic Test was a pre-requisite for the successful completion of Performance Guarantee Test. As such, it was found that if the Unit Characteristic Test had failed, there was no question of the Performance Guarantee Test having passed. It was further found that a failure to successfully complete the Reliability Run Test and Unit Characteristic Test would mean that the preconditions to perform the Performance Guarantee Test had, in fact, not been achieved and thus the question of conducting the same would not arise. The Division Bench, therefore, held that the Arbitral Tribunal had modified the express terms of the agreements which was contrary to the public policy of India. 121. It could, thus, be seen that the Division Bench has come to a considerable conclusion that the Arbitral Award passed by the Arbitral Tribunal was in conflict with the public policy of India inasmuch as the Arbitral Award was passed in ....