1. Dispute over reimbursement for increased royalty, sales tax, forest transit fees, and payment for embankment construction under a road project contract. (Para 1 , 2 )
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2024 Supreme(SC) 431
SUPREME COURT OF INDIA
ABHAY S. OKA, PANKAJ MITHAL, JJ.
National Highways Authority of India – Appellant
Versus
M/s Hindustan Construction Company Ltd. – Respondent
Civil Appeal No. 4702 of 2023 with Civil Appeal No. 4703 of 2023, Civil Appeal No. 4704 of 2023, Civil Appeal No. 4705 of 2023, Civil Appeal No. 4706 of 2023, Civil Appeal No. 4707 of 2023, Civil Appeal No. 4708 of 2023 and Civil Appeal No. 4709 of 2023
Decided On : 07-05-2024
Important Points
IMPORTANT POINT
Appeal against arbitral award – It is for Arbitral Tribunal to adjudicate upon terms of a contract.
Appeal against arbitral award – It is for Arbitral Tribunal to adjudicate upon terms of a contract.
Subject
Construction Law - Contract Dispute
Act Referred
Headnote
Arbitration and Conciliation Act, 1996 – Sections 34 and 37 – Appeal against arbitral award – Jurisdiction of Court under Section 34 is relatively narrow and jurisdiction of Appellate Court under Section 37 of Arbitration Act is all the more circumscribed – As far as construction of terms of a contract is concerned, it is for Arbitral Tribunal to adjudicate upon – If, after considering material on record, Arbitral Tribunal takes a particular view on interpretation of contract, Court under Section 34 does not sit in appeal over findings of Arbitrator – Single Judge and Division Bench of High Court have examined challenge to award within four corners of limitation imposed by Sections 34 and 37 of Arbitration Act – View taken by Arbitral Tribunal, Single Judge and Division Bench cannot be found fault with – Appeals dismissed. (Paras 9, 13, 14 and 15)
Facts of the case:
Being aggrieved by award, appellant filed a petition under Section 34 of Arbitration and Conciliation Act, 1996. By impugned judgment and order dated 30th November 2011, Single Judge confirmed the award in respect of Claim no.1 and Claim no.3.
Findings of Court:
Division Bench was right in holding that majority opinion of technical persons need not be subjected to a relook, especially when Single Judge had also agreed with view taken by Arbitral Tribunal. We have also perused findings of majority in Award. We find nothing perverse or illegal about it.
Result : Appeals dismissed.
Legal Category Hierarchy
Advocates appeared:
For the Appellant(s) : Ms. Pinky Anand, Sr. Adv. Mr. A.P. Singh, Adv. Ms. Neetica Sharma, Adv. Mr. Tavinder Sidhu, Adv. Ms. Akansha Das, Adv. Ms. Shrikhla, Adv. Mr. Vikas Soni, Adv. M/S. M. V. Kini & Associates, AOR
For the Respondent(s): Mr. Vineet Dwivedi , AOR Mr. R. Sathish, AOR Mr. Devendra Singh, AOR M/S. Parekh & Co., AOR
For the Appellant(s) : Ms. Pinky Anand, Sr. Adv. Mr. A.P. Singh, Adv. Ms. Neetica Sharma, Adv. Mr. Tavinder Sidhu, Adv. Ms. Akansha Das, Adv. Ms. Shrikhla, Adv. Mr. Vikas Soni, Adv. M/S. M. V. Kini & Associates, AOR
For the Respondent(s): Mr. Vineet Dwivedi , AOR Mr. R. Sathish, AOR Mr. Devendra Singh, AOR M/S. Parekh & Co., AOR
Table of Contents
2. Whether price adjustments via WPI cover statutory tax increases and whether embankment construction is a separate payable item or part of clearing and grubbing. (Para 4 , 5 , 6 )
3. Statutory tax increases are distinct from market-based price escalation, and majority findings of technical experts in arbitration are generally non-interferable. (Para 11 , 12 , 13 )
4. Courts have narrow jurisdiction under Sections 34 and 37 of the Arbitration Act to interfere with awards unless they are perverse or against public policy. (Para 7 , 8 , 9 )
5. Appeals dismissed; judgments of the High Court confirming the arbitral award are upheld. (Para 14 , 15 )
6. What is the scope of judicial interference with an arbitral award under Sections 34 and 37 of the Arbitration Act?
Interference is narrow and limited to awards that are against the public policy of India, including patent illegality or contravention of the contract. The court does not act as a court of appeal over facts or errors of fact. (Para 7 , 8 , 9 )
7. Does a price adjustment formula based on the Wholesale Price Index (WPI) cover additional costs resulting from subsequent legislation?
