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IN THE HIGH COURT OF JUDICATURE AT BOMBAY

CIVIL APPELLATE JURISDICTION

ARBITRATION APPEAL NO. 9 OF 2021

Pratibha Industries Limited (In Liquidation) Thr its

Liquidator, Mr. Anil Mehta

…Appellant

Versus

Navi Mumbai Municipal Corporation, Through Its

Executive Engineer (Morbe)

…Respondent

Ms. Ridhi Nyati, a/w Kunal Naik, Vanshika Jain, i/b Ashwin

Shanker, for the Appellant.

Mr. Tejesh Dande, a/w Bharat Gadhvi, Sarvesh Deshpande,

Mansi Dande, Trusha Shah, for Respondent.

CORAM : SOMASEKHAR SUNDARESAN, J.

DATE : FEBRUARY 6, 2026

JUDGEMENT:

Context and Factual Background:

1. This is an Appeal under Section 37 of the Arbitration and

Conciliation Act, 1996 (“the Act”) impugning an order dated December

10, 2020 (“Impugned Judgement”) passed by the Learned Principal

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AARTI

GAJANAN

PALKAR

Digitally

signed by

AARTI

GAJANAN

PALKAR

Date:

2026.02.06

14:35:54

+0530

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District Judge, Thane, setting aside the arbitral award dated November

05, 2015 passed by a Learned Sole Arbitrator (“Arbitral Award”). The

arbitral award partly allowed certain claims of the Appellant, Pratibha

Industries Limited, Mumbai (in liquidation) (“Pratibha”) in its claims

against the Respondent, Navi Mumbai Municipal Corpora tion

(“NMMC”).

2. The disputes between the parties relate to a project awarded

by NMMC to Pratibha by a Contract dated April 04, 2005 (“Contract”)

entailing laying of pipelines in Navi Mumbai under a deferred payment

scheme (“Project”). All payments for the Project were required to be

made after completion of the Project. The cost of the Project was

approximately Rs. 200 crores. Right of way over land on which pipelines

had to be laid,– for over a 30-kilometer stretch – was necessary, but the

last parcel of land was actually received after approximately two years,

while the Project was to be completed within one year.

3. There is no dispute between the parties on the quantification

of the claimed amounts. Suffice it to say that Pratibha had claimed

Rs.~20.8 crores towards increase in financing costs on account of

delayed release of instalment payments, but was awarded only Rs.14.68

crores. Pratibha also made a claim for price escalation during the

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extended contract and also for the cost of extended stay for the Project

in the sum of Rs.8.56 crores and Rs.7.27 crores respectively, but was

awarded sums of Rs.3.07 crores and Rs.3.11 crores respectively. The

length of the pipeline was increased, and Pratibha made a claim for such

increase in length in the sum of Rs.1.74 crores, which was disallowed.

Finally, interest had been claimed until the date of the award, in the

sum of Rs.15.51 crores but the Learned Arbitrator granted interest

which amounted to Rs.5.41 crores. No costs were awarded in the

Arbitral Award. The aggregate amount awarded by the Learned Arbitral

Tribunal was in the sum of Rs.26.29 crores along with interest at the

rate of 18% per annum from the date of the Arbitral Award until

realisation.

Contentions of the Parties:

4. I have heard Ms. Ridhi Nyati, Learned Advocate for Pratibha

and Mr. Tejesh Dande, Learned Advocate for NMMC and with their

assistance, examined the record.

5. It is seen from the material on record that the quantification

of the claims is not subject matter of dispute between the parties. The

core question that arises for consideration in the adjudication of this

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Appeal is whether the Section 34 Court was right in its intervention,

quashing and setting aside the Arbitral Award.

6. Ms. Nyati would contend that the Section 34 Court has

adjudicated the facts and the evidence afresh, re-appreciating the

evidence to effectively carry out fresh trial. In other words, the

contention is that the Section 34 Court has not been mindful of the

scope of jurisdiction under Section 34 of the Act and has instead chosen

to conduct the proceedings as if it were a first appeal with full

consideration of facts as well as the Contract involved in the matter. Ms.

Nyati would contend that the Learned Arbitral Tribunal had interpreted

the Contract between the parties to return an eminently plausible and

reasonable view, and that the Section 34 Court ought not to have

substituted such a plausible view with another view that was considered

more plausible and more appropriate by the Section 34 Court.

