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2023 Supreme(Megh) 62

IN THE HIGH COURT OF MEGHALAYA AT SHILLONG
SANJIB BANERJEE, CJ, W. DIENGDOH, J.
Public Works Department (National Highway) – Appellant
Versus
M/s BSC-CC & JV, 6-2-913/914 – Respondent
Arb. A. No. 6 of 2023
Decided On : 19-06-2023

Advocates:
Advocate Appeared:
For the Appellants : A. Kumar, S. Sengupta, S. Sahay, A.S. Pandey, S. Laloo.
For the Respondents: R. Prakash, K. Ch. Gautam, K. Tiwari, S. Gangar, A. Pandey.

Headnote:(A) Arbitration and Conciliation Act, 1996 - Sections 16, 31(6), 34, and 37 - Appeal challenging an arbitral award - The court rejected the appeal citing lack of challenge by the appellant against the Dispute Review Expert Board's decisions as fatal to its arguments - The issue of delay and disruption claims were properly within the scope of arbitration as per the contract - It ruled that the appellant's failure to object to the DREB award resulted in the loss of its right to contest those findings in arbitration. (Paras 27, 35)

(B) Contract Law - Principles of Dispute Resolution - The court emphasized adherence to contractually stipulated dispute resolution mechanisms and warned against attempts to bypass established arbitration processes - Non-responsiveness of the appellant to reference claims allowed for the arbitrators to assume jurisdiction. (Paras 10, 36)

Facts of the case:
The appellant engaged the contractor for highway development, leading to disputes over delayed payments attributed to contract delays. The contractor had multiple claims acknowledged by the Dispute Review Expert Board but faced failure from the appellant to adhere to contract-specified dispute resolution timelines.

Findings of Court:
The court upheld the arbitral award rendered on July 27, 2021, noting the appellant's failure to challenge earlier DREB decisions and allowing the contractor to claim due payments, solidifying that no dispute existed post-DREB decision which warranted arbitration.

Issues: The main issues were the validity of claims based on DREB decisions, the appellant's failure to initiate timely disputes, and the enforceability of the arbitral tribunal's jurisdiction over non-payment claims.

Ratio Decidendi: The court underscored the importance of strict adherence to procedural timelines set in contracts for dispute resolution and held that the arbitral tribunal acted within its jurisdiction based on the appellant's silence and acquiescence.

Result: Appeal dismissed with costs of Rs. 10 lakh.

Table of Content
1. arbitration challenge under section 37. (Para 1 , 2)
2. details of the contractual relationship and claims. (Para 3 , 4 , 5)
3. challenges to the dreb decisions. (Para 6 , 11)
4. contractor's claims for delayed payments. (Para 8 , 9 , 10 , 12)
5. nomination of arbitrators and acceptance of claims. (Para 13 , 15 , 16 , 17)
6. constitution of the arbitral tribunal. (Para 18 , 26 , 35)
7. disputes and their arbitrability. (Para 19 , 22 , 24 , 27 , 30 , 31)
8. significance of contractor’s payments and obligations. (Para 29 , 32 , 33)
9. conclusion on costs and dismissal of the appeal. (Para 34 , 39)

JUDGMENT :

SANJIB BANERJEE, CJ.

1. This is a complete waste of time and a reckless exercise undertaken by an irresponsible appellant. The challenge here is under Section 37 of the Arbitration and Conciliation Act, 1996 to an order dated May 17, 2023 passed by the Commercial Court, Shillong on a plea under Section 34 of the Act challenging an arbitral award rendered on July 27, 2021.

2. The arbitral award was made on an application under Section 31 (6) of the Act. Such provision empowers an arbitral tribunal to pass an interim arbitral award in respect of any matter that may be covered by a final arbitral award.

3. The appellant herein engaged the respondent for the two-laning of the highway from Shillong to Nongstoin and beyond, possibly, up to Tura. The claims in the reference pertained to the delay, disruption and prolongation of the contract together with interest on account of delayed payments and the like. There is no dispute that there was delay in the execution of the contract and the appellant herein submits that it was for such reason that the value of the contract had been revised and claims on account of interest and the like for previous delayed payments had been subsumed in the enhanced value of the contract.

4. The contract itself provided for a two-tier mechanism for the resolution of disputes. In such context, clause 25 of the contract is of some relevance:

    “25. Procedure for Disputes

    25.1. The Dispute Review Expert (Board) shall give a decision in writing within 28 days of receipt of a notification of a dispute.

    25.2. The Dispute Review Expert (Board) shall be paid daily at the rate specified in the Contract Data together with reimbursable expenses of the types specified in the Contract Data and the cost shall be divided equally between the Employer and the Contractor, whatever decision is reached by the Dispute Review Expert. Either party may give notice to the other to refer a decision of the Dispute Review Expert to an Arbitrator within 28 days of the Dispute Review Expert’s written decision. If neither party refers the dispute to arbitration within the next 28 days, the Dispute Review Expert’s decision will be final and binding.

    25.3. The arbitration shall be conducted in accordance with the arbitration procedure stated in the Special Conditions of Contract.”

5. Despite the value of the contract being enhanced, the contractor sought to assert a claim on account of delayed payments of its regular bills. In accordance with clause 25 of the contract, the Dispute Review Expert Board considered such claim and, by a reasoned decision passed on September 25, 2016, found that the contractor was entitled to a substantial sum. Upon the contractor requiring the Dispute Review Expert Board (DREB) to re-examine its claim since several aspects of the delay had not been accounted for, a revised decision was passed by the DREB on February 19, 2017 finding that the contractor was entitled to a sum in excess of Rs.117 crore on account of interest for delayed payments and on account of unpaid bills or delayed payments for bitumen.

6. In accordance with clause 25.2 of the contract, such decision of the DREB ought to have been challenged by the appellant employer within 28 days. However, even if it be accepted for argument’s sake that the abridgement of the time would fall foul of Section 28 of the CONTRACT ACT , 1872, what is evid

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