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TMI Blog2014 (10) TMI 589X X X X Extracts X X X X X X X X Extracts X X X X ..... any further. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an arbitral tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest. Inasmuch as the arbitrators clubbed the entire period between 16th October, 2001 and 21st March, 2002 for purposes of holding the appellant-Corporation responsible for the delay, they committed an error resulting in miscarriage of justice apart from the fact that they failed to appreciate and draw inferences that logically flow from such proved facts. We have, therefore, no hesitation in rejecting the contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sponse to the tender notice respondent-M/s Western Geco International Ltd., submitted a bid offering to supply Nessie 4 streamers equipped with Geopoint Hydrophones of U.S. origin. The appellant s case is that the term relating to supply of such Geopoint Hydrophones formed a material part of the offer made by the respondentcompany in whose favour the appellant-Corporation eventually awarded a contract in terms of its letter dated 10th October, 2000 duly accepted by the respondent on 25th October, 2000. The Vessel was resultantly handed over to the respondent on 10th April, 2001 for carrying on the proposed modernisation and upgradation work. A formal contract was in due course executed between the parties on 18th June, 2001. 4. It is common ground that Geopoint Hydrophones of U.S. origin were in terms of the contract fitted in the vessel and test trials of the same conducted. Even so the vessel could not be delivered back to the appellant on 9th July, 2001, the due date for that purpose, because of some problem which the respondent encountered in obtaining licence from the U.S. authorities for sale of such hydrophones. The appellant-Corporation asserts that the respondent ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It was on the contrary keen to have US made hydrophones fitted on the vessel. The Corporation, therefore, required the respondent to continue its efforts to secure a licence from the US Government in which direction the appellant- Corporation on its own moved the concerned Ministry in Government of India to secure a licence. Further information and details in respect of the proposed Canadian hydrophones was all the same called for by the Corporation from the respondent. Since, however, the efforts to secure a licence from US Government were making no progress, the respondent sought approval of the appellant-Corporation to remove the US hydrophones from the vessel and transfer them to their repair facility in Singapore to facilitate replacement by the Canadian made hydrophones. The respondent also wrote a detailed letter dated 10th October, 2001 to the appellant-Corporation informing the latter that the US government was not likely to grant a licence and that it had withdrawn the application made for that purpose to prevent a denial. What is important is that by letter dated 16th October, 2001 the respondent clearly stated that it was not in a position to deliver the vessel with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espondent claimed a sum of US $ 7,327,610.68 towards principal dues plus US $1,205,564.13 by way of interest for the period from 20th August, 2003 to 15th November, 2003 totalling US $ 8,533,174,81 with interest pendent lite at 12% p.a. from the date of the filing of the claim till the award at the same rate. 9. The appellant-Corporation stoutly contested the claim made against it and alleged that hydrophones being an important component, the respondent had not only offered to fit US made hydrophones in the streamer section of the Vessel but actually fitted the same. The appellant s case was that the claimant having contracted to supply US made hydrophones was legally obliged to handover the Vessel duly filled with such hydrophones within the stipulated period of 90 days which expired on 9th July, 2001. The appellant s further case was that the requirement of a licence was first mentioned by the respondent when letter dated July 9, 2001 was delivered to the appellant s representative on board the vessel at Singapore in an attempt to explain the respondent s failure to hand over the vessel on the due date. The appellant-Corporation asserted that the respondent had not even applie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hydrophones used in the Nessie-4 streamers, a material term of the contact between the parties? (2) Was the respondent justified in refusing to allow substitution of the Canadian M-2 hydrophones for the US Geopoint hydrophones? (3) Was the claimant s declaration of force majeure justified under the terms of the contract? (4) Whether there was any delay in the performance of the contact? (5) If the answer to point No.4 is in the affirmative, who is responsible for such delay? (6) If the answer to point No.4 is in the affirmative, whether the Claimant is entitled to damages? (7) Whether the respondent was entitled to adjust the sum of US $ 491,000 out of the sum payable, in whole or in part, as alleged in para 30 of the statement? (8) Is respondent entitled to both Liquidated Damages and Excess Engagement charges for the same periods of time under the provisions of the Contract? 12. In the award which the Tribunal made and published Issue No. 1 was answered in the negative holding that since the choice of the hydrophones was left to the bidders subject to the equipment meeting the specifications prescribed for the purpose and since the stipulations did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Corporation as early as on October 24, 2001 that it did not desire to pursue the request for a licence with the U.S. authorities any further and since by a letter dated 25th October 2001 the final particulars in regard to the Canadian hydrophones were duly supplied, allowing some time to the respondent to take a decision, the delay post October 21, 2001 could not be attributed to the respondent. That finding, observed the Tribunal, did not impact the amount deducted by the respondent towards liquidated damages as the capping provision limited to 10% was less than the sum payable for the delay upto October 31, 2001. As regards excess engagement charges the Arbitrators held that except for the period commencing November 1, 2001 to March 22, 2002 the appellant Corporation was justified in making deductions for the rest of the period from the claim of the respondent. The Arbitrators held that the deductions in relation to the period from November 1, 2001 to March 22, 2002 amounting to US$ 2,445,246.54 were wrongly made by the appellant- Corporation which amount the respondent was entitled to get from the appellant together with interest at the rate indicated in the award. 15. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cording to the High Court, rightly disallowed by the Arbitrators. 17. The present appeal assails the correctness of the Award of the Arbitral Tribunal and the orders passed by the High Court as noticed in the beginning of this order. 18. We have heard learned counsel for the parties at length who have taken us through the award made by the Arbitral Tribunal, provisions of the contract executed between the parties and the correspondence exchanged between them. There is no denying the fact that there was delay in the return of the vessel to the Corporation after upgradation. In terms of the contractual time schedule the vessel ought to have returned to the Corporation by 9th July 2001 which was instead returned to the Corporation only on 6th May 2002 i.e. after a delay of 9 months and 28 days. Who is responsible for this delay is the essence of the dispute between the parties. According to the appellant- Corporation the delay is entirely attributable to the respondent while according to the respondent the delay is attributable to the appellant. The Arbitrators have after examining the material placed before them recorded a finding to the effect that the delay between 10th July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and 21st March, 2002. It is common ground that while the U.S Authorities had rejected the request for grant of a license on 8th March, 2002, the said rejection was conveyed to the appellant-corporation only on 22nd March, 2002. 20. From the findings of the fact recorded by the arbitrators with which we see no reason to interfere or disagree, it is evident, that the appellant-corporation was solely responsible for the delay in taking a decision in the matter between 24th October, 2001 and 26th November, 2001. The arbitrators have found and, in our opinion, rightly so that the respondent-claimant had by its letter dated 24th October, 2001 clearly informed the appellant that there was no use pursuing the matter with the U.S. Authorities any further. Even particulars regarding Canadian hydrophones were supplied to the appellant in terms of a letter dated 25th October, 2001. The arbitrators have held that delay in taking a decision whether or not any formal application should be made and a formal rejection obtained by the respondent was attributable only to the appellant- Corporation. There is, in our opinion, no legal flaw, infirmity or perversity in that finding which we hereby af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the respondent, who could and indeed should have conveyed the rejection to the appellant- Corporation forthwith, instead of taking nearly two weeks to do so. To sum up; the period of 4 months and 22 days which the arbitrators have attributed to the appellant-Corporation shall have to be reduced by 42 days comprising the first interval and 14 days comprising the fourth making a total of 56 days. Resultantly, deduction made by the appellant- Corporation for 56 days referred to above deserve to be affirmed, and the award made by the arbitrators modified to that extent. It follows that the amount awarded to the respondent-Company shall on a proportionate basis, stand reduced. 24. We may at this stage deal with the contention urged on behalf of the respondent that the jurisdiction of the Court to set aside an arbitral award being limited to grounds set out in Section 34 of the Arbitration and Conciliation Act, 1996, this Court ought not to interfere with the same. It was contended that none of the grounds on which a Court is authorised to interfere with an arbitral award are present in the case at hand. Alternatively, it was contended that even if a contrary view is possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the grounds enumerated under Section 34(2)(a) were set up before the High Court to assail the arbitral award. What was all the same urged before the High Court and so also before us was that the award made by the arbitrators was in conflict with the public policy of India a ground recognised under Section 34(2)(b)(ii) (supra). The expression Public Policy of India fell for interpretation before this Court in ONGC Ltd. v. Saw Pipes Ltd. (2003) 5 SCC 705 and was, after a comprehensive review of the case law on the subject, explained in para 31 of the decision in the following words: 31. Therefore, in our view, the phrase public policy of India used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision is not actuated by any extraneous consideration. Judicial approach in that sense acts as a check against flaws and faults that can render the decision of a Court, Tribunal or Authority vulnerable to challenge. In Ridge v. Baldwin [1963 2 All ER 66], the House of Lords was considering the question whether a Watch Committee in exercising its authority under Section 191 of the Municipal Corporations Act, 1882 was required to act judicially. The majority decision was that it had to act judicially and since the order of dismissal was passed without furnishing to the appellant a specific charge, it was a nullity. Dealing with the appellant s contention that the Watch Committee had to act judicially, Lord Reid relied upon the following observations made by Atkin L.J. in [1924] 1 KB at pp. 206,207: Wherever any body of persons having legal authority to determine questions affecting the rights of subjects, and having the duty to act judicially, act in excess of their legal authority, they are subject to the controlling jurisdiction of the King s Bench Division exercised in these writs. 27. The view taken by Lord Reid was relied upon by a Constitution Bench of this Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... available. 30. It is neither necessary nor proper for us to attempt an exhaustive enumeration of what would constitute the fundamental policy of Indian law nor is it possible to place the expression in the straitjacket of a definition. What is important in the context of the case at hand is that if on facts proved before them the arbitrators fail to draw an inference which ought to have been drawn or if they have drawn an inference which is on the face of it, untenable resulting in miscarriage of justice, the adjudication even when made by an arbitral tribunal that enjoys considerable latitude and play at the joints in making awards will be open to challenge and may be cast away or modified depending upon whether the offending part is or is not severable from the rest. 31. Inasmuch as the arbitrators clubbed the entire period between 16th October, 2001 and 21st March, 2002 for purposes of holding the appellant-Corporation responsible for the delay, they committed an error resulting in miscarriage of justice apart from the fact that they failed to appreciate and draw inferences that logically flow from such proved facts. We have, therefore, no hesitation in rejecting the conte ..... 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