7. Ms. Nyati would also contend that the Section 34 Court, in

adopting the aforesaid approach, has gone so far as to rule on the entire

material on record, even relying upon points that had never been

pressed into service by NMMC either in the arbitral proceedings or in

the Section 34 proceedings. Ms. Nyati would submit that the Impugned

Judgement is also perverse because the Section 34 Court alluded to

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evidence which does not exist. She would further submit that the

Impugned Judgement is also inherently contradictory in holding that

there is no ambiguity in the contractual terms even while noting that

there were two competing sets of conditions, with the Section 34 Court

choosing to reconcile such competing sets of conditions in a manner

that appealed more to the Section 34 Court.

8. Mr. Tejesh Dande on behalf of NMMC would counter the

foregoing submissions to contend that the Section 34 Court has been

mindful of the scope of review available under Section 34 of the Act and

has arrived at a considered view that the Arbitral Award was against the

fundamental policy of Indian law. He would point to Paragraphs 20 to

26 of the Impugned Judgement to justify the approach of the Section 34

Court and contend that the Learned Arbitral Tribunal had completely

ignored the priority and relevance of the constituent documents

constituting the Contract between the parties. Therefore, since the

Arbitral Award had applied incorrect parameters of assigning priorities

to multiple documents constituting the Contract, the Section 34,

according to Mr. Dande, has rightly interfered with findings that were

contrary to contract.

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9. Mr. Dande would submit that the Learned Arbitral Tr ibunal

had erred in appreciating the exact controversy between the parties in

connection with breach of the escrow arrangement put in place and it

was the Section 34 Court that has correctly interfered on this count. He

would submit that it was Pratibha's obligation to pursue and obtain all

necessary permissions to secure the right of way and the General

Conditions of Contract (“GCC”) had specifically stipulated that no

compensation can be granted for delay in obtaining of sanctions. Since

the Learned Arbitral Tribunal has wrongly interpreted this issue, Mr.

Dande would submit, the Section 34 Court was entitled to interfere and

set aside the arbitral award.

10. Mr. Dande would also submit that the grant of a claim for

price escalation was also wrongly granted by the Learned Arbitral

Tribunal. Pratibha had sought extension of time for completion of

milestones and each time NMMC granted such extension, it imposed a

categorical condition that the extension was granted without any

compensation or cost escalation. Therefore, the Learned Arbitral

Tribunal was perverse in allowing claims in this regard.

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Core Issues:-

11. Having heard the parties, it is evident to me that the core

issue that needs to be dealt with for adjudication of this Appeal is

whether the Learned Arbitral Tribunal had erred in its interpretation of

the interplay between the terms of the Fédération Internationale Des

Ingénieurs-Conseils (“FIDIC Conditions”) and the GCC, which form part

of the tender document (“Tender Terms”). Should a conflict arise

between the FIDIC Conditions and the Tender Terms, which one would

prevail, is the question that arose. The Learned Arbitral Tribunal held

that the Contract between the parties is to be interpreted in a manner

that the FIDIC conditions and the Escrow Agreement would override

the Tender Terms where a conflict emerged, whereas the Section 34

Court held that the Tender Terms would override the FIDIC conditions

and the Escrow Agreement, in its interpretation of the precedence and

priority in the contract-forming instruments.

12. The implications for the delay in obtaining the right of way

for timely completion of the Project is the other key broad issue that

falls for consideration. The Arbitral Award returns a finding that NMMC

was entirely responsible for providing the right of way at its own cost

and time, and in the event of delay, Pratibha would be entitled to time

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extension and cost compensation for such delay. The Section 34 Court

held that NMMC was only required to make the applications and pay

the requisite fees towards the right of way, but securing the right of way

was entirely Pratibha's obligation with cost implications for its own

account in the event of delay. Therefore, Section 34 Court held that

while NMMC was entitled to grant extension of time to Pratibha, the

Arbitral Tribunal ought not to have awarded any costs or damages in

favour of Pratibha.

Scope of Review:-

13. The scope of review of Section 34 Court is now quite clear

and has been laid down in multiple judgements of the Supreme Court

including Dyna Technologies

1

, Associate Builders

2

, Ssyangyong

3

,

Konkan Railway

4

and OPG Power

5

. The arbitral award having been

passed on November 5, 2015, there can be no quarrel that the Act as

amended in 2015 would apply in the instant case.

