The principle established is that liability for cess under the Cess Act rests with the contractor, as per statutory provisions and relevant contract clauses.

JUDGMENT :

Bhaskar Raj Pradhan, J.

This is an appeal preferred under section 37 of the Arbitration and Conciliation Act, 1996 (for short, the Arbitration Act). The impugned judgment and order dated 14.08.2023 dismissed the petition filed by M/s Teesta Urja Ltd. [now, Sikkim Urja Limited (appellant)] under section 34 refusing to interfere with the arbitral award dated01.10.2019 in favour of the respondents herein.

2. The grounds for interference under section 34 of the Arbitration Act are limited. When should a Court interfere under section 34 is clearly defined in the provision and amply clarified by the Hon'ble Supreme Court in its various judgments. On examination of the arbitral award, we find that the arbitral award is in conflict with the public policy of India, in that it is in contravention with the fundamental policy of Indian law. We also find that the arbitral award is vitiated by patent illegality appearing on the face of the award. The Arbitral Tribunal has also imposed the liability of payment of cess upon the appellant although section 3 of the Building and Other Construction Worker'sWelfare CESS ACT , 1996 (for short, the CESS ACT , 1996) mandates that it is the respondent who are liable to pay it. While determining who is liable to pay the cess, the Arbitral Tribunal reversed the mandate of the law and imposed the liability upon the appellant instead. The arbitral award suffers from the vice of disregarding the two judgments of the Hon'ble Supreme Court in A. Prabhakara Reddy and Company vs. State of Madhya Pradesh and Others , (2016) 1 SCC 600 and M/s Dewan Chand Builders and Contractors vs. Union of India & Ors., [ (2012) 1 SCC 101 ] Thus, the impugned judgment passed by the learned Commercial Court while exercising the powers under section 34 refusing to set aside such an arbitral award requires to be interfered with. We explain our reasons hereunder.

3. The claimant before the Arbitral Tribunal was the consortium of M/s Abir Infrastructure Pvt. Ltd. (respondent no.1 herein), M/s Navayuga Engineering Co. Ltd. (respondent no.2 herein) and M/s SEW Infrastructure Ltd. (respondent no.3 herein). The respondent therein was M/s Teesta Urja Ltd.

4. The consortium of the respondents along with M/s CGGC International Ltd, M/s CKD Hydro Power Pvt. Ltd, M/s SABIR Dam & Water Works Construction Co., was awarded the work for Turnkey execution of 1200 MW Teesta Stage-III of Hydroelectric Project in the State of Sikkim after a successful bid. For the said purpose various agreements were executed. The contracts were subject to arbitration for settlement of disputes. The contract was awarded on 18.04.2007 with subsequent amendments dated 26.05.2007. The contract was signed on 12.09.2007 and the project completed on 28.02.2017.

5. According to the Arbitral Tribunal, as stated in its award, the dispute arose with respect to the liability for the payment of cess under the CESS ACT , 1996. Teesta Urja Ltd. addressed a letter on 29.08.2016 to the respondent no.2 with copies to the respondents no.1 and 3 making demands of Rs.5.88 crores, Rs. 8.12 crores and Rs.27.39 crores from the consortium members totalling to Rs.41.39 crores for cess @1% and required them to pay it from the date of the contract award on 18.04.2007. This was disputed by the respondents who invoked the arbitration clause.

The statement of claim by the respondents

6. The respondents through their statement of claims sought to have the letters dated 16.10.2010, 19.05.2014, 12.06.2014, 07.06.