Bombay High Court
F.A.Enterprises vs Konkan Irrigation Development … on 12 August, 2025
Author: M. S. Karnik
Bench: M. S. Karnik
2025:BHC-OS:13724-DB
comapl.4915-2020 & ors(4).odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
COMMERCIAL APPEAL (L) NO. 4915 OF 2020
IN
COMMERCIAL ARBITRATION PETITION NO.79 OF 2021
WITH
INTERIM APPLICATION NO. 40 OF 2023
WITH
INTERIM APPLICATION (L) NO. 4918 OF 2020
IN
COMMERCIAL APPEAL (L) NO. 4915 OF 2020
M/s. F. A. Enterprises
A Partnership Firm
Having their Office at Plot No.112, 1st Floor,
TPS-III, 6th Floor, Opp. Oriental Palace
Khar (West), Mumbai 400 052 ... Appellant
Versus
1. Konkan Irrigation Development Corporation
Water Resources Department, Sinchan Bhavan,
Kopri Colony, Thane (East).
2. City and Industrial Development Corporation
CIDCO Bhavan, CBD-Belapur,
Navi Mumbai 400 614.
3. State of Maharashtra
Through Water Resource Department
Mantralaya, Mumbai 400 032. .... Respondents
WITH
COMMERCIAL APPEAL (L) NO. 4925 OF 2020
IN
COMMERCIAL ARBITRATION PETITION NO.793 OF 2019
WITH
INTERIM APPLICATION (L) NO. 4927 OF 2020
IN
COMMERCIAL APPEAL (L) NO. 4925 OF 2020
M/s. F. A. Enterprises
A Partnership Firm
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Having their Office at Plot No.112, 1st Floor,
TPS-III, 6th Floor, Opp. Oriental Palace
Khar (West), Mumbai 400 052. ... Appellant
Versus
1. Konkan Irrigation Development Corporation
Water Resources Department, Sinchan Bhavan,
Kopri Colony, Thane (East).
2. City and Industrial Development Corporation
CIDCO Bhavan, CBD-Belapur,
Navi Mumbai 400 614.
3. State of Maharashtra
Through Water Resource Department
Mantralaya, Mumbai 400 032. .... Respondents
WITH
COMMERCIAL APPEAL (L) NO. 4932 OF 2020
IN
COMMERCIAL ARBITRATION PETITION NO.921 OF 2019
WITH
INTERIM APPLICATION (L) NO. 4935 OF 2020
IN
COMMERCIAL APPEAL (L) NO. 4932 OF 2020
M/s. F. A. Enterprises
A Partnership Firm
Having their Office at Plot No.112, 1st Floor,
TPS-III, 6th Floor, Opp. Oriental Palace
Khar (West), Mumbai 400 052. ... Appellant
Versus
1. Konkan Irrigation Development Corporation
Water Resources Department, Sinchan Bhavan,
Kopri Colony, Thane (East).
2. City and Industrial Development Corporation
CIDCO Bhavan, CBD-Belapur,
Navi Mumbai 400 614.
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3. State of Maharashtra
Through Water Resource Department
Mantralaya, Mumbai 400 032. .... Respondents
****
Mr. Aspi Chinoy, Senior Advocate a/w Mr. Prashant Patil, Mr.
Chaitanya Nikte, Ms. Shilpa Kapil, Mr. Chidanand Kapil, Ms.
Priti Karbhari, Mr. Swapnil Sangle, for the Appellant/Applicant.
Mr. R. V. Govilkar, Senior Advocate a/w Ms. Shaba N. Khan, Mr.
Mihir Govilkar, for Respondent No.1.
Mr. G. S. Hegde, Senior Advocate a/w Ms. P. M. Bhansali, for
Respondent No.2-CIDCO.
Mr. Rajiv Chavan, Senior Advocate a/w Ms. Jyoti Chavan,
Addl.G.P., for Respondent No.3-State of Maharashtra.
