Case: PATEL ENGINEERING LTD.  Vs. NORTH EASTERN ELECTRIC POWER CORPORATION LTD. (NEEPCO)

3.4 of the BoQ are applicable. The provisional payment was an interim arrangement and was preceded by meetings dated 07.12.2012 and 08.12.2012 wherein it was specifically agreed between the parties that HoP, NEEPCO would take steps for referring the dispute to arbitration and that till the arbitral award, the payment would be made as per the prevailing provisional rate without any escalation and that final rate payable for transportation of sand and boulder shall be done on implementation of the arbitral award. As such the fact that provisional payment was made by deducting initial lead of 3.0 km was an irrelevant fact for deciding the issue. The findings of the learned Arbitrator having been arrived at by taking into account irrelevant factors and by ignoring vital clauses, the same suffers from vice of irrationality and perversity. It must be borne in mind that the Arbitral Awards in question are Declaratory Arbitral Awards and involved interpretation of Clauses 2.7 and 3.4 of the BoQ and Clauses 32(ii)(a) and 33(iii) of the Conditions of Contract and the learned arbitrator was required to interpret the same in accordance with the established rules of interpretation. The findings of the learned Additional Deputy Commissioner (Judicial), Shillong while upholding the arbitral awards of the learned Arbitrator also suffer from the similar vice. We are, therefore, of the considered view that that the common order dated 27.04.2018 passed by the learned Additional Deputy Commissioner (Judicial), Shillong in Arbitration Case No. 5 (T) 2016, Arbitration Case No. 6 (T) 2016 and Arbitration Case No. 7 (T) 2016 as well as the 3 (three) Arbitral Awards dated 29.03.2016 passed by the learned Arbitrator warrant interference in these appeals under Sec. 37 of the Arbitration and Conciliation Act, 1996. 53. There are additional reasons for interfering with order dated 27.04.2018 passed by the learned Additional Deputy Commissioner (Judicial), Shillong and the Arbitral Awards dated 29.03.2016 passed by the learned Arbitrator. As the learned counsel for the appellant has submitted, the potential effect of the Arbitral Award on public exchequer is that the appellant, which is a public sector undertaking, will have to pay a sum of about Rs. 3.56 Lakh for every truckload of 10 cubic metre of sand or boulder (travelling for 100 km) and the total potential effect would be about Rs. 1,000 Crore. We are of the considered view that payment of Rs. 3.56 Lakh per truck (10 Cubic Metre) of sand or boulder (100 km distance) is definitely a case of unjust enrichment which is contrary to the Fundamental Policy of Indian Law. Unjust enrichment being contrary to the Fundamental Policy of Indian Law is a ground for interference with an Arbitral Award under Sec. 34(2) of the Act. The Bombay High Court in Angerlehner Structural and Civil Engineering co. v. Municipal Corporation of Greater Mumbai has recognized unjust enrichment of a party at the cost of public exchequer as being against the fundamental policy of Indian law. The Bombay High Court has held: If the argument of the Contractors is accepted, it lead to them blatantly enriching themselves over and above what they are entitled. Such completely unjust enrichment, that too at the cost of public funds, is abhorrent under the fundamental policy of Indian Law. The award in AJECT, which permits such blatant enrichment is therefore is also vitiated on the ground that it is against the fundamental policy of Indian Law. We are also of the considered view that the Arbitral Award which would potentially result in unjust enrichment of the respondent to the extent of about Rs. 1,000 Crores is against the fundamental policy of Indian law and, therefore, warrant interference on this count as well. Though this court is not sitting in appeal over the award of the arbitral tribunal, the presence of grounds under Section 34[2] of the Act and the satisfaction arrived at by this Court in this regard, warrants interference more so, as the Arbitral Awards in question are Declaratory Arbitral Awards and involved interpretation of Clauses 2.7 and 3.4 of the BoQ and Clauses 32(ii)(a) and 33(iii) of the Conditions of Contract and the learned arbitrator was required to interpret the same in accordance with the established rules of interpretation and in line with the fundamental policy of Indian law. (emphasis supplied) 26. Even though the High Court in paragraph (44) of the judgment referred to various judgments, including Western Geco (supra) [which is now no longer good law], the case has been decided on the ground that the arbitral award is a perverse award and on a holistic reading of all the terms and conditions of the contract, the view taken by the arbitrator is not even a possible view. The High Court has rightly followed the test set out in paragraph (42.3) of Associate Builders (supra), which was reiterated in paragraph (40) of the Ssangyong Engineering judgment (supra). 27. In our view, while dealing with the appeal under Section 37 of the Act, the High Court has considered the matter at length, and held that while interpreting the terms of the contract, no reasonable person could have arrived at a different conclusion and that the awards passed by the arbitrator suffer from the vice of irrationality and perversity. 28. The learned Solicitor General Mr. Tushar Mehta and Mr. H. Ahmadi, Senior Advocate for the respondent, submitted that all these contentions were raised in the earlier round when challenge to the substantive Judgment dated 26.02.2019 was made. The said challenge was repelled by this Court vide Order dated 19.07.2019 by dismissal of the earlier SLPs. It is now not open to re-open the matter by filing a review petition on the same grounds, which have been rightly dismissed by the High Court. The Petitioner has failed to make out any error on the face of the judgment dated 26.02.2019. The High Court by the impugned order dated 10.10.2019 rightly dismissed the review petitions and we do not find any ground warranting interference with the impugned order.