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IN THE HIGH COURT OF DELHI
Prateek Jalan, J.
National Highway Authority of India - Appellant
Versus
Continental Engineering Corporation - Respondent
O.M.P. (COMM) 426 of 2018 & I.A. 13900 of 2018
Decided On : 06-10-2022




In international commercial arbitration, challenges to awards are limited to specific legal grounds, and mere dissatisfaction with arbitral decisions does not constitute public policy violations.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Challenge to arbitral award - Dispute concerning a construction contract - Claims regarding embankment and concrete awarded despite prior payments - Court held awards to be justified based on evidence, not warranting interference. Court clarified that public policy grounds under Section 34 do not apply to international commercial arbitration. (Paras 8-22)

(B) Public Policy - Definition - An award is against public policy only in exceptional cases where it shocks the court's conscience; mere dissatisfaction with the award is inadequate for setting it aside. (Paras 14-20)

(C) Interpretation of contracts - Arbitral tribunal's interpretation of contract terms not open to challenge unless unreasonable; existing amendments need to be considered. (Paras 21-22)

Facts of the case:
The National Highways Authority of India challenged two claims awarded to the Continental Engineering Corporation under a construction contract regarding road rehabilitation. The NHAI argued that the awarded claims were duplicative as they had effectively been compensated under other items.

Findings of Court:
The arbitral tribunal's findings were found to have adequate evidentiary support, thus justifying the awards made.

Issues: The primary issues included the validity of the claims under the contract terms and whether the grounds for setting aside the arbitral award fell within permissible limits.

Ratio Decidendi: The court ruled that in international commercial arbitration, specific grounds for contesting awards apply, and disagreements over awards do not constitute grounds for interference unless they fundamentally breach public policy.

Result: Petition dismissed.

Table of Content
1. context of the arbitration petition and claims. (Para 1 , 2)
2. arguments about validity of claims and contract terms. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12)
3. court's reasoning on public policy and merits. (Para 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21 , 22 , 23)
4. final dismissal of the petition. (Para 24)

JUDGMENT

Prateek Jalan, J. (Oral)--The present petition under Section 34 of the Arbitration and Conciliation Act, 1996, [hereinafter, "the Act"] is directed against an arbitral award dated 08.06.2018 by which a three member tribunal adjudicated disputes arising out of a contract dated 20.02.2007 for work of "Rehabilitation and upgrading of existing 2-lane road to 4 lane divided carriageway configuration from km 293.400 to km 336.000 Hyderabad-Bangalore section of NH-7 in the State of Andhra Pradesh on North-South Corridor, Contract Package No./ADB-II/C12" [hereinafter, "the Contract"].

2. The challenge of the petitioner -National Highways Authority of India [hereinafter, "NHAI"] is restricted to two claims which were awarded by the Tribunal against it:

a. Claim No.1: Payment of 150 mm thick embankment quantity under Bill of Quantities [hereinafter, "BOQ"] item No. 2.04.

b. Claim No. 3: Non-payment of BOQ item No. 5.15 for providing and laying M-15 grade concrete in pipe bedding.

3. Ms. Nivedita Nair, learned counsel for the NHAI, submits that the award on both these claims is contrary to the terms of the Contract, as the activities for which the award has been made were already covered under other items of the BOQ.

4. As far as claim No. 1 is concerned, Ms. Nair contends that, since the respondent has already been paid for "clearing and grubbing" under BOQ item No. 1.01, the grant of the claim for embankment under BOQ item No. 2.04 was not permissible. According to NHAI, "clearing and grubbing" activity includes backfilling, and grant of both items of the BOQ amounts to double recovery on the part of the respondent.

5. As far as claim No. 3 is concerned, the principal submission of Ms. Nair is that no amount was liable to be awarded under BOQ item No. 5.15 as the work to be done was covered under BOQ item No. 5.14. She draws my attention to two items of the BOQ [at page 424 of the petitioner's documents] which are listed as follows:

Bill No. 5,
Item No.DescriptionUnitEstimated QuantityUnit Rate (Rs.)Amount Rs.
in figuresIn words(in figures)
5.14Providing laying and jointing RCC NP-4 Pipe (as per IS:458-2002) for culverts including testing complete as per drawings and Technical Specifications Section 2900,
a) Dia 1000 mmm14916100/-Six thousand one hundred only9095100/-
b) Dia 1200 mmm13898410/-Eight thousand four hundred ten only11681490/-
5.15Providing and laying M 15 grade concrete in pipe bedding as per drawing and fourty Technical Specifications Section 2900 cum20542440/-Two thousand four hundred only5011760/-

6. According to Ms. Nair, by an amendment to the technical specifications, the following provision was incorporated in Clause 2911 of the amended technical specifications:

"Clause 2911Rate
The first paragraph under this Sub Clause shall be read as:
The Contract unit rate for the pipes shall include the cost of pipes including loading, unloading, hauling, storing, laying in positionjointing and cement concrete bedding below the pipe complete and all incidental costs to complete the work as per these specifications."

7. Ms. Nair submits that the award of the respondent's claim under BOQ item No. 5.15 separately by the arbitral tribunal is directly in the teeth of Clause 2911 of the amended technical specifications which provides that the contract unit rate of the pipes shall inter alia, include the cement concrete bedding below the pipe.

8. Dr. Amit George, learned counsel for the respondent, at the very outset, submits that the aforesaid grounds of challenge are not available in the present case as the respondent is an entity incorporated in Taiwan, and the award under challenge is

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