14. The principles of law laid down in Ssyangyong, to the extent

it overwrote the principles declared earlier in Associate Builders would

1 Dyna Technologies Private Limited v. Crompton Greaves Ltd – (2019) 20 SCC 1

2 Associate Builders vs. Delhi Development Authority – (2015) 3 SCC 49

3 Ssangyong Engineering & Construction Co. Ltd. v. National Highways Authority of

India – (2019) 15 SCC 131

4 Konkan Railways v. Chenab Bridge Project Undertaking – 2023 INSC 742

5 OPG Power vs. Enoxio – (2025) 2 SCC 417

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apply. In a nutshell, it must be remembered that the Section 34 Court

must not lightly interfere with arbitral awards. The Section 34

jurisdiction lends itself to disturbing arbitral awards strictly within the

parameters legislated within Section 34 of the Act. It cannot be

forgotten that arbitral tribunals are the master of the evidence and

therefore, the best determinants of the quality and the quantity of the

evidence. Indeed, it is quite right that if the findings of the arbitral

tribunal are plausible, the Section 34 Court ought not to re-appreciate

the evidence, re-interpret the contract and return its own view on what

ought to have been the arbitrator's view so long as the arbitrator's view

is a plausible one.

15. For the Section 34 Court to interfere with an arbitral award, it

must come to a view that the arbitral award suffers from unpardonable

perversity in a manner that cuts to the root of the matter with no

possibility of another view.

16. To avoid prolixity, each of the aforesaid judgements need not

be extracted from, but the following extract from Dyna Technologies

would suffice:

“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 in-

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terpreted 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 possibil-

ity 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 un-

der the law. If the courts were to interfere with the arbitral award in

the usual course on factual aspects, then the commercial wisdom be-

hind opting for alternate dispute resolution would stand frustrated.

25. Moreover, umpteen number of judgments of this Court have cat-

egorically held that the courts should not interfere with an award

merely because an alternative view on facts and interpretation of con-

tract 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 unpardon-

able under Section 34 of the Arbitration Act .”

[Emphasis Supplied]

17. In Dyna Technologies, the Supreme Court also ruled on the

scope of jurisdiction of the Section 37 Court to remind that the

jurisdiction of Section 37 Court is akin to the jurisdiction of Section 34

Court. The scope of interference by the Section 37 Court in examining

an order under Section 34 would be to see whether the review of the

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Arbitral Award was effected in the manner stipulated iun Section 34 of

the Act. If the Section 34 Court did not discharge its powers consistent

with its jurisdiction, the Section 37 Court would play the role the Section

34 Court ought to have played. If the Section 34 Court had exercised its

jurisdiction accurately, the Section 37 Court ought not to interfere with

the Section 34 Court’s view.

18. Specifically, dealing with the facets of interpretation of

contract, in Konkan Railway the Supreme Court ruled thus:

14. Analysis: At the outset, we may state that the jurisdiction of the Court under Sec -

tion 37 of the Act, as clarified by this Court in MMTC Ltd. v. Vedanta Ltd., is

akin to the jurisdiction of the court under Section 34 of the Act . Scope of inter-

ference by a court in an appeal under Section 37 of the Act , in examining an

order, setting aside or refusing to set aside an award, is restricted and subject

to the same grounds as the challenge under Section 34 of the Act .

[Emphasis Supplied]

19. Specifically, on the subject of re-interpretation of contracts,

the Supreme Court has cautioned that reinterpretation to arrive at an

alternate view is impermissible. This ought to be remembered both by

the Section 34 Court and the Section 37 Court.

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20. The upshot is that the Supreme Court has specifically

cautioned time and again against re-interpreting a contract on the

ground that a different alternate view was felt to be more appealing than

how the arbitral tribunal interpreted it.

Analysis and Findings:-

21. Against this aforesaid backdrop, it would be necessary for

this Court to examine whether the Section 34 Court had exercised its

jurisdiction consistent with the scope of review contemplated under

Section 34 of the Act.

22. To begin with, it is apparent, even from a plain reading of the

submissions made by NMMC in defence of the Impugned Judgement,

that NMMC's robust defence is entirely based on interpretation of the

evidence, finding fault with the Learned Arbitral Tri bunal's

interpretation. It is important to examine the issue of the conflict

between the FIDIC Conditions and the Tender Terms. The Impugned

Judgement indeed recognizes that there was an ambiguity and conflict

between the FIDIC Conditions and the Tender Terms. Thereafter, the

Section 34 Court has proceeded to delve deep into the merits to return a

finding as to what was a more appropriate interpretation for resolving

such conflict.

