IMPORTANT POINT
The Court emphasized the importance of evidence in arbitration proceedings and upheld the validity of the arbitral award based on the evidence presented.

JUDGMENT :

Moushumi Bhattacharya, J.

1. The Union of India represented by the General Manager, South Eastern Railway, has applied for setting aside of an Award dated 10.8.2020; as corrected on 7.11.2020 under section 34 of The Arbitration and Conciliation Act, 1996. The impugned Award was passed by an arbitral tribunal consisting of three learned arbitrators.

2. The impugned Award was made on a claim of the respondent / Award-holder Electro Steel Castings Limited including for the market value of the Rakes, loss of freight rebate and loss of profit. By the impugned Award, Electro Steel was awarded a sum of Rs. 232.44 crores along with interest at 9% per annum from the date of the Award till full recovery. The counter-claim of the petitioner / award-debtor was rejected.

3. The award-debtor has assailed the Award on the ground that the award is perverse in failing to consider relevant materials and taking into account matters which were not within the contemplation of the dispute. The argument of perversity is based on limitation, the Award of the claim for market value of rakes being contrary to the method for assessment contained in the Agreement, the Award for loss of freight rebate being in disregard of the evidence and the Award for loss of profit being contrary to the Wagon Investment Scheme (WIS).

4. The Court proposes to discuss each of these heads and the arguments in context.

5. The Court is required to deal with the facts and documents placed since the argument is of perversity.

The List of events

6. The sequence of relevant events should be briefly stated before the Court delves into the competing submissions made on behalf of the parties.

7. The Ministry of Railways, Government of India introduced a Wagon Investment Scheme (WIS) on 30.3.2005. The object of the WIS was to enable investors to procure wagons from approved builders. The investors were entitled to certain benefits including freight rebate and additional guaranteed number of rakes without freight rebate in return for the investment.

8. The respondent applied to two BOX N HS rakes of 122 wagons including 4% spares for each rake under the WIS. The respondent’s application was forwarded by the South Eastern Railway to the Railway Board subject to the condition that the rakes will be inducted after construction of respondent’s private siding at Barajamda. The Railway Board accepted the respondent’s proposal on 16.5.2007. The parties entered into an agreement on 9.1.2008 pursuant to the WIS and the approval granted by the Railway Board.

9. In terms of Clause 16.0 of the WIS, any change in terms and conditions of the agreement could only be made by mutual consent of both parties. On 26.9.2008, 3.2.2011, 27.7.2011 and 1.8.2013, circulars were issued by the petitioner Railways which in effect made unilateral changes to the WIS. In 2014, these circulars were challenged before the Delhi High Court by other similarly-placed WIS investors. The Delhi High Court, by an order dated 29.6.2015, held that the circulars amounted to altering the basic structure of the agreement by modifying the essential terms and conditions. By a judgment dated 3.11.2015 the Division Bench of the Delhi High Court affirmed the view taken by the Single Bench. The Special Leave Petition arising from the said judgment was also dismissed by the Supreme Court on 28.11.2017.

10. The respondent issued a notice for termination of the agreement on 17.6.2016 and invoked the arbitration clause in the Agreement on 3.10.2016.

11. The arbitration proceedings between the parties culminated in the impugned Award dated 10.8.2020, as corrected on 7.11.2020.

Limitation

12. The award-debtor has argued that the notice issued by the award-holder under section 21 of the Act is barred under Article 113 read with Article 137 of the Schedule to the Limitation Act, 1963 since the challenge to the impugned Circulars were made after 3 years from the dates of issue of the Circulars.

13. The award-holder, on the other hand, places the Ci