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TMI Blog2020 (5) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... I of the 1996 Act. The Court held that an award would be patently illegal , if it is contrary to the substantive provisions of law; or, provisions of the 1996 Act; or, terms of the contract. 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 view - In the present case, the High Court has referred to the judgment in ASSOCIATE BUILDERS VERSUS DELHI DEVELOPMENT AUTHORITY [ 2014 (11) TMI 1114 - SUPREME COURT] at length and arrived at the correct conclusion that an arbitral award can be set aside under Section 34 if it is patently illegal or perverse. 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect 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 contract. I, 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merits and hence no objection could be taken for filing of the review petition. Placing reliance upon Bussa Overseas and Properties Private Limited and Another v. Union of India and Another (2016) 4 SCC 696 and Constitution Bench decisions in Durga Shankar Mehta v. Thakur Raghuraj Singh and Others (1955) 1 SCR 267, it was submitted that Article 136 of the Constitution confers on the Supreme Court special or residuary powers which are exercisable outside the purview of the ordinary laws in cases where the needs of justice demand interference by the Supreme Court. It was submitted that in paragraph (30) of Bussa Overseas and Properties Private Limited and Another v. Union of India and Another (2016) 4 SCC 696 , the Supreme Court held that though the decision in Shanker Motiram Nale v. Shiolalsing Gannusing Rajput (1994) 2 SCC 753 referred to Order 47 Rule 7 of the Code of Civil Procedure bars an appeal against the order of the court rejecting the review, it is not to be understood that the court has curtailed the plenary jurisdiction under Article 136 of the Constitution by taking recourse to the provisions in the Code of Civil Procedure. 9. Mr. Tushar Mehta, learned Solicitor Gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt is not assailed and the challenge is only to the order passed in review, this Court is obliged not to entertain such special leave petition. The said principle has gained the authoritative status and has been treated as a precedential principle for more than two decades and we are disposed to think that there is hardly any necessity not to be guided by the said precedent. 31. In this context, we may profitably reproduce a passage from State of A.P. v. A.P. Jaiswal (2001) 1 SCC 748, wherein a three- Judge Bench has observed thus: (SCC p. 761, para 24) 24. Consistency is the cornerstone of the administration of justice. It is consistency which creates confidence in the system and this consistency can never be achieved without respect to the rule of finality. It is with a view to achieve consistency in judicial pronouncements, the courts have evolved the rule of precedents, principle of stare decisis, etc. These rules and principle are based on public policy . (emphasis supplied) The Supreme Court held that the decision rendered in Thungabhadra Industries Ltd. v. Government of Andhra Pradesh Represented by the Deputy Commissioner of Commercial Taxes, Anantapur (1964) 5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Solicitor General and Mr. Huzeffa Ahmadi, learned Senior counsel have submitted that at the time when the earlier SLP(C) Nos.13629-13631 of 2019 were heard, they were heard at length and all the arguments including the effect of the amendment to Section 34 was also raised and only thereafter, the earlier SLPs came to be dismissed. It was submitted that though the dismissal of order dated 19.07.2019 is a non-speaking order, the petitioner had raised all contentious points, now urged, and faced an order of dismissal, and the petitioner cannot be allowed to reagitate the matter by filing a review petition. 15. In Board of Control for Cricket in India v. Kochi Cricket Private Limited and Others (2018) 6 SCC 287, the Supreme Court held that the Amendment Act, 2015 would apply to Section 34 petitions that are made after 23.10.2015 (the day on which the Amendment Act came into force). In 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 v. Kochi Cricket Private Limited and Others (2018) 6 SCC 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f an arbitrator gives no reasons for an award in contravention of Section 31(3) of the Act, such award will be liable to be set aside. 42.3 (c) Equally, the third sub-head of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as under: 28. Rules applicable to substance of dispute.- (3) In all cases, the arbitral tribunal shall decide in accordance with the terms of the contract and shall take into account the usages of the trade applicable to the transaction. This last contravention must be understood with a caveat. An arbitral tribunal must decide in accordance with the terms of the contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside on this ground. 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. (emphasis supplied) 18. The Law Commission in its 246th Report Available at : http://lawcommissionofindia.nic.in/reports/Report246.pdf recommended the insertion of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of evidence, which cannot be the basis for setting aside awards.] (emphasis supplied) 19. Pursuant to the recommendations of the Law Commission, the 1996 Act was amended by Act 3 of 2016, which came into force w.e.f. 23.10.2015. The ground of patent illegality for setting aside a domestic award has been given statutory force in Section 34(2A) of the 1996 Act. The ground of patent illegality cannot be invoked in international commercial arbitrations seated in India. Even in the case of a foreign award under the New York Convention, the ground of patent illegality cannot be raised as a ground to resist enforcement, since this ground is absent in Section 48 of the 1996 Act. The newly inserted sub-section (2A) in Section 34, reads as follows:- (2A) An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court, if the Court finds that the award is vitiated by patent illegality appearing on the face of the award : Provided that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence. 20. In Ssangyong Engineering and Constructi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bitrator construes the contract in a manner that no fair-minded or reasonable person would; in short, that the arbitrator s 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 view. 23. 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 fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the initial lead of 3.0 km has been deducted and that this shows that Clause 2.7 and 3.4 of the BoQ are applicable. The provisional payment was an interim arrangement and was preceded by meetings dated 07.12.2012 and 08.12.2012 wherein it was specifically agreed between the parties that HoP, NEEPCO would take steps for referring the dispute to arbitration and that till the arbitral award, the payment would be made as per the prevailing provisional rate without any escalation and that final rate payable for transportation of sand and boulder shall be done on implementation of the arbitral award. As such the fact that provisional payment was made by deducting initial lead of 3.0 km was an irrelevant fact for deciding the issue. The findings of the learned Arbitrator having been arrived at by taking into account irrelevant factors and by ignoring vital clauses, the same suffers from vice of irrationality and perversity. It must be borne in mind that the Arbitral Awards in question are Declaratory Arbitral Awards and involved interpretation of Clauses 2.7 and 3.4 of the BoQ and Clauses 32(ii)(a) and 33(iii) of the Conditions of Contract and the learned arbitrator was required to interp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also of the considered view that the Arbitral Award which would potentially result in unjust enrichment of the respondent to the extent of about Rs. 1,000 Crores is against the fundamental policy of Indian law and, therefore, warrant interference on this count as well. Though this court is not sitting in appeal over the award of the arbitral tribunal, the presence of grounds under Section 34[2] of the Act and the satisfaction arrived at by this Court in this regard, warrants interference more so, as the Arbitral Awards in question are Declaratory Arbitral Awards and involved interpretation of Clauses 2.7 and 3.4 of the BoQ and Clauses 32(ii)(a) and 33(iii) of the Conditions of Contract and the learned arbitrator was required to interpret the same in accordance with the established rules of interpretation and in line with the fundamental policy of Indian law. (emphasis supplied) 26. 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 condition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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