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23. The Project, which entailed a laying of a pipeline passing

through land belonging to various third parties, including authorities

such as the Railways. This necessitated obtaining permission for right of

way from such parties to lay the pipelines in their land. At the time of

the Tender, since the right of way was not readily available for the entire

stretch of the Project and the Project was covered by a deferred payment

scheme, financial closure was a challenge. The contractor’s payments

would not be made from time to time, but only after due completion of

the Project of pre-agreed milestones. Therefore, the contractor, had to

achieve financial closure for the Project in advance on its own. In other

words, there could have been no reliance on any cash flows emanating

from NMMC (i.e. the client) for Pratibha (i.e. the contractor) to manage

its cash flows, although the Project is the client’s project and never the

contractor’s project. Therefore, even before the Contract was awarded,

the uncertainty as to how this facet would be handled came up for

discussion in pre-bid meetings. It was pointed out that the Tender

Terms led to financial uncertainty and therefore in discussions between

NMMC and the bidders for the Project, it was clarified that although the

tender stipulated that NMMC would provide the right of way and that

there shall be only a time extension without compensation for delay,

FIDIC Conditions would be adopted. The record bears out the fact that

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the parties had agreed in the pre-bid stage itself that to make the Project

bankable it would be appropriate to adopt the FIDIC Conditions.

24. Once the evidence on record reasonably and plausibly

pointed to the adoption of FIDIC Conditions, which provide that the

contractor would be entitled to compensation on account of delay in

right of way being made available, the Arbitral Award cannot be faulted

in its analysis of the consequences of delay. It is also apparent that the

financial uncertainty in sequencing and timing of release of payments

under the deferred payment scheme had to be addressed for which the

escrow arrangement was also contracted although never envisaged in

the original Tender Terms.

25. It is in this context, that the submissions made by Ms. Nyati

on behalf of Pratibha are quite accurate inasmuch as the Statement of

Defence on behalf of NMMC specifically pleaded that NMMC had

allowed suggestions from the bidders in relation to the conditions of

contract at the pre-bidding stage. It is clear that based on suggestions

from bidders, NMMC

“had agreed to adopt FIDIC”. In view of such

pleading by NMMC, it would follow that to the extent the FIDIC

Conditions entailed any conflict with the Tender Terms, the FIDIC

Conditions would apply. Indeed, even while the Tender Terms were not

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wholly substituted, lock stock and barrel with the FIDIC Conditions,

what was certainly achieved is that wherever there was a conflict, it

would be the FIDIC Conditionsthat would prevail.

26. Therefore, the contract-forming provisions governing the

relationship between the parties was an amalgam of the Tender Terms

and the FIDIC Conditions, and to the extent there was any conflict

between the two, it would not be unreasonable to conclude that the

FIDIC Conditions would govern the area of conflict between the two

instruments. Under the FIDIC Conditions, the delay in providing right

of way would lead to an extension of time coupled with compensation

whereas under the Tender Terms the delay in right of way would lead to

only extension of time without compensation.

27. Likewise, if the FIDIC Conditions were to be applied, while

Pratibha was to obtain permits and licences in relation to the design,

execution and completion of the Project, it would follow that the risk

and reward of the permissions being secured would lie in the domain of

NMMC.

28. Indeed, as Ms. Nyati would rightly point out, there also are

terms contained in the Tender Terms which would not stand displaced

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by the FIDIC Conditions – for example, the dispute resolution

procedure or the period of limitation for raising claims.

29. It cannot be forgotten that the discussion and adoption of the

FIDIC Conditions in the pre-bid meetings was essentially centered

around the financial uncertainty that emerged from the Project being

implemented on a deferred payment basis. Indeed, under Section 28(3)

of the Act, the Arbitral Tribunal must rule not only in accordance with

the terms of the contract, but also in accordance with customs and trade

usages applicable to the transactions in question. It goes without saying

that against this backdrop, when parties applied their mind to the

problems that would emerge in achieving financial closure, and for

timely execution of the contract, adopted the FIDIC Conditions, the

view returned by the Learned Arbitral Tribunal cannot be considered to

be an unreasonable, arbitrary or perverse view. Therefore, interference

with the Arbitral Award on this count does not appear to be a correct,

specifically bearing in mind the scope of review envisaged under Section

34 of the Act.

