1. This appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short, the Act) is directed against the order dated 09.8.2021 in O.P.No.306 of 2015 passed under Section 34 of the Act.

2. We have heard the learned Senior Counsel appearing on behalf of the appellant.

3. The facts on record show that a contract was entered into between the appellant and the respondent, for construction of service road and foot path on LHS and RHS in Rajiv Gandhi Salai (IT Corridor), Chennai, Tamil Nadu. The relevant dates, which include the date of commencement of work and the period for its completion, have been indicated in paragraph 3 of the impugned order. It appears that after commencement of the work, since the appellant failed to show progress as was required and committed several breaches, the respondent terminated the contract. At the instance of the appellant, the matter was referred to a Three Member Arbitral Tribunal (for brevity, the Arbitral Tribunal) wherein the appellant sought to declare the termination notice dated 30.11.2010 to be arbitrary, illegal and premature and to direct the respondent to pay a sum of Rs.7.68 Crores together with interest at 12% from the date of filing of claim statement till the date of payment.

4. The appellant appeared to have completed only 17% of the work and from the inception, the work was slow and therefore, the contract was terminated by the respondent.

5. The parties led evidence before the Arbitral Tribunal and it was thoroughly examined by the Arbitral Tribunal and accordingly, an award came to be passed on 02.8.2014.

6. Aggrieved by the award passed by the Arbitral Tribunal, the appellant filed a petition before this Court under Section 34 of the Act. However, it came to be dismissed by the impugned order by a learned Single Judge of this Court, which resulted in filing of this appeal under Section 37 of the Act.

7. The first limb of argument of the learned Senior Counsel appearing for the appellant is with regard to the difference of amount of the remaining work, required to be paid to the respondent. It is her further submission that the award passed by both the Arbitral Tribunal as well as the order passed by the learned Single Judge were not in terms of the contract. It is argued that there was no clause in the contract, so as to recover the difference of amount of the remaining work, if assigned to other party. According to her, the amount was not determined by taking into consideration the value of the remaining work in view of the fact that the total contract amount was for Rs.31,75,30,560/-, out of which, the appellant completed work for Rs.2.2 Crores and the remaining 83% of the work could not be given on the value of Rs.45.33 crores. Rather, it could have been only on the balance amount of Rs.29.55 Crores (Rs.31.75 Crores – Rs.2.20 Crores). Accordingly, a challenge to recovery of the difference of the amount of the remaining work has been made.

8. The learned Senior Counsel further submits that this is mainly on the ground that without calling for bids with competitive rates by evolving a transparent procedure of the bids, the contract was given to a company namely M/s.SPL Infrastructure Private Limited (for brevity, M/s.SPL) and without examining the fact that the contract was on an inflated cost and not on realistic costs, the award was passed. It is further submitted that the Arbitral Tribunal could not have awarded the difference of amount by taking it on a sum of Rs.45.33 Crores, for which, the remaining work was assigned to the said M/s.SPL. The learned Senior Counsel appearing for the appellant has sought to set side the impugned order.

9. To examine the first limb of the argument raised before us, we have carefully gone through the records.

10. The facts not in dispute are regarding award of contract to the appellant for construction of service road and foot path on LHS and RHS in Rajiv Gandhi Salai (IT Corridor), Chennai.

11. The date of commencement of work was 12.4.2010 with the completion period of 12 months. Accordingly, the contractual date for completion was 11.4.2011. The total cost of the project was Rs.31,75,30,560/-. The respondent terminated the contract on slow progress and on account of several breaches committed by the appellant. The appellant raised a dispute and pursuant to that, the matter was referred to the Arbitral Tribunal.

12. The only issue raised before us is with regard to recovery of difference of amount of the remaining work without the clause of risk and cost and without adequate assessment as to whether the amount, for which, the remaining part of the work was given to the said M/s.SPL was proper or not.

13. To examine the issue, we would like to refer to Clause 45.1 of the contract, which is quoted as hereunder :

“For Construction/Impovement Works

a. In case of non-completion of the entire construction/improvement works within the Intended Completion Date as indicated in the Contract Data, the Contractor shall pay liquidated damages to the Employer at the rate per day stated in the Contract Data for each day that the actual Completion Date is later than the Intended Completion Date. The liquidated damages amount shall be deducted from payments due to the Contractor and shall not be refundable. The total amount of liquidated damages shall not exceed the amount defined in the Contract Data.

b. Time is the essence of the Contract and payment or deduction of penalty or liquidated damages shall not relieve the Contractor from his obligation to complete the works as per agreed Construction Program and Milestones or from any other of the Contractor’s obligations and liabilities under the Contract or the Employer’s right to invoke the Performance Security.

c. If the Intended Completion Date is extended after liquidated damages have been paid, the Engineer shall correct any overpayment of liquidated damages have been paid, the Engineer shall corret any overpayment of liquidated damages by the Contractor by adjusting the next payment certificate. The Contractor shall be paid interest on the over payment calculated from the date of payment to the date of repayment at the ate of 8% p.a.”

