The Delhi High Court expounded that the Court cannot re-appreciate the evidence and re-adjudicate the disputes. The award can only be set aside if it is in conflict with the public police of India or vitiated by patent illegality.
In the present case, the Bench noted that the letters of the Respondent did not remotely suggest that NHAI was in material default of the Concession Agreement. It was noted that the question of compensation was dependent upon whether NHAI was in material default or breach of the Concession Agreement.
In this regard, the Court noted that the Arbitral Tribunal was required to adjudicate on whether NHAI was in material breach and determine the direct costs suffered by the Respondent as consequence of such default. However, the Tribunal did not adjudicate on the question of material breach at all.
The High Court ruled that the Tribunal had committed an error by not addressing the real dispute which was whether NHAI was in material default of the Concession Agreement or not. Therefore, it was held that the award is in fact vitiated by patent illegality and hence, must be set aside. It was noted that even though the grounds for setting aside of award are limited, however, the Court’s examination of such grounds cannot be superficial.
Brief Facts:
The present appeal has been filed by the Appellant under Section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as “A&C Act”) against the order of the High Court vide which Section 34 application of the Appellant was rejected.
Brief Background:
NHAI was entrusted with the development of the National Highway No. 15 for which it invited proposals from the bidders. A letter of acceptance was issued to the consortium constituted by the IRB Infrastructure Developers Ltd. And Modern Road Makers Pvt. Ltd.
Thereafter, the consortium promoted the Respondent a special purpose vehicle for executing the project and hence, a Concession Agreement was entered into by the parties.
The construction of the project got delayed and the Respondent argued that the delay was attributable to the NHAI and hence, it sought compensation and extension of the concession period. Thereafter, arbitration was invoked and an award was passed in favor of the Respondent.
Contentions of the Appellant:
It was argued that the Tribunal did not return any independent finding that NHAI was responsible for the delay in completion of the construction. Further, compensation could only be granted if NHAI was found to be in material default of the Concession Agreement.
Further, it was argued that the Tribunal failed to appreciate that the plea of the Respondent that Supplementary Agreement was signed after coercion was raised after 4 years without any justification.
Contentions of the Respondent:
It was argued that the Court cannot re-appreciate the evidence and substitute its interpretation in place of the Tribunal’s interpretation. Further, the Court cannot interfere with the said conclusion of the Arbitral Tribunal under Section 37 of the A&C Act.
Observations of the Court:
It was observed that the scope if interference under Sections 34 and 37 is well established now. Under Section 34, an award can only be set aside based on grounds mentioned under Section 34(2) or Section 34(2A). Further, interference under Section 37 cannot traverse beyond the scope as set out in Section 34 of the A&C Act.
It was expounded that the Court cannot re-appreciate the evidence and re-adjudicate the disputes. The award can only be set aside if it is in conflict with the public police of India or vitiated by patent illegality.
In the present case, the Bench noted that it could not interfere with the findings of the Tribunal regarding the extension of the timeline as the Tribunal was of the opinion that there was sufficient material and evidence to prove the same.
However, it was noted that the letters did not remotely suggest that NHAI was in material default of the Concession Agreement. It was noted that the question of compensation was dependent upon whether NHAI was in material default or breach of the Concession Agreement.
In this regard, the Court noted that the Arbitral Tribunal was required to adjudicate on whether NHAI was in material breach and determine the direct costs suffered by the Respondent as consequence of such default. However, the Tribunal did not adjudicate on the question of material breach at all.
The High Court ruled that the Tribunal had committed an error by not addressing the real dispute which was whether NHAI was in material default of the Concession Agreement or not. Therefore, it was held that the award is in fact vitiated by patent illegality and hence, must be set aside. It was noted that even though the grounds for setting aside of award are limited, however, the Court’s examination of such grounds cannot be superficial.
Regarding the finding that the Supplementary Agreement was signed by the Respondent under coercion, the High Court ruled that such plea should not have been accepted without any cogent and credible material. It was further noted that the averment of signing the agreement under duress was raised at a belated stage , without explaining the cause for delay and therefore, the Tribunal should not have accepted such plea.
The Bench opined that there would be no interference if the Tribunal interprets the contract in a reasonable manner, however, the award can be impeached under Section 34 if the interpretation is unreasonable and no fair person could accept such an interpretation.
The decision of the Court:
Based on the aforementioned findings, the Delhi High Court accordingly set aside the award and allowed the appeal.
Case Title: National Highways Authority of India v. IRB Pathankhot Amritsar Toll Road Ltd.
Case No.: FAO(OS)COMM 129/2022
Coram: Hon’ble Justice Vibhu Bakhru, Hon’ble Justice Amit Mahajan
Advocates for Appellant: Advs. Mr. A.K. Verma, Mr. Nikhil Mehta, Mr. Vinod Mehta, Mr. Varun Sharma
Advocates for Respondent: Advs. Mr. Saurabh Kirpal, Dr. Rajeshwar Singh, Mr. Saket Sikri, Mr. Apoorv Agarwal, Mr. Sarthak Sachdeva, Ms. T.R. Daulat, Mr. Mohnish Patkar, Mr. Hemant Sharma, Ms. Shabhavi Singh
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