Delhi High Court: Petitioner, National Highways Authority of India filed the present petition challenging the award dated 26-06-2021 (‘impugned award’) passed by the Arbitral Tribunal (‘the Tribunal’). Chandra Dhari Singh, J.*, opined that the material on record clearly suggested that the Tribunal was apprised about the pending disputes between the parties, therefore, any certificate issued during the pendency of a dispute would not amount to Final Payment Certificate, and deciding the issues in favour of the respondent was a mistake of law. The Court opined that in the present case, petitioner had made out a case to prove that the impugned award suffered from illegality as it was against the public policy of this country. There were multi-fold reasons for the same, as firstly, the Tribunal erroneously directed payment of the due amount based on same, despite holding that the certificate dated 31-08-2014 was not a final payment certificate. Secondly, the non-adjudication of the contentions raised by petitioner was a clear violation of the principles of natural justice and thirdly, the contrary opinions given by the same Tribunal in similar factual scenario created a bizarre situation and the same could not be permitted under the law.
Thus, the Court set aside the impugned award dated 26-06-2021, since the same was in contravention of the settled position of law and, therefore, against the public policy of the country. Accordingly, the Court remanded the dispute back to the Arbitral Tribunal for fresh adjudication.
Background
Petitioner was an undertaking of the Government of India entrusted with the construction of national highways throughout the country. Petitioner invited bid for construction of various portions of the highways by the private contractors. In 2005, petitioner invited bids for construction of Sagar by-pass between 211 kms to 255 kms of NH-26 in Madhya Pradesh. Ssangyong Engineering & Construction Co. Ltd., the respondent was a company registered under the laws of Republic of Korea submitted its bid for the said contract and the same was awarded to them vide letter dated 30-12-2005.
Pursuant to completion of the tender process, various contracts were entered into between the parties. Further, by the contract package dated 12-04-2006 (‘the Contract’), various terms and conditions were agreed upon by the parties. To supervise the contract performance, an independent engineer firm was appointed by the parties. As per the agreement, the said engineer, a third party working independently was empowered to give decisions, opinions, or act which might affect the rights and obligations of the employer or the contractor.
As per clause 67 of the Conditions of Particular Application (‘COPA’), the parties agreed to refer to resolve the disputes through arbitration. As per the agreement between the parties, respondent was required to submit a draft final statement showing value of all the work done as per the Contract along with the amount which the company considered was due to them within a period of fifty-six days. In furtherance of the said obligation, vide letter dated 24-06-2014, respondent submitted the alleged final draft statement claiming certain amount.
Thereafter, numerous disputes arose between the parties regarding the completion of work and due payments, and the same was referred for arbitration. Meanwhile, the engineer issued a payment certificate dated 31-08-2014. Subsequently, petitioner raised various grievances regarding completion of work vide letter dated 15-10-2014 and sought reply from the respondent and the engineer. In response to the questions raised by the petitioner, the respondent wrote several letters assuring compliance of the observations made by the petitioner.
It was stated that during the pendency of the said disputes, respondent invoked arbitration on 07-09-2016 and accordingly the Tribunal was constituted for adjudication of the disputes wherein, the petitioner preferred a counter claim regarding recovery of excess payments made to respondent. The Tribunal passed an impugned award holding that the Payment Certificate dated 31-08-2014 should be considered as Final Statement and therefore, directed petitioner to make remaining payments to the respondent. Thus, petitioner filed the present petition.
The issue for consideration before the Court was whether the impugned award suffered from illegality and could be termed against the public policy of the country.
Analysis, Law, and Decision
The Court after perusal of the impugned award and various clauses of the agreement and opined that it was evident that to adjudicate upon the dispute, the Tribunal delved into the steps which were required to be taken by the parties. The Court observed that petitioner had contended that respondent was not entitled to claim any amount as per the Final Payment Certificate, since the engineer revised its earlier certification. Accordingly, the Engineer corrected the various quantities claimed by the respondent in the revised bill. It was further noticed by the petitioner that the price formula was incorrectly applied, pursuant to which the engineer carried out fresh calculation. Accordingly, vide letter dated 31-03-2017, the engineer issued the second revised final bill.