****
CORAM : ALOK ARADHE, CJ &
M. S. KARNIK, J.
RESERVED ON : 8th MAY, 2025
PRONOUNCED ON : 12th AUGUST, 2025
JUDGMENT (PER M. S. KARNIK, J.) :
1. The present Appeals preferred under Section 37 of
the Arbitration and Conciliation Act, 1996 (“the said Act”, for
short) impugn the common judgment and order dated 19 th
May 2020 (“impugned order”, for short) passed by the learned
Single Judge of this Court, whereby, the Commercial
Arbitration Petition No.79 of 2021 (filed by KIDC) along with
Commercial Arbitration Petition No.921 of 2019 (filed by ‘The
State of Maharashtra’) and Commercial Arbitration Petition
No.793 of 2019 (filed by CIDCO) under Section 34 of the said
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Act, was allowed and the Majority Award dated 3 rd April 2019
passed by the Arbitral Tribunal was set aside. We refer to the
facts in Commercial Appeal (L) No.4925 of 2020. The
Appellant – M/s. F. A. Enterprises (“F. A. Enterprises”, for short)
is the Original Claimant before the Arbitral Tribunal.
Respondent No.1 is the Konkan Irrigation Department
Corporation (“KIDC”, for short). Respondent No.2 is the City
and Industrial Development Corporation (“CIDCO” for short).
Respondent No.3 is the State of Maharashtra (“State”, for
short).
2. The facts leading upto the filing of the Appeal need
to be set out. In a meeting held on 28 th January 2009 under
the chairmanship of the then Hon’ble Minister, Water Resource
Development (“WRD”), State, it was decided to develop the
Balganga Dam (“the said Dam” for short) to cater to the need
of drinking water and water for industrial purposes in sub-
region 6, Panvel and sub-region-8 Urban Metropolitan Region.
Thereafter, on 1st March 2009 under the chairmanship of the
Hon’ble Chief Minister, Government of Maharashtra, it was
decided that CIDCO would bear the capital cost of the
development of the said Dam and would get ownership right
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over the water of the dam. It was further decided that, the
construction of the said Dam would be executed by the WRD
through KIDC.
3. An advertisement was published in the
newspapers and website of the State by the Executive
Engineer, Raigad Irrigation Department on behalf of KIDC.
Invitations were invited from those contractors registered with
the Public Works Department (“PWD”, for short) for
construction of Earthen Dam, Spillway, Tail Channel, Water
Supply and Power outlet of Balganga River Project.
4. On and from 27th February to 6th March 2009, pre-
qualification documents (“PQD”, for short) were issued by the
said Executive Engineer, Raigad Irrigation. By 12 th March
2009, around 7 contractors submitted the said PQD to the
Superintending Engineer, Irrigation Department, Thane.
5. In a meeting held on 13th March 2009 between the
members of the valuation committee appointed for the
Balganga Project in the office of the Chief Engineer, WRD,
Mumbai, F. A. Enterprises along with three other contractors
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were declared eligible for construction of the said Dam. The
eligible contractors including F. A. Enterprises purchased the
tender from the Executive Engineer, Raigad. On 18 th March
2009 a pre-tender meeting was held between the eligible
contractors including F. A. Enterprises with the Superintending
Engineer, Executive Engineer and other concerned officers.
6. On 30th March 2009 the said tenders were opened
and F. A. Enterprises’s bid was found to be lowest being
55.51% (Extra Rate) and accordingly F. A. Enterprises was
called by KIDC for negotiations. F. A. Enterprises submitted
another revised quotation vide letter dated 1st April 2009.
7. On or about 12th May 2009 the work order (First
Work Order) for the said Dam was issued to F. A. Enterprises
by the Executive Engineer. The cost of construction of the said
Dam was accepted as Rs.495.95 crores and accordingly a
contract agreement was executed between KIDC and F. A.
Enterprises-Claimant being B.1/1 for 2009. Subsequently, a
revised work order dated 11th June 2010 was also issued by
KIDC to F. A. Enterprises.
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8. Thereafter, in the meeting held under the
chairmanship of the then Chief Minister of the State, it was
decided that CIDCO would bear the capital cost of the
Balganga project and also get ownership rights of the dam.
Accordingly, on 24th February 2009, CIDCO passed a resolution
that the project would be executed by KIDC and CIDCO would
be the funding agency. Accordingly, on or about 23 rd
September 2009, a Memorandum of Understanding (MOU)
was executed between KIDC and CIDCO. However, the terms
of the said MOU were not incorporated in the First Work Order
dated 12th May 2009 or revised Work Order dated 11 th June
2010 executed between KIDC and F. A. Enterprises.
