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SUPREME COURT OF INDIA
Arun Mishra, M.R. Shah, JJ.
Parsa Kente Collieries Limited – Appellant
Versus
Rajasthan Rajya Vidyut Utpadan Nigam Limited – Respondent
Civil Appeal No. 9023 of 2018
Decided On : 27-05-2019
(A) Arbitration and Conciliation Act, 1996 – Sections 34 and 37 – Arbitral award – Scope of judicial interference – Arbitral Tribunal must decide in accordance with terms of contract, but if an Arbitrator construes a term of contract in a reasonable manner, it will not mean that award can be set aside on this ground – Construction of terms of contract is primarily for Arbitrator to decide unless Arbitrator construes contract in such a way that it could be said to be something that no fair minded or reasonable person could do – Only when award is in conflict with public policy in India, Court would be justified in interfering with arbitral award – When court is applying “public policy” test to arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected – A possible view by Arbitrator on facts has necessarily to pass muster as Arbitrator is ultimate master of quantity and quality of evidence to be relied upon when he delivers his arbitral award – Award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score. (Para 9.1)
(B) Arbitration and Conciliation Act, 1996 – Sections 34 and 37 – Arbitral award – Reversal by High Court – Coal Mining Service Agreement – There was delay in obtaining forest clearance and environmental clearance and date of commencement of supply came to be changed – In between there would be hike in labour charges, transportation charges, etc. – Though date of commencement of supply was extended, there was no corresponding amendment in relevant clauses of agreement with respect to price escalation – Reasoning given by Arbitrator was both possible as well as plausible – Merely because some other view could have been taken, High Court is not justified in interfering with interpretation made by Arbitrator – Judgment passed by High Court partly set aside. (Paras 11.1 to 12)
Facts of Case:
Coal Mining Service Agreement. certain disputes arose between parties, more particularly escalation price, fixed costs, amount lying in Escrow account and cost of construction of railway siding. Therefore, appellant invoked clause 10.2 of CMDA and sought arbitration. while allowing claim with respect to ‘Fixed Costs’, Arbitrator held that respondent could not take required delivery of coal from the appellant, thus causing loss to appellant. Arbitrator held that therefore appellant is entitled to compensation as claimed for Rs.78 crores. By impugned judgment and order dated 28.02.2018, High Court has allowed said appeal and has set aside the award passed by Arbitrator and confirmed by Commercial Court, Jaipur.
Findings of Court:
Interpretation by Arbitrator was both possible as well as plausible. Therefore, merely because some other view could have been taken, High Court is not justified in interfering with the interpretation made by Arbitrator which was possible and plausible. Therefore, in the facts and circumstances of case, we are of the opinion that the High Court has clearly exceeded in its jurisdiction in interfering with award passed by Arbitrator with respect to claim no.1 – price adjustment/escalation.
Result : Appeal Partly allowed.
JUDGMENT :
M.R. SHAH, J.
Feeling aggrieved and dissatisfied with the impugned judgment and order dated 28.02.2018 passed by the Commercial Appellate Court/Division Bench of the High Court of Judicature for Rajasthan, Bench at Jaipur in D.B. Civil Miscellaneous Appeal No. 3785 of 2017, by which the High Court has allowed the said appeal preferred by the respondent herein – Rajasthan Rajya Vidyut Utpadan Nigam Limited and has quashed and set aside the award passed by the learned Arbitrator, confirmed by the Commercial Appellate Court at Jaipur, the appellant – the original claimant – Parsa Kente Collieries Limited has preferred the present appeal.
2. That in the month of March, 2006, the respondent floated a tender for joint venture to undertake coal block development, mining and transportation of coal and delivery. That one Adani Enterprises Limited (AEL) submitted a bid which was accepted on 12.05.2006. A Letter of Intent was issued to AEL by the respondent on 23.10.2006. Respondent and AEL entered into a joint venture, namely, Parsa Kente Collieries Limited, the appellant herein. A Coal Mining Service Agreement was entered into between the said Parsa Kente Collieries Limited and AEL. That a Coal Mining and Delivery Agreement (hereinafter referred to as ‘CMDA’) was executed between the appellant and the respondent on 16.07.2008 for supply of coal.
2.1 As per CMDA, the date of commencement of the contract was 25.06.2011. As per CMDA between the appellant and the respondent, the coal supply was to commence at the earliest within 42 months, or within 48 months from the date of allotment of coal blocks, i.e., by 25.06.2011. CMDA also provided a clause for extending the date of commencement. Clause 3.2.1 of the CMDA provided for scope of work; Clause 4.1.3 and 4.1.4 provided for responsibility of the respondent to inform the appellant as regards the requirement of coal in advance. Clause 4.5 provided for commencement of the date; clause 5.1 provided for contract of price; clause 5.2.2. provided for calculation of basic price; clause 5.4.3 provided for escalation in price; clause 7.1 provided for force majeure and clause 7.3 provided for effect of force majeure. There was a delay of 21 months in obtaining the forest clearance and environmental clearance. The appellant started supply of coal to the respondent with effect from 25.3.2013, i.e., after a delay of 21 months. It appears that the date of commencement was extended by mutual agreement from 25.6.2011 to 25.3.2013. However, certain disputes arose between the parties, more particularly the escalation price, fixed costs, amount lying in Escrow account and cost of construction of railway siding. Therefore, the appellant invoked clause 10.2 of the CMDA and sought arbitration. A retired Hon’ble Judge of the Rajasthan High Court was appointed as the sole arbitrator. The appellant submitted the statement of claim and thereafter filed another statement of claim.
2.2 Before the learned Arbitrator, the claim was bifurcated into four heads, namely, (1) Price Adjustment; (2) Fixed Costs; (3) Escrow Account; and (4) Construction of Railway Siding. The learned Arbitrator passed an award dated 27.05.2015 allowing the claims under the heads of ‘Price Adjustment’, ‘Fixed Costs’ and ‘Escrow Account’ and rejected the claim under the head ‘Construction of Railway Siding’. While allowing the claim under the head ‘Price Adjustment’, the learned Arbitrator held that the date of commencement of the first operating year for the purposes of clauses 5.2.2 read with 5.4.3 would be 25.06.2011. The learned Arbitrator further held that thus the Zero year for the purpose of price escalation has to be 2011-2012. The learned Arbitrator accordingly held that because the date of commencement of the agreement for the purpose of price escalation is 25.06.2011, the appellant shall be entitled to the enhanced amount as applicable in 2013-2014. Accordingly, the learned Arbitrator held that the appellant is entitled to the
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