No. Price escalation based on market fluctuations of inputs stands on one footing, while additional costs resulting from the impact of any statute, decree, ordinance, or law stand on another and are treated as a separate category of compensation. (Para 11 )
8. Can a court interfere with a majority decision of an Arbitral Tribunal based on technical expertise?
Generally, no. If the Arbitral Tribunal takes a reasonable view on the interpretation of a contract based on technical expertise, the court will not interfere unless the view is perverse or illegal. (Para 13 )
FACTUAL ASPECTS IN CIVIL APPEAL NO. 4702 OF 2023
1. The appellant- National Highways Authority of India Ltd. has been constituted under Section 3 of the National Highways Authority of India Act, 1988. On 2nd June 2004, the appellant awarded a contract to the respondent for the work of the Allahabad Bypass Project, which involved the construction of a road from km 158 to km 198 (except a bridge on the river). The total cost of the project was Rs.4,46,99,12,839/-. A dispute between the parties was referred to the Dispute Resolution Board. The Board gave its recommendations. Ultimately, the dispute was referred to an Arbitral Tribunal of three arbitrators. There were three claims referred to arbitration, which are as follows:
- Claim no.1 - Reimbursement of additional expenditure incurred due to an increase in the rates of royalty and associated sales tax on soil, sand and crushed stone aggregates;
- Claim no.2 - Non-payment for executed work of embankment with soil/pond ash for the initial 150 mm depth stripped in accordance with the requirements of the contract and
- Claim no.3 - Reimbursement of additional costs incurred due to an increase in the forest transit fee rates.
2. The Arbitral Tribunal made an award on 30th March 2010. The summary of the award is as follows:
- Claim no.1 – The Arbitral Tribunal granted an amount of Rs.2,69,91,248/- as an additional cost to the respondent till 31st December 2008, along with interest and future interest of 12% per annum. A direction was also issued to the appellant to pay an additional cost to the respondent post-31st December 2008 on account of an increase in royalty charges and associated sales tax;
- Claim no. 2 - Two members of the Arbitral Tribunal consisting of three members held that the respondent was entitled to Rs.3,47,35,522/- towards the formation of the embankment for an initial 150 mm, along with a price adjustment on the said amount in accordance with clause 70.3 of the contract, with interest and future interest at 12% per annum. The third member of the Arbitral Tribunal dissented and held that the respondent was not entitled to any amount under the said claim.
- Claim no.3 - The respondent was granted Rs.3,77,74,427.39/- along with interest and future interest at 12% per annum.
3. Being aggrieved by the award, the appellant filed a petition under section 34 of the Arbitration and Conciliation Act, 1996 (for short ‘the Arbitration Act’). By the impugned judgment and order dated 30th November 2011, the learned Single Judge confirmed the award in respect of Claim no.1 and Claim no.3, relying upon the decision of the High Court in the case of National Highways Authority of India v. M/s. ITD Cementation India Limited, 2008 (100) DRJ 431. Regarding Claim no.2, the learned Single Judge held that the award was a majority decision of the Arbitral Tribunal based on an analysis of the material placed before the Arbitral Tribunal. Therefore, the award for Claim no.2 was upheld. Being aggrieved by the said judgment and order, the appellant preferred an appeal under Section 37 of the Arbitration Act before a Division Bench of the Delhi High Court. By the impugned judgment, the said appeal has been dismissed. From the impugned judgment, it appears that the submissions made before the Division Bench of Delhi High Court were confined to Claim nos. 1 and 2. By the impugned judgment, the appeal preferred by the appellant was dismissed. Being aggrieved by the Arbitral Tribunal’s award and the judgments of the High Court, the appellant has preferred the present appeal. At the outset, we may note here that one of the grounds of challenge in the present appeal was that the decision of the High Court in the case of National Highways Authority of India v. M/s. ITD Cementation India Limited, 2008 (100) DRJ 431 was the subject matter of challenge before this Court. We may state that by judgment and order dated 24th April 20152[(2015) 14 SCC 21], the said appeal has been partly allowed by setting aside t