14. Clause (b) of the above extracted portion states that time was the essence of contract and payment or deduction of penalty or liquidated damages should not relieve the contractor from his obligation to complete the works as per agreed construction program and milestones or from any other of the contractor’s obligations and liabilities under the Contract or the employer’s right to invoke the performance security.

15. In that regard, Clause 45.2 of the conditions of contract, which is also relevant, has been taken into consideration by the learned Single Judge. Clause 45.2 of the conditions of contract is quoted hereunder for ready reference :

“(a). In case the Contractor has not rectified or addressed deficiencies as directed by the Engineer at the time of Site Inspections during defects liability period, the Employer retains the right to get works done through a third party and debit the cost and expenses incurred to the Contractor. Alternatively, the Engineer may recommend invoking of Performance Security in part of full, as the case may be. In case, the Contractor still fails to rectify or address deficiencies even after Invoking Performance Security, as described earlier, then the Employer shall treat the event as fundamental breach of Contract in terms of Clause 54 of Conditions of Contract.”

16. The last paragraph of Clause 54.2 of the conditions of contract has been specifically referred to by the learned Single Judge wherein it has been agreed by the parties that in case the contractor has not rectified or addressed deficiencies as directed by the Engineer at the time of site inspections during defects liability period, the employer retains the right to get works done through a third party and debit the cost and expenses incurred to the contractor. This Clause has been referred to show that the appellant agreed that in case of default on their part in carrying out the work as per the programme, the employer would be entitled to employ and pay others to carry out the work and, additional cost, if any, will be recovered from the defaulting contractor.

17. The last paragraph of Clause 54.2 of the conditions of contract reads as follows :

“In case of default on the part of the Contractor in carrying out the work as per programme, the employer is entitled to employ and pay others to carry out the work. The additional cost if any will be recovered from the defaulting contractor.”

18. After making a reference to Clause 54.2 of the conditions of contract, the learned Single Judge came to the conclusion that the employer would be entitled to employ and pay others to carry out the work and accordingly, the additional sum incurred for completion of the remaining 83% was sought to be recovered from the appellant on difference of amount. In view of the above, we are unable to accept the first limb of argument that there was no contract between the parties for risk and cost.

19. The second limb of argument is that inflated cost was taken by the respondent for the remaining work and that too, without having a transparent bidding process.

20. We find that the learned Single Judge, after going through the award, came to the conclusion that the contract was awarded to the other party after calling for bids wherein eight bidders participated and out of them, five were found to be eligible and the bid was awarded to the successful bidder by way of a transparent bidding process at competitive rates. The Arbitral Tribunal meticulously considered all the issues, which included the method adopted by the respondent employer in calling for the bids and awarding the contract.

21. For ready reference, paragraph 13.2 of the award is quoted as hereunder :

“13.2 XI. Whether the balance works were awarded to M/s.SPL Infrastructure Private Limited at inflated cost without calling for competitive bids.

A. Claimant’s submission :

(i) Claimant stated that the process of retendering was not transparent and the respondent had straightaway awarded the balance works to M/s.SPL Infrastructure without calling for competitive bids. The claimant also stated that balance works were retendered at inflated cost.

(ii) The claimant further stated that out of the total value of Rs.31.75 Crores work entrusted to them, the claimant had executed works to the value of Rs.2.20 Crores and so only the balance value of Rs.29.55 Crores should have been retendered. Whereas the value of works entrusted to the other contractor is Rs.44.49 Crores. This entrustment is at an inflated cost.

B. Respondent’s submission :

(i) Respondent stated that the claimant has completed 17% of LHS works and totally has executed 8.5% of only and so the balance works to be retendered would be 91.5% of the indicative value of works entrusted to the claimant i.e Rs.45.83 Crores (C1).

(ii) After termination of contract awarded to the claimant, after taking into consideration of the works executed by the claimant, the respondent invited tenders for the balance works through competitive bidding in a transparent manner, following the procedure. Eight bidders have participated, out of which, five were qualified. The bid was awarded to the successful bidder. The relevant documents pertaining to the bidding process and selection of the successful bidder were placed before the Tribunal for perusal and substantiated that the allegations are contrary to the facts.

