IMPORTANT POINT
The court emphasized the limited scope of interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, and highlighted the principle that the court does not sit in appeal over the arbitral award and may interfere only on limited grounds, such as violation of public policy or patent illegality.

ORDER :

SUNITA AGARWAL, J.

The instant Appeal has been filed under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as ‘the Act, 1996’) seeking to challenge the Arbitral Award dated 17.12.2020, after the dismissal of the application under Section 34 of the Act, 1996 by the Additional District Judge, at Rajpipala, District : Narmada vide order dated 01.03.2024.

2. The main ground of challenge urged by the learned counsel for the appellant was that the entire award revolves around the terms of the supplementary agreement and the terms and conditions of the main agreement, which have been conveniently ignored by the learned Arbitrator. As per the condition No.‘11’ of the supplementary agreement, the supplementary agreement dated 15.10.1992 was subject to the approval of the State Government, which was never granted. All the breaches mentioned in the award at the ends of the appellant, are with reference to the supplementary agreement and there is no finding with regard to breach of Clause ‘17.6’ of the original agreement. Reference has been made to Clause ‘17.6’ of the original agreement to submit that once the contractor/claimant has abandoned the contract and has failed to comply with the conditions of the agreement, he was not entitled for any claim. The contention was that it was the claimant who had abandoned the project and failed to execute it, as agreed. In the said circumstance, the appellant was constrained to enter into a fresh contract with another entity namely National Heavy Engineering Co-operative Ltd. On 22.4.1995. The learned Arbitrator has erred in ignoring this aspect of the matter and allowing the claims of the claimant partly. The findings returned by the learned Arbitrator being an ignorance of the relevant clauses of the contract between the parties, are perverse in law as well as on facts. The counter claims made by the appellant for various grounds towards loss of profit, loss of goodwill etc. as also interest and cost have been illegally rejected and the findings on the said issues are also perverse. The submission, thus, is that the sole learned Arbitrator has committed patent illegality in passing the award, inasmuch as, the claimant was not entitled for any damage under the relevant terms and conditions of the contract. The award being against the public policy is liable to be set aside. The further submission is that the Court exercising jurisdiction under Section 34 of the Act, 1996 has also ignored the above stated aspects of the matter, in dismissing the application under Section 34 of the Act, 1996 on the premise that the impugned award passed by the sole learned Arbitrator does not suffer from patent illegality and there was no conflict with the public policy.

3. Noticing the above submissions, we may go through the learned Arbitrator’s award and the opinion drawn by the concerned Court under Section 34 of the Act, 1996, keeping in mind the limited scope of interference by the Court under Sections 34 and 37 of the Act, 1996.

4. Certain relevant facts of the instant case are also to be noted at the outset. The appellant, a co-operative Society registered under the Gujarat Co-operative Societies’ Act, 1961 had invited tenders on 16.10.1990 from the interested parties for supply of Sugar Plant. The claimant made an offer for supply of the machinaries and commissioning of the plant. The said offer was accepted and the agreement was executed on 29.12.1990 for the contract price of Rs. 16,60,00,000/-. The contractor/claimant was to supply, commission and make ready for commercial use of the plant within 18 months from the date of execution of the agreement, i.e. 28.06.1992. As noted by the learned Arbitrator, the time was an essence by of the contract. There are claims and counter claims by the parties about the delays and defaults on the part of each other, which has resulted in the fact that the contract could not be completed within the time stipulated in the agreement.