30. As regards the escrow agreement, there is again a conflict and

ambiguity that has emerged in the contract-forming documentation

between the parties. Under the original tender, the commencement date

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of the Project would have been May 20, 2006 whereas under the escrow

agreement the commencement date was July 14, 2006. The escrow

agreement was in fact executed between Pratibha and NMMC and State

Bank of Mysore on June 14, 2006, well after the date of commencement

envisaged under the Tender Terms. Under the escrow agreement, the

pleaded case of NMMC acknowledges that the commencemen t date

would be the date following 60 days from the date of issuance of the

letter of acceptance and therefore, the scheduled commencement date

for the Project would be July 14, 2006. While this is an admitted

position in the statement of defence of NMMC, the Impug ned

Judgement has taken a view contrary to the pleadings of NMMC.

31. Reference may be made to Paragraph 4 in the tender notice

pursuant to which the Project was awarded. In this paragraph, it was

explicitly envisaged that a pre-bid conference of all interested bidders

would be held. The bidders would be allowed to seek clarifications and

suggest “

suitable modifications in specifications, conditions of contract,

etc.

”. This paragraph squarely provided that queries about the Project

would need to be communicated in writing well prior to the conduct of

the pre-bid conference and such suggestions which are accepted by

NMMC would be communicated to all. Only the changes that are so

communicated would bind NMMC and the bidders.

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32. It is in this backdrop, that one must note that the Tender

Terms explicitly provide that the contract-forming documentation

would include the tender notice and instructions given to the bidders.

Paragraph 4 is an integral part of the tender notice, and the pre-bid

discussions, which led to the adoption of the FIDIC Conditions, which

then become a part of the Tender Terms. The minutes of the meeting

which contained the pre-bid clarifications were communicated by

NMMC by a letter dated January 30, 2006, also calling upon the bidders

to duly sign the same in acceptance. Specifically, in the pre-bid meeting,

it was agreed between the parties that FIDIC Conditions would be

adopted and the parties would need to execute the FIDIC Conditions

and return the same to NMMC.

33. In response to the FIDIC suggestion from another bid der

namely, IVRCL Infrastructure and Projects Ltd. (“IVRCL”), the decision

communicated by NMMC stated, “

We agree to adopt FIDIC conditions.

However, the agency has to submit FIDIC document duly signed and

accepted

”.

34. Likewise, in response to a query raised by Pratibha ,

suggesting that NMMC must pool all its revenues into an escrow

account with a designated bank and release payments to the contractor

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through that account, and suggested that a tripartite agreement for the

purpose, NMMC provided its decision stating that “

Escrow Account

Procedure can be considered

”. Other bidders too had raised queries in

relation to escrow procedures for the milestone-based payments to be

released to the contractor and NMMC has replied that “

Deposit can be

escrowed

”. The execution of a signed copy of the pre-bid minutes of

meeting and of the FIDIC conditions is a matter of record. The actual

execution of an escrow agreement is also a matter of record.

35. When these terms are explicitly executed as provisions

governing the parties, based on the decision taken even prior to the

award of the project, it would be completely plausible that these

additional measures adopted by the parties would form part of Item

No.3 of Clause 3(e) of the Tender Terms in the “

order of precedence in

case of discrepancies

” stipulated in the GCC.

36. The order of precedence in the GCC places the tender notice

and bidder instructions at Item 3 of Clause 3(e); special conditions of

contract at Item 4 and the GCC at Item 5. The issue before the Arbitral

Tribunal was to examine whether the FIDIC Conditions cou ld

reasonably be regarded as forming part of the tender notice and

instructions given to bidders.

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37. Since the decision to adopt FIDIC Conditions, and the

decision to adopt an escrow mechanism was taken prior to award of the

Project and in modification of the Tender Terms themselves, it is

completely plausible for the Learned Arbitral Tribunal to treat them as

having priority over the special conditions of contract and the general

conditions of contract in the order of precedence.

38. That apart, to my mind, since Section 28(3) of the Act

requires the arbitrator, (that too in the facts of this case, an arbitrator

with expertise in the domain) to rule not only in accordance with the

terms of the contract, but also in accordance with customs and trade

usages applicable to the transactions in question, one cannot lose sight

of the context in which FIDIC Conditions and the escrow agreement

were introduced into the contract-forming documentation – the core

objective being to make the Project bankable and amenable to a smooth

financial closure. This being the objective for which the parties

consciously agreed to move away or to improve upon the originally

stipulated Tender Terms, in my opinion, it would be very difficult to

take a view that the Learned Arbitral Tribunal had adopted a perverse

view, not supported by the terms of contract between the parties.

