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TMI Blog2022 (1) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... ng a part of the Implementation Agreement. The interpretation of the relevant clauses of the Implementation Agreement, as arrived at by the learned Sole Arbitrator, are both, possible and plausible. Merely because another view could have been taken, can hardly be a ground for the learned Single Judge to have interfered with the arbitral award. In the given facts and circumstances of the case, the Appellate Court has rightly held that the learned Single Judge exceeded his jurisdiction in interfering with the award by questioning the interpretation given to the relevant clauses of the Implementation Agreement, as the reasons given are backed by logic. In the instant case, the State of H.P. had terminated the Implementation Agreement five months prior to the stipulated period by adopting a distorted interpretation of Clause 4 of the Implementation Agreement, which was impermissible - Appeal allowed in part. - CIVIL APPEAL NO. 10341 OF 2011 CIVIL APPEAL NO. 10342 OF 2011 - - - Dated:- 7-1-2022 - CJI [N.V. RAMANA] , JUSTICE A.S. BOPANNA And JUSTICE HIMA KOHLI For the Appellant : Mr. Santosh Kumar - I, AOR In C.A.10341/11 For the State of H.P. Mr. Abhinav Mukerji, AOR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the date of filing of the claim, till the date of realization of the awarded amount. For declining payment of compound interest awarded by the learned Sole Arbitrator to UHL, the Division Bench relied on the decision of this Court in State of Haryana v. S.L. Arora and Co. (2010) 3 SCC 690 , wherein it was held that compound interest can be awarded only if there is a specific contract, or authority under a Statute, for compounding of interest and that there is no general discretion vested in courts or tribunals to award compound interest. It was further held that in the absence of any provision for interest upon interest in the contract, the Arbitral Tribunals do not have the power to award interest upon interest, or compound interest, either for the pre-award period or for the post-award period. 4. By now, the aforesaid aspect has been set at rest by a three-Judge Bench of this Court in Hyder Consulting (UK) Ltd. V. Governor, State of Orissa through Chief Engineer (2015) 2 SCC 189 , that has overruled the verdict in the case of S.L. Arora (supra). The majority view is that post-award interest can be granted by an Arbitrator on the interest amount awarded. Writing for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly simple interest can be awarded in favour of UHL on the principal amount claimed, is quashed and set aside. As a result, the findings returned in para 54(a) of the impugned judgment insofar as it relates to grant of the interest component, are reversed while restoring the arbitral award on the above aspect in favour of UHL. 7. Proceeding to the submission made by Mr. Abhinav Mukerji, learned Additional Advocate General for the State for assailing the impugned judgment, we may note that two-fold arguments have been put forth. Firstly, that the Division Bench has gravely erred in upsetting the findings returned by the learned Single Judge vide judgment dated 16th December, 2008 and has failed to appreciate that the Memorandum of Undertaking For short MoU dated 10th February, 1992, did not merge into the Implementation Agreement dated 22nd August, 1997, as both were distinct documents and that the MoU contained a separate Arbitration clause numbered as Clause 18, whereas the Implementation Agreement contained Clause 20. Secondly, it has been canvassed that the Appellate Court as also the Arbitral Tribunal have committed a grave error in arriving at the conclusion that the Imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , shall include all its appendices and annexures. The MoU having been described by the parties as Appendix A to the Implementation Agreement, would have to be treated as having merged with the Implementation Agreement for all effects and purposes. In the light of the aforesaid recitals and clauses of the Implementation Agreement, this Court endorses the findings returned in para 47 of the impugned judgment, wherein it has been held that a plain reading of the second recital read with Clause 2.2 of the Implementation Agreement suggested that the MoU has merged with the Implementation Agreement and, therefore, the disputes that were referable to arbitration under the Implementation Agreement in terms of Clause 20, were to include disputes arising under the MoU, even though the latter document did contain a separate arbitration clause. 11. No exception can be taken to the observations made by the Appellate Court that the learned Single Judge erred in singularly relying on the contents of Clause 1 of the Implementation Agreement, which states as follows: CLAUSE 1 STATEMENT OF IMPLEMENTATION OF PROJECT : Both the parties i.e. the Government and the company agree that the P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vernment including the Government land or private land already acquired by Government on lease etc., for the purpose of carrying out preparatory works. g) Achieve Financial Closure. Both parties acknowledge that fulfillment of activities enumerated at 4.1(a), 4.l(b) of this clause and clause 16.8 of this Agreement are not totally under the control of the Company, therefore, if the fulfillment of these activities is delayed beyond three 3 months from effective Date, the stipulated period of one year, shall be extended by one month for each month of delay in fulfillment of any of the activities enumerated at 4.1(a), 4.1 (b) and 16.8 provided that the total of the monthly extensions shall not exceed twelve (12). 13. A plain reading of Clauses 4.1(a) and (b) leaves no manner of doubt that UHL was required to commence construction of the project within a period of one year from the effective date only after obtaining a techno-economic clearance from CEA and an environmental clearance from the Government of India, Ministry of Environment and Forests. However, it was agreed by the parties that since obtaining of the relevant clearances referred to above and under Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court in exercise of powers under Section 34 of the Arbitration Act has been explained in the following words: 11. As far as Section 34 is concerned, the position is well- settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b) (ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the fundamental policy of Indian law would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness. Furthermore, patent illegality itself has been held to mean contravention of the substantive law of India, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e resolution would stand frustrated. 18. In Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam Limited (2019) 7 SCC 236 , adverting to the previous decisions of this Court in McDermott International Inc. v. Burn Standard Co. Ltd. And Others (2006) 11 SCC 181 and Rashtriya Ispat Nigam Ltd. V. Dewan Chand Ram Saran (2012) 5 SCC 306 , wherein it has been observed that an Arbitral Tribunal must decide in accordance with the terms of the contract, but if a term of the contract has been construed in a reasonable manner, then the award ought not to be set aside on this ground, it has been held thus: 9.1 ..It is further observed and held that construction of the terms of a contract is primarily for an Arbitrator to decide unless the Arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do. It is further observed by this Court in the aforesaid decision in paragraph 33 that when a court is applying the public policy test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the Arbitrator on fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated. 13. It is also settled law that where two views are possible, the Court cannot interfere in the plausible view taken by the arbitrator supported by reasoning. This Court in Dyna Technologies [Dyna Technologies (P) Ltd. V. Crompton Greaves Ltd., (2019) 20 SCC 1 : 2019 SCC OnLine SC 1656] observed as under : (SCC p.12, para 25) 25. Moreover, umpteen number of judgments of this Court have categorically held that the Court should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The Courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act. [emphasis supplied] 21. In the instant case, we a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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