9. As per the First Work Order issued on 12 th May 2009
the work was to commence on the specified date which was to
be after 2 ½ years. However, the senior most officials of KIDC,
CIDCO, Forest Department, State and others decided that the
construction work at the dam site should be started
immediately on the non-forest land and hence, directed KIDC
i.e. the executing body to start work. Accordingly, F. A.
Enterprises started the project work in the year 2010 as per
the directions of the Executive Engineer of KIDC who by his
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letter dated 28th January 2010 informed F. A. Enterprises that
the Notification under Section 4 of the Land Acquisition Act
has been issued in the Gazette dated 19 th January 2010 and
vide the said letter, F. A. Enterprises was instructed to mobilize
the manpower and machinery and start the work. As such, the
work was commenced by F. A. Enterprises from the first week
of February 2010 as per the directions of the KIDC.
10. During the course of the work executed on the site,
Senior Officers of KIDC and CIDCO visited the site on
numerous occasions to observe the work in progress. The said
visits have been recorded in the Monthly Progress Report. In
the meanwhile, KIDC paid 10 Running Account Bills (“RA Bills”,
for short) and all the bills have been paid without any protest.
All payments in relation to the said 10 RA Bills were released
by CIDCO to KIDC without any protest. Ultimately, CIDCO paid
an amount of Rs.494.15 crores to KIDC which in turn was paid
to F. A. Enterprises relating to the 10 RA Bills. This according to
F. A. Enterprises is because CIDCO and KIDC were aware of the
extra work being carried out at site under the instructions of
senior officers of KIDC and as per site inspections and
supervision by CIDCO officers. The officers who visited the site
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neither objected to the extra work that was being undertaken
on the site by F. A. Enterprises nor issued any stop work orders
to halt the extra work being undertaken by F. A. Enterprises.
11. It is the case of F. A. Enterprises that in order to
maintain the progress of the work, ‘Steering Committee
Meetings’ and ‘Control Board Meetings’ were regularly held
between senior most officials of KIDC and CIDCO. Monthly
Progress Reports were maintained by officers of KIDC during
the work in progress which recorded the physical and financial
progress of the construction work executed by F. A.
Enterprises. The Monthly Progress Report reflects the site
visits of officers of CIDCO, State, Central Design Organization
(CDO), KIDC, Forest Department and other officers.
12. After the payment of 10th RA Bill on April 2011, as
per the directions of CIDCO, the Executive Director of KIDC
submitted a Revised Estimate to CIDCO on 10 th June 2011. The
said Revised Estimate contained the Technical Justification for
Cost Escalation at the Project Site. The said Revised Estimate
was signed by all the officers of KIDC and contained detailed
explanation of each and every extra item and additional work
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as executed by F. A. Enterprises at the Dam site. The said
Revised Estimate was for Rs.1220 crores for the construction
of the entire site. Thereafter, CIDCO appointed a 3-member
Expert Committee headed by Mr. R. G. Kulkarni for analyzing
the Revised Estimate submitted by KIDC. The said Expert
Committee gave a finding that the revised cost of the project
should be approximately Rs.920 crores. After the payment of
10 RA Bills, the payment of M-15 Concrete was not paid at all
to F. A. Enterprises as the work of ‘Concreting’ started only
after ‘Excavation’ and ‘Embankment’. Major payment for
‘Excavation item’ and ‘Embankment’ were already paid in the
10 RA Bills by KIDC to F. A. Enterprises and were released by
CIDCO to KIDC without protest. The rates of Excavation and
Embankment were sanctioned and approved by KIDC and
CIDCO. Hence, it is the claim that almost 10% of outstanding
payment for Excavation and Embankment was not paid to F. A.
Enterprises. The R. G. Kulkarni Expert Committee appointed by
CIDCO, suggested rate of Rs.8756/- per Cubic Meter for the M-
15 Concrete instead of Rs.12073/- per Cubic Meter as
approved by KIDC against the demand of Rs.14,000/- per
Cubic Meter as claimed by F. A. Enterprises. KIDC by its letter
requested F. A. Enterprises to accept the rate of M-15 concrete
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as suggested by R. G. Kulkarni Committee of CIDCO. F. A.
Enterprises by a detailed reply rejected the said rate offered.