C. Evidence placed before the Tribunal reveals the following :

During the proceedings as per the directions of the Tribunal, the respondent presented the documents pertaining to the retender for balance works. On perusal, the Tribunal found that the submissions made by the respondent were true and that the allegations made by the claimant are false. The Tribunal observes that on the face of it, it could be seen that the claimant at one place has stated that the works were awarded to the other contractor (M/s.SPL Infrastructure) without calling for competitive bids and in other place contradicting his own stand, stated that balance works were retendered at inflated cost. The allegations made by the claimant have no merits and hence, these are rejected by the Tribunal.”

22. The finding rendered by the Arbitral Tribunal shows the transparent bidding process by the employer after taking into consideration the competitive rates. Therefore, we are unable to accept the second limb of argument of the learned Senior Counsel appearing for the appellant. No evidence was produced by the appellant to show that the award of remaining work was on a higher cost or inflated cost. In the absence of any evidence, the mere submissions with reference to the total cost, on which the contract was awarded and the subsequent award of contract to the said M/s.SPL to complete the remaining work cannot be taken to be without basis to hold that the subsequent award was on inflated cost. We do not find any ground for interference in this appeal under Section 37 of the Act.

“11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of . As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of public policy, in turn, includes a violation of the fundamental policy of law, a violation of the interest of , conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the ‘fundamental policy of law’ would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness. Furthermore, ‘patent illegality’ itself has been held to mean contravention of the substantive law of , contravention of the 1996 Act, and contravention of the terms of the contract.

12. It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b)(ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible view based on facts. (See Associate Builders v. DDA, (2015) 3 SCC 49). Also see ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705; Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445; and McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181.

13. It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

14. As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.” [Emphasis Added]

24. The Apex Court in the recent judgment in UHL Power Company Limited v. State of Himachal Pradesh, 2022 SCC OnLine SC 19 after referring to the judgment in MMTC Ltd. (supra) and a series of earlier decisions on the scope of interference under Section 37 of the Act, held as under:

“16. As it is, the jurisdiction conferred on Courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an Appellate Court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed…

‘2. The contours of the power of the Court under Section 34 of the Act are too well established to require any reiteration. Even a bare reading of Section 34 of the Act indicates the highly constricted power of the civil court to interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the arbitrator and the role of the court should be restricted to the bare minimum. Interference will be justified only in cases of commission of misconduct by the arbitrator which can find manifestation in different forms including exercise of legal perversity by the arbitrator.’

18. It has also been held time and again by this Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned Arbitrator proceeds to accept one interpretation as against the other. In Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20 SCC 1, the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been highlighted thus:

’24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the Court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the Courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated.’

19. In Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam Limited, (2019) 7 SCC 236, adverting to the previous decisions of this Court in McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181, and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306, wherein it has been observed that an Arbitral Tribunal must decide in accordance with the terms of the contract, but if a term of the contract has been construed in a reasonable manner, then the award ought not to be set aside on this ground, it has been held thus:

‘9.1 …..It is further observed and held that construction of the terms of a contract is primarily for an Arbitrator to decide unless the Arbitrator construes the contract in such a way that it could be said to be something that no fair-minded or reasonable person could do. It is further observed by this Court in the aforesaid decision in paragraph 33 that when a court is applying the ‘public policy’ test to an arbitration award, it does not act as a court of appeal and consequently errors of fact cannot be corrected. A possible view by the Arbitrator on facts has necessarily to pass muster as the Arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon when he delivers his arbitral award. It is further observed that thus an award based on little evidence or on evidence which does not measure up in quality to a trained legal mind would not be held to be invalid on this score.

20. In Dyna Technologies (P) Ltd. (supra), the view taken above has been reiterated in the following words:

’25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.'” [Emphasis Added]

25. In view of the judgments referred to above, we find very limited jurisdiction with us to cause interference in the order passed by the learned Single Judge under Section 37 of the Act. The challenge to the order is not on any of the grounds on which interference is permitted by the Apex Court, rather on facts and in reference to the interpretation of the agreement taken by the Arbitral Tribunal. We find no reason to interfere with the concurrent findings on fact. In view of the above, we find no case for exercise of power under Section 37 of the Act to cause interference with the award passed under Section 34 of the Act.

26. For the foregoing reasons, the appeal fails and the same is dismissed. Consequently, the connected CMP is also dismissed.

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