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39. What complicated the matter further for the Section 34 Court

is that the FIDIC Conditions themselves also contain a sequence and

order of priority among the contract-forming documents. Clause 1.5 of

the FIDIC Conditions stipulates a priority whereby the contract

agreement would have priority over particular conditions which would

then have priority over general conditions, and the tender and other

documents forming part of the contract would come in last in the order

of priority.

40. The Section 34 Court has concluded that the tender Terms,

which included the GCC and the special conditions of contract, would

fall within the ambit of “particular conditions” under Clause 1.5 and that

the FIDIC Conditions, would fall under the category “gen eral

conditions”, with a lower precedence. Without intending to comment on

the accuracy of such reading, what becomes abundantly clear is that the

Section 34 Court has waded deep into the ambit of interpretation of

contract to substitute its reading of the contract for the reasonable

reading adopted by the Learned Arbitral Tribunal. Even assuming such

a view were plausible, it was not open to the Section 34 Court to replace

a plausible view already taken by the Learned Arbitral Tribunal with

another view that appeared more plausible to the Section 34 Court.

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41. That apart, it appears that treating the FIDIC Conditions as

forming part of the tender conditions under Clause 1.5(e) of the FIDIC

conditions or to indicate that the general conditions and the special

conditions would fall within the ambit of “particular conditions” under

Clause 1.5(b) of the FIDIC Conditions, one would necessarily need to

conclude that there were conflicting terms of priority, even while

treating the FIDIC Conditions themselves as forming part of one of the

competing instruments in such priority. This would lead to a circular

and irrational conflict within a conflict.

42. The upshot of this situation is that evidently the contract

contains an ambiguity requiring a forum interpreting the contract to

adopt the business efficacy test to give true meaning to the situation at

hand and interpret the same in a commercially logical and rational

manner.

43. In Nabha Power

6

the Supreme Court noticed various earlier

judgements on how to give commercial sense to terms in a contract that

may not lend themselves to a clear unequivocal meaning, in the

following terms:

6 Nabha Power Ltd. v. Punjab SPCL – (2018) 11 SCC 508

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49. We now proceed to apply the aforesaid principles which have

evolved for interpreting the terms of a commercial contract in

question. Parties indulging in commerce act in a commercial sense. It

is this ground rule which is the basis of The Moorcock [The Moorcock,

(1889) LR 14 PD 64 (CA)] test of giving “business efficacy” to the

transaction, as must have been intended at all events by both business

parties. The development of law saw the “five condition test” for an

implied condition to be read into the contract including the “business

efficacy” test. It also sought to incorporate “the Officious Bystander

Test” [Shirlaw v. Southern Foundries (1926) Ltd. [Shirlaw v. Southern

Foundries (1926) Ltd., (1939) 2 KB 206 : (1939) 2 All ER 113 (CA)] ].

This test has been set out in B.P. Refinery (Westernport) Proprietary

Ltd. v. Shire of Hastings [B.P. Refinery (Westernport) Proprietary

Ltd. v. Shire of Hastings, 1977 UKPC 13 : (1977) 180 CLR 266 (Aus)]

requiring the requisite conditions to be satisfied: (1) reasonable and

equitable; (2) necessary to give business efficacy to the contract; (3) it

goes without saying i.e. the Officious Bystander Test; (4) capable of

clear expression; and (5) must not contradict any express term of the

contract. The same penta-principles find reference also in Investors

Compensation Scheme Ltd.v. West Bromwich Building

Society [Investors Compensation Scheme Ltd. v. West Bromwich

Building Society, (1998) 1 WLR 896 : (1998) 1 All ER 98 (HL)]

and Attorney General of Belize v. Belize Telecom Ltd. [Attorney

General of Belize v. Belize Telecom Ltd., (2009) 1 WLR 1988 (PC)]

Needless to say that the application of these principles would not be to

substitute this Court's own view of the presumed understanding of

commercial terms by the parties if the terms are explicit in their

expression. The explicit terms of a contract are always the final word

with regard to the intention of the parties. The multi-clause contract

inter se the parties has, thus, to be understood and interpreted in a

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manner that any view, on a particular clause of the contract, should

not do violence to another part of the contract.

[Emphasis Supplied]

44. In coming to the foregoing view, the Supreme Court endorsed

and reiterated what had been stated in a long line of judgements that

had endorsed these principles including in the cases of Dhanrajamal

Gobindram

7

(paragraph 19); D.N. Revri

8

(paragraph 7); and Satya Jain

9

(paragraphs 33 to 35).

