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IN THE HIGH COURT OF DELHI AT NEW DELHI
VIBHU BAKHRU, J.
L And T MHPS Boilers Private Ltd. – Appellant
Versus
NTPC Ltd. – Respondent
O.M.P. (COMM) 535, 567 of 2020
Decided on : 29-11-2021
Arbitration and Conciliation Act, 1996- Section 34- Minimum Wages Act, 1948. -Arbitral award- the contract for the third contract package for ‘Inland Transportation including Port Clearance, Port Charges and Inland Insurance Charges for Plant and Equipment and Mandatory Spares- L&T’s claim for payment of additional amounts as compensation for the increase in costs on account of increase in the basic minimum wage rates- NTPC rejected L&T’s claim stating that price adjustment for compensation for any increase in the minimum wages was covered in Appendix-2 of the Contract Agreement - Arbitral Tribunal partially allowed L&T’s claim in respect of reimbursement of increase in costs resulting from the Notification.
Finding of the Court:
Patent illegality should be illegality which goes to the root of the matter. In other words, every error of law committed by the Arbitral Tribunal would not fall within the expression ‘patent illegality’. Likewise, erroneous application of law cannot be categorised as patent illegality. In addition, contravention of law not linked to public policy or public interest is beyond the scope of the expression ‘patent illegality’. What is prohibited is for courts to re-appreciate evidence to conclude that the award suffers from patent illegality appearing on the face of the award, as courts do not sit in appeal against the arbitral award. The permissible grounds for interference with a domestic award under Section 34(2-A) on the ground of patent illegality is when the arbitrator takes a view which is not even a possible one, or interprets a clause in the contract in such a manner which no fair- minded or reasonable person would, or if the arbitrator commits an error of jurisdiction by wandering outside the contract and dealing with matters not allotted to them. An arbitral award stating no reasons for its findings would make itself susceptible to challenge on this account. The conclusions of the arbitrator which are based on no evidence or have been arrived at by ignoring vital evidence are perverse and can be set aside on the ground of patent illegality. Also, consideration of documents which are not supplied to the other party is a facet of perversity falling within the expression ‘patent illegality’.
Result: Disposed of.
JUDGMENT :
VIBHU BAKHRU, J
1. The parties have filed these petitions under Section 34 of the Arbitration and Conciliation Act, 1996 (hereinafter the ‘A&C Act’) impugning an arbitral award dated 25.06.2020 (hereinafter ‘the impugned award’) delivered by the Arbitral Tribunal constituted of three members, Justice PK Balasubramanyam (Retd.), Justice M.Y. Eqbal (Retd.) and Justice Dr Mukundakam Sharma (Retd.) as the Presiding Arbitrator (hereafter ‘the Arbitral Tribunal’).
2. The impugned award was delivered by the majority with Justice (Retd.) M.Y. Eqbal rendering a partially dissenting opinion.
3. The controversy in the present case arises in the following context:
3.1 Tenders were invited by National Thermal Power Corporation Limited (hereafter ‘NTPC’) for setting up of Steam Generator, Tanda Thermal Power Project Stage-II (2x660 MW) located at Vidyut Nagar, District Ambedkar Nagar, Uttar Pradesh on EPC basis (hereinafter ‘the Project’). The work was divided into three packages as under:
| Contract Package 1 | CIF Supply (Indian Port of Entry) |
| Contract Package 2 | Ex-works (India) Supply |
| Contract Package 3 | Inland Transportation including Port Clearance, Port Charges and Inland Insurance Charges for Plant and Equipment and Mandatory Spares covered under first and second contract, and Installation Services for the Project. |
3.2 Larsen and Toubro Limited (hereafter ‘L&T’) had participated in the bidding process pursuant to the aforesaid Notice Inviting Tenders. L&T’s bid for the contracts was accepted by NTPC and on 11.09.2014, NTPC issued three Notifications of Awards in favor of L&T.
3.3 Thereafter, contracts for all the aforesaid packages were signed by the parties on 07.10.2014.
3.4 The impugned award was rendered in the context of the disputes that have arisen between the parties in connection with the contract for the third contract package (hereafter ‘the Contract Agreement’) for ‘Inland Transportation including Port Clearance, Port Charges and Inland Insurance Charges for Plant and Equipment and Mandatory Spares covered under first and second contract, and Installation Services for the Project’ awarded by NTPC to L&T on 11.09.2014.
3.5 The dispute between the parties relates to L&T’s claim for payment of additional amounts as compensation for the increase in costs on account of increase in the basic minimum wage rates notified in terms of notification no. S.O.188 (E) dated 19.01.2017 (hereafter ‘the Notification’) issued under the Minimum Wages Act, 1948.
3.6 By its various communications addressed to NTPC, L&T claimed that the increase in minimum wages of construction workers had severely affected the labor cost portion in executing the contracts and requested NTPC to consider reimbursement of additional costs in terms of Clause 26 of the Special Conditions of Contract (hereinafter ‘SCC’), which provided for reimbursement of increased expenses, inter alia, resulting from any change in law.
3.7 NTPC rejected L&T’s claim stating that price adjustment for compensation for any increase in the minimum wages was covered in Appendix-2 of the Contract Agreement.
3.8 L&T did not accept NTPC’s stand and by its letter requested NTPC to appoint an adjudicator for settlement of the disputes. By the award passed by the adjudicator on 10.10.2018 (modified by an order dated 15.10.2018), NTPC was directed to reimburse L&T in terms of Clause 26 of the SCC.
3.9 Aggrieved by the award passed by the adjudicator, NTPC invoked Clause 6.2 of the General Conditions of Contract (hereafter ‘GCC’) read with Clause 3 of the SCC and referred the matter to arbitration for adjudication of the disputes.
4. The claims made by L&T before the Arbitral Tribunal are set out below:
| CLAIM | PARTICULARS | AMOUNT |
| Claim no.1 and 2 | Impact due to revision in minimum wages due to the Notification dated 19.01.2017 alo | |
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