Case: THE STATE OF JHARKHAND Vs. M/S HSS INTEGRATED SDN

2. This special leave petition arises out of the contractual dispute between the petitioners-State and the respondents in relation to a consultancy agreement over construction of six-lane Divided Carriage Way of certain parts of Ranchi Ring Road. Respondent Nos. 1 and 2 acted as a consortium for providing such consultancy and supervisory services. An agreement was entered into between the parties on 28.08.2007. The original work period under the said agreement was for 36 months, i.e. from 01.10.2007 to 30.09.2010. There was a dispute with respect to the non¬performance and unsatisfactory work done by the respondents. However, the respondents were granted extension of contract twice. Thereafter, a letter dated 25.11.2011 was issued by the Executive Engineer to the respondents and other contractors entrusted with the task of construction, granting a second extension of time of contract for construction work. The respondents were called upon to make compliances with the issues pointed out, at the earliest. In the said communication dated 25.11.2011, it was stated that if the deficiencies are not removed and/or complied with, in that case, there shall be suspension of payment under Clause 2.8 of the General Conditions of Contract (for short the GCC). On 05.12.2011, a review meeting was held between the parties, followed by a letter dated 07.12.2011 issued by the respondents¬ original claimants in reply/compliance of the aforesaid letter dated 25.11.2011. It was the case on behalf of the respondents¬original claimants that without properly considering the said letter of the respondents-original claimants dated 07.12.2011, petitioners herein issued letter dated 12.12.2011 invoking Clause 2.8 of the GCC for suspension of payment, alleging certain deficiencies. It was the case on behalf of the respondents¬original claimants that by letter dated 27.12.2011, they replied to the suspension notice and complied with the deficiencies. In reply to the aforesaid letters, the petitioners issued letters dated 23.12.2011 and 28.12.2011 asking the claimants to ensure compliance of the pending issues. That by letter/communication dated 09.02.2012, the petitioners served a notice upon the respondents terminating the contract with effect from 12.03.2012. The said termination notice was issued under Clause 2.9.1(a) and (d) of the GCC. The respondents-original claimants replied to the said termination notice by letters dated 16.02.2012 and 24.02.2012 and requested the petitioners to re-consider the matter. However, the dispute between the parties was not resolved. The respondents-original claimants served a legal notice dated 10.03.2012 and invoked the arbitration clause 2.9.1(a). Pursuant to the order passed by the High Court, the Arbitral Tribunal was constituted2.1 The Arbitral Tribunal comprised of nominees of the rival parties and a retired Judge of the Jharkhand High Court as the Presiding Arbitrator. The respondents¬original claimants claimed a total sum of Rs.5,17,88,418/- under 13 different heads, excluding interest. The petitioners also filed a counter¬claim for Rs.6,00,78,736/¬ under five heads. The claim of the original claimants primarily involved the unpaid amount in respect of the work executed under the contract, loss of profit and over¬head charges, apart from other consequential claims arising out of termination. It was the specific case on behalf of the original claimants that the termination was absolutely illegal and not being in according with the terms of the contract. The counter¬claim filed by the petitioners-State was for reimbursement on account of unsatisfactory performance by the respondents2.2 That, on appreciation of evidence, the learned Arbitral Tribunal gave a specific finding that the termination of the contract was illegal and without following the procedure as required under the contract (paras 17 to 36). That, thereafter the learned Arbitral Tribunal proceeded to consider the claims on merits and ultimately allowed the claims to the extent of Rs.2,10,87,304/¬ under different heads as under:2.3 In view of the finding arrived at by the learned Arbitral Tribunal that the termination of the contract was illegal and without following due procedure as required under the contract and in view of allowing the claims of the claimants partly, the Arbitral Tribunal dismissed the counter claims submitted by the petitioners2.4 The award declared by the learned Arbitral Tribunal has been confirmed by the First Appellate Court in a proceeding under Section 34 of the Arbitration Act. The same has been further confirmed by the High Court by the impugned judgment and order in an appeal under Section 37 of the Arbitration Act2.5 Feeling aggrieved and dissatisfied with the impugned judgment and order passed by the High Court dismissing the appeal under Section 37 of the Arbitration Act and consequently confirming the award passed by the learned Arbitral Tribunal, the original respondents-State and others have preferred the present special leave petition.

Reasoning: As held by this Court in catena of decisions, the award passed by the Arbitral Tribunal can be interfered with in the proceedings under Sections 34 and 37 of Arbitration Act only in a case where the finding is perverse and/or contrary to the evidence and/or the same is against the public policy. (see Associate Builders v. DDA (2015) 3 SCC 49 etc.)6.3 In the present case, the categorical findings arrived at by the Arbitral Tribunal are to the effect that the termination of the contract was illegal and without following due procedure of the provisions of the contract. The findings are on appreciation of evidence considering the relevant provisions and material on record as well as on interpretation of the relevant provisions of the contract, which are neither perverse nor contrary to the evidence in record. Therefore, as such, the First Appellate Court and the High Court have rightly not interfered with such findings of fact recorded by the learned Arbitral Tribunal6.4 Once it is held that the termination was illegal and thereafter when the learned Arbitral Tribunal has considered the claims on merits, which basically were with respect to the unpaid amount in respect of the work executed under the contract and loss of profit. Cogent reasons have been given by the learned Arbitral Tribunal while allowing/partly allowing the respective claims. It is required to be noted that the learned Arbitral Tribunal has partly allowed some of the claims and even disallowed also some of the claims. There is a proper application of mind by the learned Arbitral Tribunal on the respective claims. Therefore, the same is not required to be interfered with, more particularly, when in the proceedings under Sections 34 and 37 of the Arbitration Act, the petitioners have failed7. Once the finding recorded by the learned Arbitral Tribunal that the termination of the contract was illegal is upheld and the claims made by the claimants have been allowed or allowed partly, in that case, the counter-claim submitted by the petitioners was liable to be rejected and the same is rightly rejected. No interference of this Court is called for.