45. In my opinion, the view returned by the Learned Arb itral

Tribunal can also be upheld on the premise that it was a rational, logical

and fair manner of giving business efficacy to the contract between the

parties. Effectively, what the Learned Arbitral Tribunal has found is

clearly justifiable on the aforesaid parameters since its formulation of

the interpretation is responsive to the business efficacy test.

46. It is also well-settled law that if an arbitral award returns a

fair finding, and could be justified by any logical reasons that may not

have been explicitly set out by the arbitrator, then too, the Section 34

7 Dhanrajamal Gobindram v. Shamji Kalidas and Co. – (1961) 3 SCR 1020 : AIR

1961 SC 1285

8 Union of India v. D.N. Revri & Co. – (1976) 4 SCC 147

9 Satya Jain v. Anis Ahmed Rushdie – (2013) 8 SCC 131

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Court must lean in favour of giving deference to such logical and fair

outcome rather than look for reasons to set aside the arbitral award.

47. In addition to the foregoing, it must also be noted that the

reliance by the Learned Arbitral Tribunal on trade practice, to

supplement its reasoning, with particular regard to the facet of

obtaining permissions for right of way, ought not to have been faulted

by the Section 34 Court. It is undisputed that the time taken for

obtaining the right of way took way beyond the 12 months within which

the Project was to be completed. The Section 34 Court has criticized the

invocation of practice and usage by the Learned Arbitral Tribunal by

stating that this was not a matter of any technical or scientific issues

having to be examined to necessitate any expert knowledge of the

arbitrator. The Section 34 Court disagreed with the Learned Arbitral

Tribunal in its view on taking into account usage of trade applicable to

the transaction.

48. Section 28(3) of the Act squarely requires the arbi tral

tribunal to take into account usages of trade applicable to the

transaction. The Learned Arbitral Tribunal was manned by a former

Chief Engineer of City and Industrial Development Corporation of

Maharashtra Limited (“CIDCO”) and was in fact a unilateral appointee

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of NMMC. He has taken a view on what it entails to secure the right of

way and that too from other government agencies such as the Railways,

Development Authorities, Public Works Departments and CIDCO. In

my view, there was no need to find fault with the Arbitral Award on this

count. An instrumentality of the State would be best placed to engage

with other instrumentalities of the State in obtaining approvals as

serious as the right of way to dig up land and lay pipelines. It is

reasonable and plausible to interpret Pratibha’s obligation to obtain the

right of way as the obligation to engage with the requisite officials of

these State agencies to facilitate securing the right of way. Such a role

would be a role of interacting on behalf of NMMC. It also cannot be

forgotten that the principal in the contract is NMMC while Pratibha is

the agent.

49. It is in this light that when parties have agreed to a specific

timeframe for completion of the contract and the very basic requirement

i.e. obtaining the right of way, took far longer than the envisaged Project

timeline, it was only logical and fair for the arbitrator, having examined

the evidence on record, to return the view that he did.

50. Equally, it is a matter of record that even in disallowing

Pratibha’s claim for additional costs for the additional pipeline, it is

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trade usage that the arbitrator has relied upon to dismiss that

component of Pratibha’s claim in favour of NMMC.

51. Therefore, in my opinion, it would be inappropriate to second

guess the findings of the Learned Arbitrator and effect a whole-scale

substitution at the Learned Arbitrator's view. This is not a a permissible

approach for the Section 34 Court’s review of the Arbitral Award.

52. The tender notice itself specifically provided Clause 55 of the

GCC that NMMC would give the contractor possession of the site. To

give possession of the site and possession of further portions of the site,

as required from time to time, the NMMC had contracted that it would

do so with due dispatch. Clause 56 of the GCC provided that in the event

of failure to give possession, it was the contractor's obligation to plan his

work commensurate with the handing over of the site. If handing over of

the entire site itself was well after the scheduled period for completion

of the Project, it cannot be said that there would be no scope whatsoever

for the time extension obliterating scope for compensation for the delay.

In this regard, it is noteworthy that the contract indeed envisaged that

NMMC would make all necessary applications for right of way and pay

the administrative charges while the contractor would be responsible

“

for follow up and getting all types of permissions”. This too was the

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outcome of the pre-bid meeting clarifications issued by NMMC in

response to a query raised by IVRCL.

