2023 Supreme(Del) 3499

IN THE HIGH COURT OF DELHI AT NEW DELHI
Satish Chandra Sharma, Subramonium Prasad, JJ.
NTPC Ltd. – Appellant
Versus
L And T – Mhps Boilers Pvt. Ltd. – Respondent
FAO(OS) (COMM) 45 of 2022 & CM APPL. 9296 of 2022 & FAO(OS) (COMM) 46 of 2022 & CM APPL. 9300 of 2022
Decided On : 18-07-2023

Headnote:

The Court held that the Arbitral Tribunal's interpretation of the contract was plausible and not patently illegal. The Court also held that the Arbitral Tribunal's reliance on the material submitted by NTPC to quantify the claim was not based on no evidence at all. The Court further held that the Arbitral Tribunal's direction for further opportunity to be granted to the Respondent to prove its claims was beyond the scope of reference of the Arbitral Tribunal and was patently erroneous.

Fact of the Case:

The Appellant, NTPC, entered into a contract with the Respondent, L&T, for the setting up of a Steam Generator, Tanda Thermal Power Project Stage-II (2x660 MW) located at Vidyut Nagar, District Ambedkar Nagar, Uttar Pradesh. Disputes arose between the parties with respect to the works to be carried out by the Respondent in the third package, i.e., for `Inland Transportation including Port Clearance, Port Charges and Inland Insurance Charges for Plant and Equipment and Mandatory spares covered under the first and second contract, Installation Services of Steam Generator (SG) Package for Tanda Thermal Power Project, Stage II (2 x 660 MW), bearing Ref. No. CS-9562-102-2-TC-NOA-6212 (`Tanda Contract'). The crux of the dispute revolved around extra monies which accrued to workers/labourers who had been engaged by the contractor/Respondent/L&T MHPS Boilers Pvt. Ltd on account of a notification dated 19.01.2017 published by the Ministry of Labour and Employment, Government of India, i.e., S.O. 188 (E), whereby the Ministry notified a revised and increased rate of wages to be paid to various categories of labourers. The Respondent herein, in accordance with the mechanism for dispute resolution as provided for under the Tanda Contract, referred the present dispute to the Ld. Adjudicator. An Adjudicator was appointed in the matter. The Ld. Adjudicator, after perusing the material on record and the arguments propounded, held that the Notification dated 19.01.2017 is a change in law within the meaning of Clause 26 of the SCC. It was thus held, that the Respondent herein was entitled to reimbursement/compensation in terms of Clause 26 of the SCC to the extent of real difference in the additional cost/expenditure incurred by the Respondent in complying with the mandate of Notification dated 19.01.2017. Upon receipt of the aforesaid Order of the Ld. Adjudicator, the Appellant herein, being dissatisfied with the same, invoked arbitration as per the next line of the dispute resolution mechanism envisaged under Clause 6.2.1 under the Tanda Contract. An Arbitral Tribunal consisting of three retired Judges of the Apex Court was constituted and an award was passed on 25.06.2020. The Ld. Arbitral Tribunal relying on the notification dated 19.01.2017 issued by the Ministry of Labour and Employment by majority partially allowed the Respondent's claim of Rs.38,30,42,225.76/- inclusive of interest in respect of reimbursement due to it. The Ld. Arbitral Tribunal awarded Rupees 7.104 crores with interest at the rate of 10 % per annum till the date of payment to the Respondent, along with Rs.50,00,000/- as costs towards pursuing the arbitration to be paid within a period of six weeks by the Appellant herein. After perusing the relevant material on record and hearing arguments with respect to applicability of Clause 26 of the SCC/Appendix 2 of the Tanda Contract, the Ld. Tribunal was pleased to rule in favour of the Respondent and held that Clause 26 of the SCC would be attracted in light of coming into effect of the notification of the Ministry of Labour and Employment dated 19.01.2017 as the same amounts to a change in law. Aggrieved against the Impugned Judgements, the Appellant and the Respondent herein filed cross-applications under Section 34 of the A&C Act before this Court following which the Impugned Judgements were passed. The Ld. Single Judge, while disposing of the applications under Section 34 of the A&C Act held that it cannot be construed that the Impugned Award is ex-facie contrary to the terms of the contracts entered into between the parties and therefore vitiated by patent illegality. It was held that the decision of the Ld. Tribunal with regards to the construction and interpretation of the contract was final and that the Court cannot supplant its view in place of that of the Ld. Tribunal. The scope of adjudication under Section 34 of the A&C Act is limited and that unless the Court finds that the Impugned Award is patently illegal on the face of it or fall afoul of the fundamental policy of Indian Law, the Impugned Award cannot be set aside.

Finding of the Court:

The Court held that the Arbitral Tribunal's interpretation of the contract was plausible and not patently illegal. The Court also held that the Arbitral Tribunal's reliance on the material submitted by NTPC to quantify the claim was not based on no evidence at all. The Court further held that the Arbitral Tribunal's direction for further opportunity to be granted to the Respondent to prove its claims was beyond the scope of reference of the Arbitral Tribunal and was patently erroneous.

Issues: 1. Whether the Arbitral Tribunal's interpretation of the contract was patently illegal? 2. Whether the Arbitral Tribunal's reliance on the material submitted by NTPC to quantify the claim was based on no evidence at all? 3. Whether the Arbitral Tribunal's direction for further opportunity to be granted to the Respondent to prove its claims was beyond the scope of reference of the Arbitral Tribunal and was patently erroneous?

Ratio Decidendi: 1. The Court held that the Arbitral Tribunal's interpretation of the contract was plausible and not patently illegal. The Court reasoned that the Arbitral Tribunal had considered the language of Clause 26 of the SCC and found that the said clause had implied the use of the word `reimbursement`. The Arbitral Tribunal reasoned that for the petitioner to establish the claim on the basis of reimbursement, it was required to establish that it had incurred additional expenditure and the same was on account of increase in labour wages as notified under the Notification. The Court found that the Arbitral Tribunal's interpretation was a plausible one and that it could not supplant its view in place of that of the Arbitral Tribunal. 2. The Court held that the Arbitral Tribunal's reliance on the material submitted by NTPC to quantify the claim was not based on no evidence at all. The Court reasoned that the Arbitral Tribunal had relied on the submissions made in the written submissions and the affidavit filed by NTPC's witness, Mr. R.K. Singh, AGM-ME, NTPC Ltd., Tanda Thermal Power Station. The Court found that the said affidavit clearly established that L&T had submitted documents and returns to NTPC indicating the number of man days in relation to which the increase in minimum wages was required to be considered. The Court also found that the tabular statements produced by NTPC did constitute material, which could be considered by the Arbitral Tribunal. 3. The Court held that the Arbitral Tribunal's direction for further opportunity to be granted to the Respondent to prove its claims was beyond the scope of reference of the Arbitral Tribunal and was patently erroneous. The Court reasoned that the Arbitral Tribunal had already found that L&T had failed to establish the amount payable to it on account of its claim for increased expenditure. The Court also found that the Arbitral Tribunal had not only issued directions for L&T to further submit proof and evidence for claiming reimbursement but also directed NTPC to pay the same along with interest. The Court found that this amounted to making an award in respect of a possible dispute that was not before the Arbitral Tribunal.

Final Decision: The Court dismissed the Appeals filed by NTPC Ltd. along with any pending application(s), if any.