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IN THE HIGH COURT OF DELHI
Vipin Sanghi, Rekha Palli, JJ.
Steel Authority of India Limited - Appellant
Versus
Mohan Steel Limited - Respondent
FAO(OS) 14 of 2021
Decided On : 12-04-2021
| Table of Content |
|---|
| 1. initial procedural matters and delay arguments. (Para 1 , 2 , 3) |
| 2. description of contract terms and conditions. (Para 4 , 5 , 6) |
| 3. interpretation of escalation clause and its application. (Para 7) |
| 4. court’s reasoning regarding misunderstanding of contract terms. (Para 8 , 9 , 10 , 11) |
| 5. final order on recovery and interest. (Para 13) |
JUDGMENT
Vipin Sanghi, J. (ORAL)
CM APPL. 13248/2021
Exemption allowed, subject to all just exceptions.
The application stands disposed of.
FAO(OS) 14/2021 & CM APPL. 13246/2021,CMAPPL. 13247/2021(to seek condonation of delay of 360 days in filing the appeal)
1. We have heard learned senior counsel for the appellant, and perused the record. Learned counsel for the respondent is also present on advance notice.
2. Mr. Phoolka, at the outset, points out that the delay is not of 360 days as stated in the application considering the fact that the order was passed on 04.03.2020, whereafter the lockdown was imposed due to the pandemic, and the running of limitation was suspended by the orders of the Supreme Court.
3. Be that as it may, since we have heard Mr. Phoolka on the merits of the appeal, and we do not find merit in the present appeal, we are not inclined to deal with the issue as to what is the quantum of delay, and what is the justification therefor.
4. The present appeal is directed against the order dated 04.03.2020, passed by the learned single Judge allowing the respondents objection filed under Section 34 of the Arbitration and Conciliation Act, 1996 seeking setting aside of the award dated 29.06.2015, passed by the Sole Arbitrator, and seeking a declaration that the recovery made by the appellant herein is illegal and arbitrary.
5. The brief facts relevant for the determination of the present appeal have been noted in the impugned order, and we quote the same from the impugned order itself.
"2. Brief facts germane to the present petition are that the petitioner was appointed as a Conversion Agent for the first time in the year 2006 by the respondent which is a Government Company for conversion of TMT Bars. A contract was entered into for a period of three years i.e. from 2006 till 2009 (hereinafter referred to as 'Contract-I') Under Contract-I, conversion charges payable to the petitioner were to be increased @ 2% every year. Consequently, the respondent revised the conversion charges for the year 2007-2008 vide letter dated 17.03.2007 as well as for the year 2008-2009 vide its letter dated 30.05.2008 and accordingly reimbursed the money at increased rate every year till the conclusion of Contract-I.
3. On 05.02.2009, petitioner entered into a fresh agreement with the respondent (hereinafter referred to as 'Contract-II'). Contract-II had a different clause with regard to the rates of escalation and reads as under:
"ESCALATION OF RATES The conversion charges finalized in the tender shall be kept firm for 1 year w.e.f. the date specified for commencement of work in the work order. At the end of one year, the conversion charges will be revised based on the following weightage and neutralization for each of the components:
| Components | Weightage | Neutralization | Basis |
| Labour | 10% | 100% | Min or statutory wages as per Notification of labour department of the concerned state government |
| Fuel (Furnace Oil) | 20% | 607 | IOC Retail Outlet |
| Electricity | 25% | 60% | Unit Electricity rate as per Electricity Provider co/SEB in the concerned locality |
| Overheads | 30% | 50% | End month/end year RBI Index on machinery and M/c Tools and transport equipment and parts on a simple average basis |
| Profit | 15% | Nil | - |
4. Pursuant to Clause 8, as mentioned above, respondent after completion of one year of the agreement vide letter dated 24.05.2010 approved the revised conversion charges w.e.f. 05.02.2010 and consequently,the petitioner raised the invoices and was paid at the revised rates. The charges were once again revised w.e.f. 05.02.2011 by the respondent vide its letter dated 08.11.2011 and the petitioner was paid at the revised ra
The interpretation of contracts must adhere to explicit terms, and reliance on extraneous documents not incorporated within the contract can render an arbitration award erroneous.
The main legal point established in the judgment is the importance of relying on the terms of the binding contract between the parties and the inadmissibility of new defenses at the stage of hearing ....
The Court emphasized the importance of interpreting contracts based on their ordinary and popular sense, the limited scope of objections under Section 34 of the Arbitration and Conciliation Act, 1996....
The appellate jurisdiction under section 37 is limited to the grounds prescribed under section 34. Courts cannot re-appreciate evidence or substitute their views for that of the arbitrator, provided ....
The scope of judicial review under Section 34 of the Arbitration Act is limited to reasons of law and pertains to the arbitral tribunal's adherence to the contract terms and evidence presented.
Point of Law : None of the objections as raised, fell within the purview of Section 34 of the Act and therefore, the award impugned did not deserve any interference.
The Court upheld the AT's findings regarding the attribution of delay, enforcement of NOC, and the allowance of the claim for escalation cost without a specific clause in the Contract, based on the n....
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