The Court opined that the perusal of the impugned award depicted that petitioner had been directed to pay the due amount solely on the ground that the certificate dated 31-08-2014 was the final statement. However, reference to the relevant provisions of the contract made it abundantly clear that the Contract was completely silent on the aspect of payment to be made based on the Final Statement. The Court opined that the Tribunal had wrongly rendered its decision on the issue of final payment statement whereby, it had interpreted Clause 60 of the COPA holding the certificate dated 31-08-2014 as the final statement and the same was allegedly not challenged by petitioner. The Court opined that in the impugned award, the Tribunal also categorically held that the certificate dated 31-08-2014 was not a Final Payment Certificate, and thereafter the Tribunal itself construed the same as the final statement. Therefore, it was amply clear that the Tribunal agreed with petitioner’s contention that certificate dated 31-08-2014 could not be termed as the final certificate of payment.
The Court opined that the material on record clearly suggested that the Tribunal was apprised about the pending disputes between the parties, therefore, any certificate issued during the pendency of a dispute would not amount to Final Payment Certificate, and deciding the issues in favour of the respondent was a mistake of law. Furthermore, despite holding that the certificate dated 31-08-2014 was not a Final Payment Certificate, the learned Tribunal erroneously directed the payment to be made to the respondent based on same, hence, contradicting itself and granting a relief not provided for under the contract.
Regarding petitioner’s contention that there was violation of the principles of natural justice, the Court relied on Vijay karia v. Prysmian Cavie Sistemi SRL, and opined that when no opportunity was given to deal with an argument which went to the root of the case and resulted in denial of justice to the prejudice of the party, the same would amount to violation of principle of natural justice. The Court opined that in the impugned award, even though the Tribunal appreciated the submissions advanced by petitioner regarding the discrepancies and fallacies in the certificate, the non-adjudication of the same had resulted in violation of rights of petitioner. Therefore, the Court deemed it appropriate to hold that the said situation was a clear violation of the principle of natural justice.
The Court further opined that non-adjudication of the dispute regarding the perversity in the statement/certificate dated 31-08-2014, tantamount to breach of public policy as the said issue was the bone of contention between both the parties and should have been adjudicated by the Tribunal. The Court opined that it was satisfied that the operative part of the impugned award suffered from illegality which went to the root of the matter and could not be termed trivial in any manner.
The Court opined that based on similar facts and circumstances, in another award by the same Tribunal, exactly contrary view was taken. In another award, the Tribunal held that petitioner’s claim was not time barred, whereas in the present case counterclaim of the petitioner was dismissed on issue of limitation. The Court opined that even though the Court did not want to comment upon the findings of the Tribunal in another award, the application of principles in the impugned award made it clear that the Tribunal had committed serious errors and wrongly interpreted the contract, thereby, committing clear violation of the fundamental policy of this country.
The Court opined that in the present case, petitioner had made out a case to prove that the impugned award suffered from illegality as the same was against the public policy of this country. There were multi-fold reasons for the same, as firstly, the Tribunal erroneously directed payment of the due amount on the basis of same despite holding that the certificate dated 31-08-2014 was not a final payment certificate. Secondly, the non-adjudication of the contentions raised by petitioner was a clear violation of the principles of natural justice and thirdly, the contrary opinions given by the same Tribunal in similar factual scenario created a bizarre situation and the same could not be permitted under the law.
Thus, the Court set aside the impugned award dated 26-06-2021, since the same was in contravention of the settled position of law and, therefore, against the public policy of the country. Accordingly, the Court remanded the dispute back to the Arbitral Tribunal for fresh adjudication.
[NHAI v. Ssangyong Engg. and Construction Co. Ltd., O.M.P. (COMM) 340 of 2021, decided on 08-04-2024]
*Judgment authored by- Justice Chandra Dhari Singh
Advocates who appeared in this case :
For the Petitioner: Ankur Mittal and Raushal Kumar, Advocates;
For the Respondent: Navin Kumar, Rashmeet Kaur, Aarti Mahto and Bhagya Ajith, Advocates
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