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2023 Supreme(Online)(SC) 8602
S. RAVINDRA BHAT, J
M/S HINDUSTAN CONSTRUCTION COMPANY LIMITED – Appellant
Versus
M/S NATIONAL HIGHWAYS AUTHORITY OF INDIA – Respondent
CIVIL APPEAL NO(S). 4658 OF 2023 | CIVIL APPEAL NO(S). 4659 OF 2023 | CIVIL APPEAL NO(S). 4660 OF 2023 | CIVIL APPEAL NO(S). 4661 OF 2023 | CIVIL APPEAL NO(S). 4662 OF 2023
For the Appellants/Petitioners: Dr. Abhishek Manu Singhvi, Mr. V. Giri, Mr. Anil Airi, Mr. Sameer Parekh, Mr. George Thomas
For the Respondents: Ms. Aishwarya Bhati
The court upheld the majority view of an arbitral tribunal on contract interpretation for construction measurements, emphasizing minimal grounds for judicial interference under arbitration law.
Headnote:(A) Arbitration and Conciliation Act, 1996 - Section 34 - Interpretation of contractual conditions related to embankment construction - Contractors argued for a unified measurement of embankment with soil and pond ash; NHAI's engineer bifurcated measurements based on material type - Court emphasized the requirement for deference to expert arbitration views and the narrow grounds for judicial interference - The majority view of the tribunal determined contract interpretation, while dissenting views reflected alternative positions. (Paras 1, 3, 12, 28)
(B) Legal Standards for Arbitration Awards - The court reiterated the principle that awards should not be lightly interfered with unless the interpretation of contractual terms is patently unreasonable or perverse - Emphasis on maintaining the integrity of arbitration as a preferred dispute resolution mechanism. (Paras 22, 24)
Facts of the case:
Disputes arose from the construction of an embankment project awarded by NHAI to contractors; the interpretation of measurement-related contract clauses led to arbitration, with differing outcomes in appeal proceedings.
Findings of Court:
The appeals were allowed, restoring the arbitral awards, emphasizing rationality in interpreting contract stipulations, and mandating uniform interest payments due to contractors.
Issues: The primary issue was the proper interpretation of contract conditions regarding the measurement of embankment construction with varying materials.
Ratio Decidendi: The Court concluded that the majority view of the arbitral tribunal should prevail as it offered plausible interpretations of the contractual framework, not veered into perverse territory, and supported the integrity of arbitration under Section 34.
Result: Appeals allowed.
| Table of Content |
|---|
| 1. contract interpretation regarding embankment measurement. (Para 1 , 2) |
| 2. arguments against the division bench's decision. (Para 4 , 5 , 6 , 7 , 8 , 9 , 10 , 11 , 12) |
| 3. analysis on technical specifications and tribunal's reasoning. (Para 13 , 15 , 17 , 18 , 19 , 20) |
| 4. judicial scrutiny of arbitration awards. (Para 21 , 22 , 23) |
| 5. final ruling in favor of contractors. (Para 26 , 28) |
JUDGEMENT
S. RAVINDRA BHAT, J.
1. All these appeals involve decision on a common question, with respect to the interpretation of a contract condition, which required the measurement of quantities used for payment for embankment construction with soil or with pond ash. The claimants (hereafter “the contractors”) contended that the measure is one and the same, which is by taking a composite cross section as a whole of the Digitally signed by VISHAL ANAND Date: 2023.08.24 16:18:23 IST Reason:
- Signature Not Verified embankment and determining the volume by the average end area method.
- However, the supervising engineer (hereafter “EE”) adopted a method, whereby the area of the cross section was bifurcated to account for the area occupied by soil and pond ash for the determination of quantum of the embankment in two different items. The contractor urged that this was contrary to the technical specification (hereafter “TS”) clause 305.8; the National Highways Authority of India (hereafter “NHAI”) justified the EE’s interpretation. Since there have been different outcomes in all these appeals, and the impugned judgments in some of them have relied upon the judgment of the Division Bench of the Delhi High Court, in CA 4658/20231 (hereafter referred to as “the main judgment”) the facts and decisions, in that appeal would be alluded to.
2. NHAI awarded, to the contractor the work of construction of the Allahabad by-pass project in U.P. by agreement dated 02.06.2004. The project was completed. However, certain disputes arose inter se the parties with reference to different areas of the contract; these were referred to arbitration. NHAI has an inbuilt resolution mechanism, i.e., a Dispute Resolution Board (“DRB”) consisting of technical experts in the field, to which matters are first referred to.
Since the contractor was not satisfied with the opinion of the DRB, in terms of the agreement, it could and, did invoke the arbitration. The disputes in the present case culminated in a reference to the arbitration of three technical persons, who 1 Arising out of SLP No. 38162/2012, which was directed against the judgment of the Division Bench of the Delhi High Court dated 08.11.2012 in FAO (OS) No. 48/ 2012. after considering the rival viewpoints and the materials before them, made the award2. The award was unanimous on most questions while, on others, there was a dissenting view of one of the arbitrators.
3. The contractor, aggrieved by both the unanimous view and the majority view preferred objections under Section 34 of the Arbitration and Conciliation Act, 1996 (“the Act”). A learned single judge rejected the petition3. The single judge was of the considered opinion that as far as measurement aspects were concerned, the tribunal’s majority opinion reflected a plausible and reasonable view that did not call for interference: "26. As regards non-payment for, executed work of embankment which forms the subject matter of Disputes 2 and 4, this is purely a question of fact based on the measurement. There is no dispute in relation to the construction of the embankment that is covered under item 2. 02 (a) of the BOQ. In fact, NHAI has already paid HCC for the said construction. Clause 305.8 of the MORTHTS provides for measurement of the cross section of the embankment as one whole composite section and paid under item No.2.02(b). The decision of the majority members of the Arbitral Tribunal based on an analysis of the material before them was a possible view to take. Merely because another view as evidenced by the dissenting opinion is possible inter