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]12. In our considered view, it is not necessary to go into the question of maintainability of these SLPs preferred against the order rejecting the review, after the challenge to the main judgment had been rejected in the earlier SLPs. As noted earlier, in this case, the judgment of the High Court under Section 37 of the Act was challenged before the Supreme Court and the SLPs were dismissed by the Supreme Court after hearing the Senior Counsel for the parties vide order dated 19.07.2019. Be it noted when the earlier SLPs were dismissed, no liberty was taken to file the review before the High Court. Be that as it may, we are not inclined to go into this aspect any furtherIn the present case, admittedly, after the arbitral awards are dated 29.03.2016, the applications under Section 34 of the Act were filed before the Judicial Commissioner, Shillong as per the decision in Board of Control for Cricket in India (Board of Control for Cricket in India v. Kochi Cricket Private Limited and Others (2018) 6 SCC 287 ) , the provisions of the Amendment Act would apply20. In Ssangyong Engineering and Construction Company Limited (Ssangyong Engineering and Construction Company Limited v. National Highways Authority of India (NHAI) (2019) 15 SCC 131 ) , this Court was considering a challenge to an award passed in an international commercial arbitration, between the Appellant – company a foreign entity registered under the laws of Korea, and the Respondent, a Government of India undertaking. In paragraph (19) of the judgment, this Court noted that the expansive interpretation given to public policy of India in the Saw Pipes (supra) and Western Geco International Limited (Oil & Natural Gas Corporation Ltd. v. Western Geco International Limited (2014) 9 SCC 263 ) cases, which had been done away with, and a new ground of patent illegality was introduced which would apply to applications under Section 34 made on or after 23.10.2015. In paragraphs (36) and (37) of the judgment, this Court held that insofar as domestic awards are concerned, the additional ground of patent illegality was now available under sub-section (2A) to Section 34. However, re-appreciation of evidence was not permitted under the ground of patent illegality appearing on the face of the award21. In paragraphs (39) and (40) of Ssangyong Engineering (supra), the Court reiterated paragraphs (42.2) and (42.3) of Associate Builders (supra) wherein, it was held that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes a contract in a manner which no fair minded or reasonable person would take i.e. if the view taken by the arbitrator is not even a possible view to take. In paragraphs (39) and (40), the Supreme Court held as under:-39. To elucidate, para 42.1 of Associate Builders v. Delhi Development Authority (2015) 3 SCC 49 , namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Para 42.2 of Associate Builders v. Delhi Development Authority (2015) 3 SCC 49 , however, would remain, for if an arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paras 42.3 to 45 in Associate Builders v. Delhi Development Authority (2015) 3 SCC 49 , namely, that the construction of the terms of a contract is primarily for an arbitrator to decide, unless the arbitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrators view is not even a possible view to take. Also, if the arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2-A). (emphasis supplied)22. The present case arises out of a domestic award between two Indian entities. The ground of patent illegality is a ground available under the statute for setting aside a domestic award, if the decision of the arbitrator is found to be perverse, or, so irrational that no reasonable person would have arrived at the same; or, the construction of the contract is such that no fair or reasonable person would take; or, that the view of the arbitrator is not even a possible view23. In the present case, the High Court has referred to the judgment in Associated Builders (supra) at length in paragraph (42) of its judgment dated 26.02.2019 and arrived at the correct conclusion that an arbitral award can be set aside under Section 34 if it is patently illegal or perverse. This finding of the High Court is in conformity with paragraph (40) of the judgment of this Court in Ssangyong Engineering (supra)24. In the present case, the High Court in paragraph (51) has held that no reasonable person could have arrived at a different conclusion while interpreting Clauses 2.7 and 3.4 of the BoQ and Clauses 32(ii)(a) and 33(iii) of the Conditions of Contract. Any other interpretation of the above clauses would definitely be irrational and in defiance of all logic26. Even though the High Court in paragraph (44) of the judgment referred to various judgments, including Western Geco (supra) [which is now no longer good law], the case has been decided on the ground that the arbitral award is a perverse award and on a holistic reading of all the terms and conditions of the contract, the view taken by the arbitrator is not even a possible view. The High Court has rightly followed the test set out in paragraph (42.3) of Associate Builders (supra), which was reiterated in paragraph (40) of the Ssangyong Engineering judgment (supra)27. In our view, while dealing with the appeal under Section 37 of the Act, the High Court has considered the matter at length, and held that while interpreting the terms of the contract, no reasonable person could have arrived at a different conclusion and that the awards passed by the arbitrator suffer from the vice of irrationality and perversityThe said challenge was repelled by this Court vide Order dated 19.07.2019 by dismissal of the earlier SLPs. It is now not open to re-open the matter by filing a review petition on the same grounds, which have been rightly dismissed by the High Court. The Petitioner has failed to make out any error on the face of the judgment dated 26.02.2019. The High Court by the impugned order dated 10.10.2019 rightly dismissed the review petitions and we do not find any ground warranting interference with the impugned order