53. Likewise, similar answers were given to another bid der

Petron Civil Engineering Pvt. Ltd., which had highlighted that Project

execution could be exorbitantly delayed and that the contractor may at

the most be asked to liaison with the concerned authorities. The

assurance give by NMMC was that “

NMMC will give right of way to

agency

”.

54. Pratibha itself had raised a query seeking clarification on

whether the time period for completion would commence from the

placement of the work order or from handing over of the site, to which

NMMC replied that “

time limit will be considered from the date of work

order or date of handing over of the site whichever is later

”. If the

handing over of the entire site took nearly two years, Pratibha had a

strong case to be compensated.

55. Pratibha had also raised a query with specific regard to the

delay in allocation of sections of the site and the absence of

compensation, which would lead to loading of excessive interest burden

for the idle period when a contractor would have mobilized in all

respects and would simply be waiting for the site to be provided for

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lying the pipeline. In response, NNMC replied that “tender conditions

shall prevail. Will be paid on actuals

”.

56. This again leads to the relevance of the FIDIC Conditions. If

there were any provisions in the FIDIC Conditions that would be in

conflict with the Tender Terms that originally occupied such field of

conflict, it would follow that the FIDIC Conditions would prevail.

Towards this end, it is submitted on behalf of Pratibha that Clause 1.13

of the FIDIC Conditions provides that the employer shall have obtained

the planning, zoning or similar permission for the permanent works and

the employer shall indemnify the contract from the consequences of any

failure to do so. This certainly can be considered to be a head on conflict

between the FIDIC Conditions and the Tender Terms which stipulate

that there would be no compensation for a delay.

57. On this count too, it would be reasonable to hold that the

Learned Arbitral Tribunal can simply not be said to have returned an

implausible view in its interpretation of the various contract terms. It

becomes evident that the interpretation given by the Learned Arbitral

Tribunal is harmonious, plausible, and quite logical and reasonable.

Therefore, in my opinion, there was no basis for the Section 34 Court to

wade into how the Learned Arbitral Tribunal has interpreted the

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evidence, and to replace the Learned Arbitral Tribunal’s plausible

interpretation with a competing plausible view.

58. For the aforesaid reasons, in my opinion, the interference by

the Section 34 Court is not sustainable. Indeed, what was meant to be a

12-month project was finished in 26 months with the last parcel of land

on which the pipeline was to be laid, having been handed in 24 months.

59. The Learned Arbitral Tribunal, in my opinion, has returned a

reasonable, logical and harmonious reading of multiple constituent

instruments that on a combined basis, represent the contract between

the parties.

60. Once it is clear that evidently the Section 34 Court had

overstepped the scope of review as envisaged in the law governing

challenges to arbitration, in my opinion, there is no scope for sustaining

the Impugned Judgement.

61. It must also be mentioned before concluding, that th e

approach while assessing an Arbitral Award is not to examine whether it

can be set aside or whether it is accurate, but to examine whether the

grounds specified in Section 34 of the Act are at all made out to warrant

a decision to set it aside. What is clear from a plain reading of Section

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34 of the Arbitration Act is that the Section 34 Court must not set aside

an arbitral award unless the ingredients of Section 34(2) are available.

The opening line of Section 34(2) provides that an arbitral award may

be set aside by the Court only if the ingredients of the provisions get

attracted. There is nothing in the material on record to indicate that

the ingredients of Section 34(2) have been attracted.

62. For the reasons already articulated above, in my opinion, the

Arbitral Award does not return any decision beyond the scope of what

was submitted to arbitration. It also cannot be said to not be in

accordance with the agreement between the parties. The analysis

relating to the conflict between the FIDIC Conditions and the Tender

Terms eminently fell within the domain of interpretation of contract

that formed subject matter of the Learned Arbitrator's jurisdiction. Such

analysis being a reasonable, logical and plausible one, the Section 34

Court ought not to have substituted the views of the Learned Arbitrator

Tribunal with its own views to set aside the arbitral award.

63. For the aforesaid reasons, in my opinion, the Impu gned

Judgement is hereby set aside and the Arbitral Award is hereby revived.

64. Deposits, if any, made in the course of the challenge under

Section 34 and the further challenge under Section 37 shall be released

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to Pratibha along with accruals, if any thereon, within a period of six

weeks from the date of upload of this judgement on the website of this

Court.

65. In the peculiar circumstances of the case, I refrain from

imposing costs in the matter.

66. All actions required to be taken pursuant to this order shall

be taken upon receipt of a downloaded copy as available on this Court’s

website.

[ SOMASEKHAR SUNDARESAN, J.]

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