IMPORTANT POINT
The court emphasized that the grounds for challenging an arbitral award are limited, particularly post-2015 amendments, and clarified the definitions of corrupt and fraudulent practices in the context of contract execution.

JUDGMENT :

Sabyasachi Bhattacharyya, J.

1. The present challenge under Section 34 of the Arbitration and Conciliation 1996 (hereinafter refer to as “the 1996 Act) has been preferred against the award dated August 14, 2021 passed in an arbitral proceedings between the parties. BLA Projects Private Limited (the respondent herein) was the claimant. Out of the seven heads of claim, four were allowed by the learned arbitrator. Counter claims on two counts made by the Damodar Valley Corporation (DVC), the respondent before the learned arbitrator and the petitioner herein, were turned down.

2. Learned counsel for the petitioner argues that the award is contrary to the terms of the contract. As per the contract, DVC was entitled to terminate the contract if the claimant/BLA indulged in corrupt and fraudulent practices. The relevant clauses relating to termination were Clause 15 of the General Terms and Conditions, Clause 17 of the General Conditions of Contract (GCC), Clause 14 of the Annual Rates Contract (ARC) and Clause 24.2.1 of the Additional/Special Conditions of Contract.

3. It is argued that all the clauses are almost identical and permit termination in the event of corrupt or fraudulent practices in executing the contract. Some of the said clauses also contemplate termination at the sole discretion of the DVC, albeit with a 60 days' prior notice. It is argued that the learned arbitrator erred in holding that "corrupt" and "fraudulent" practice were intended to cover malpractice indulged in by the contractor in the matter of procurement of the contract only and not activity in performance of the contract. Thus, the other conditions of contract were overlooked by the learned arbitrator.

4. In the present case, the first notice of termination was issued, after which the matter came up to this Court and upon a direction being passed by this Court, a hearing was given to both sides and a reasoned order was passed by the Executive Director of the DVC. The said reasoned order granted liberty to the DVC to issue termination notice. In pursuance thereof, the termination notice was issued, contemplating forthwith termination.

5. It is argued that the learned arbitrator failed to take into consideration all the provisions of termination under the agreement between the parties and stuck to Clause 24.2.1 only, thus rendering the award contrary to the terms of the contract and violative of Section 21(3) of the 1996 Act.

6. Learned counsel for the petitioner next argues that the claimants/respondent indulged in corrupt and fraudulent practice. The relevant documents show that fraud was perpetuated by the BLA (claimant). The unloaded coal was contaminated with mud. The contaminated coal was loaded at the siding. The defence taken by the claimant was heavy rain, due to which the coal allegedly got mixed with the mud and soil at the loading point (kaccha point). Thus, inferior quality of coal was mixed with extraneous materials, which was admitted by the claimant, thus making the claimant liable for termination of its contract. It is argued that contamination of coal is an admitted fact in the reply dated June 5, 2018 by the claimant to the show- se notice dated June 2, 2018 and even in the statement of claims and the cross-examination of the Claimant's Witness (CW).

7. With regard to claim nos.1 and 2, pertaining to the Running Account (RA) bills, the learned arbitrator erroneously directed payment of such bills since the BLA had indulged in a corrupt and fraudulent practice. Under Clause 13 of the Annual Rates Contract, the DVC is, in fact, entitled to impose penalty for carrying stones, shortages and in respect of quantity etc, which was required to be adjusted from the running bills.

8. Further, the Engineer-in-Charge of the DVC was to pass the bills after scrutiny and final bill was to be made payable only after the reconciliation of the bills, outstanding penalties etc. at the end of the contract period. The running bills in the present case were