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

3. The learned sole arbitrator has passed the arbitral award dated 29.03.2016 in respect of Package-I holding as follows:-Based on my findings above, I have no hesitation in coming to the considered finding that the contract itself provides rate(s) for payment of extra lead in item Nos.2.7 and 3.4 of the BOO for surface and underground structures respectively. Admittedly material had been transported from a lead much longer than that envisaged at the time of award of work in favour of the claimant. It is also an admitted case of the parties that the claimant is entitled to extra payment for the extra lead. The only point at issue is whether Clause 33(ii)(a) or Clause 33(iii) would be applicable for working out the rate payable for transportation. In view of my findings, I have no hesitation in holding that the payment of extra lead is to be determined in accordance with Clause 33(ii)(a) for the item which has deviated being already available in the contractI, therefore, answer the reference as follows:The rate for extra lead for transportation of sand and boulders from Government approved quarries to the work site for package-I works under KaHEP shall be decided in terms of Clause 33(ii)(a) of Part-III, Volume-I, Conditions of Contract of Book-II of Contract Agreement No.NEEPCO/ED/QP/C&P/R/C/KaHEP/560 of 2004-05 dated 17.12.2004Similar Declaratory Arbitral Awards dated 29.03.2016 were passed by the learned sole arbitrator in respect of the other two Arbitral References in respect of contracts pertaining to Package-II and Package-III of the project4. Respondent-North Eastern Electric Power Corporation Ltd. (NEEPCO) filed three applications under Section 34 of the Arbitration and Conciliation Act, 1996 before the Additional Deputy Commissioner (Judicial), Shillong challenging the three arbitral awards dated 29.03.2016 in respect of Packages-I, II and III. The Additional Deputy Commissioner (Judicial) vide common judgment dated 27.04.2018 rejected the applications under Section 34 of the Act and upheld all the three arbitral awards. The respondent- NEEPCO filed three appeals under Section 37 of the Act before the High Court in Arbitration Appeal No(s).3, 4 and 5 of 2018. By the common judgment dated 26.02.2019, the High Court allowed the respondents appeals and set aside the common judgment dated 27.04.2018 passed by the Additional Deputy Commissioner (Judicial)5. Aggrieved by the common judgment dated 26.02.2019, the petitioner preferred special leave petitions before the Supreme Court in SLP (C) Nos.13629-13631 of 2019. After hearing both the parties, the Supreme Court vide order dated 19.07.2019 dismissed all the three SLPs filed by the petitioner holding that the Court is not inclined to interfere in the matters6. After dismissal of the SLPs, the petitioner filed review petitions before the High Court on the ground that the judgment of the High Court dated 26.02.2019 suffers from error apparent on the face of the record as it had not taken into consideration the amendments made to Arbitration and Conciliation Act, 1996 by Amendment Act of 2015. The said review petitions came to be dismissed by the High Court vide the impugned orders7. We heard the matter at some length at the time of admission and carefully considered the submissions of the learned counsel appearing for the parties and the judgments relied upon by both the sides and the judgment of the High Court dated 26.02.2019 and other materials on record.

Reasoning:
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