2015 (1) TMI 1432 - HC - Indian Laws

Grant of Arbitral award - termination of contract by the State - HELD THAT - The award was challenged under Section 34 of the Arbitration and Conciliation Act 1996 before the Commercial Court Ranchi. The Presiding Officer of the Commercial Court found no reason to interfere with the award. The reviewing Court exercising its jurisdiction under Section 34 of the 1996 Act cannot undertake the exercise of re-appreciation of evidence except on very limited ground specified in the case of OIL Natural Gas Corporation Ltd. versus Saw Pipes Ltd 2003 (4) TMI 438 - SUPREME COURT and further elaborated by a subsequent authority Associate Builders Versus Delhi Development Authority 2014 (11) TMI 1114 - SUPREME COURT . We do not find involvement of any grave violation of public policy by the Arbitral Tribunal in passing the award. The facts narrated in the award do not project any gross misuse of jurisdiction which could shock the conscience of the Court. What the appellant really wants from this Court exercising jurisdiction under Section 37 of the 1996 Act is to enter into re-appreciation of evidence. We also find that reasons were given by the Arbitral Tribunal for rejecting the counterclaim by the learned Arbitrator. Appeal disposed off.

Summary

Issues Involved:
1. Legality of the termination of the contract.
2. Validity of the arbitral award.
3. Grounds for challenging the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996.
4. Jurisdiction of the reviewing court under Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996.

Detailed Analysis:

1. Legality of the Termination of the Contract:
The primary dispute arose from the termination of a consultancy agreement related to the construction of a six-lane divided carriageway of the Ranchi Ring Road. The State issued a suspension notice on 12th December 2011 under Clause 2.8 of the General Conditions of Contract (GCC), followed by a termination notice on 9th February 2012 under Clause 2.9.1. The Arbitral Tribunal found the termination illegal and invalid, stating, "The suspension letter dated 12.12.2011 was given a go bye/diluted by the Respondents themselves and therefore Cl. 2.9.1(a) was not attracted." The Tribunal concluded that the claimant had complied with the suspension notice, and the State's actions were arbitrary and without proper consideration of the claimant's responses.

2. Validity of the Arbitral Award:
The Tribunal awarded a sum of Rs. 2,10,87,304/- to the claimant and rejected the State's counterclaim of Rs. 6,00,78,736/-. The Tribunal's decision was based on detailed findings and reasoning, including the claimant's compliance with the suspension notice and the State's failure to provide a final word on alleged deficiencies. The Tribunal held, "The purported termination of the contract is held illegal and invalid."

3. Grounds for Challenging the Arbitral Award under Section 34 of the Arbitration and Conciliation Act, 1996:
The State challenged the award under Section 34, arguing that it was perverse and contrary to the terms of the contract. The Commercial Court found no reason to interfere with the award, stating, "The learned Arbitrators have dealt with the matter in detail after giving cogent reasons and has arrived at conclusion that petitioners herein are jointly and severally liable to pay an amount of Rs. 2,10,87,304/- along with interest to the claimants." The Court emphasized that it could not re-evaluate the findings of the arbitrators unless there was evidence of bias, jurisdictional error, or violation of public policy.

4. Jurisdiction of the Reviewing Court under Section 34 and Section 37 of the Arbitration and Conciliation Act, 1996:
The reviewing court's jurisdiction under Section 34 is limited to examining whether the award is in conflict with public policy or suffers from jurisdictional errors. The Court cited precedents, including OIL & Natural Gas Corporation Ltd. versus Saw Pipes Ltd. and Associate Builders Versus Delhi Development Authority, to emphasize that re-appreciation of evidence is not permissible. The judgment stated, "We do not find involvement of any grave violation of public policy by the Arbitral Tribunal in passing the award." The appeal under Section 37 was dismissed, as the appellant sought re-appreciation of evidence, which is not allowed.

Conclusion:
The High Court upheld the arbitral award, dismissing the appeal and the connected application. The Court found that the termination of the contract was illegal and invalid, and the arbitral award was well-reasoned and did not violate public policy. The Court reiterated the limited scope of judicial intervention in arbitral awards under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996.