Due to mounting pressure from banks/lending institutions for
recovering the money borrowed for executing the said work, F.
A. Enterprises under protest, subject to immediate release,
agreed to the said rate of Rs.8756/- per Cubic Meter.
13. This resulted in preparation of 11th RA Bill, for a
sum of Rs.317 crores. The said 11 th RA Bill was signed and
sanctioned by all the officers of KIDC including the Executive
Director. This 11th RA Bill was submitted by KIDC to CIDCO for
releasing the payments to the contractor. The 11th RA Bill had
four proponents as Under :-
a. Payment of M-15 Concrete @ the rate of
Rs.8756/- Per Cubic meter.
b. Outstanding payment of 'Excavation Item' @
the rate of Rs.1152.90 per CuM. It is the case of
F.A. Enterprises that major payment towards
Excavation had already been paid at the same rate
in the 10 RA Bills, without protest.
c. Outstanding payment of ‘Embankment Item’
at the rate of Rs.432.50 per CuM. F. A. Enterprises
claims that major part of the said item of
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Embankment had already been paid at the same
rate in the 10 RA Bills, without demur.
d. Other miscellaneous items to tune of Rs.20
Crores which are not disputed by any of the parties
and are executed according to the tender rates
between KIDC and F. A. Enterprises.
14. Meanwhile, CIDCO went on to appoint three other
Committees, the last being a Committee headed by Justice
Gaikwad for evaluating and analyzing the said Revised
Estimate submitted by KIDC. All the further committees
proposed varied cost for the said project, and the report of
Justice Gaikwad was inconclusive. KIDC kept on demanding
CIDCO by various letters for releasing outstanding payment of
11th RA Bill immediately to maintain the progress of the work,
thereby accepting the rates claimed by F. A. Enterprises. As no
money was paid to F. A. Enterprises by KIDC, F. A. Enterprises
was compelled to stop the work in June 2012, owing to
financial exigencies.
15. Due to continuous pressure from banking
institutions, F. A. Enterprises was constrained to file Writ
Petition No.11019 of 2013 in this Court seeking directions to
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release payments. The Respondents filed their affidavits in
this Court. It is the case of F. A. Enterprises that KIDC
consistently maintained a stand before this Court that F. A.
Enterprises needs to be paid for its outstanding dues and
further brought it to the attention of this Court that due to the
conduct of CIDCO of appointing committee after committee,
without implementing any of its own recommendations, the
project is suffering cost escalation.
16. This Court by an order dated 28 th January 2014
recorded that F. A. Enterprises needs to be paid Rs.100 crores
to resume the work. However, as F. A. Enterprises was not in a
position to furnish bank guarantee, this Court on the basis of
the submission made by CIDCO, by order dated 17 th July 2015
directed CIDCO to deposit Rs.28.20 crores as admitted liability.
17. During the pendency of the said Writ Petition,
CIDCO referred the matter to the 4th Committee under the
chairmanship of Justice Gaikwad. Justice Gaikwad issued the
report on 30th May, 2014. KIDC rejected the said report. This
Court by an order dated 23rd June 2014 recorded that there is
an independent contract between CIDCO and KIDC wherein, if
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there is any dispute between CIDCO and KIDC it has to be
referred to the Chief Secretary of the State. This Court held
that, even in that case the said order of Chief Secretary of the
State will not be binding on F. A. Enterprises. Therefore, this
Court vide its order dated 17th July 2015 thought it fit to refer
the disputes of all the parties in relation to payment/non-
payment to F. A. Enterprises regarding construction of the said
Dam to Arbitration. By an order dated 17 th July 2015 a 5
Member Arbitral Tribunal presided by Hon’ble Justice V. G.
Palshikar (Retd.) was appointed.
18. A statement of claim came to be filed by F. A.
Enterprises before the Arbitral Tribunal seeking various reliefs.
The Respondents filed their statement of defense. On or about
28th October 2016, KIDC terminated the contract of F. A.
Enterprises. F. A. Enterprises preferred an amendment
application to original petition on account of termination by
KIDC which was allowed and amended statement of claim was
filed on 2nd January 2017 to which KIDC and CIDCO filed
additional statement of defense. F. A. Enterprises’s ‘Monetary
Claim’ before the Arbitral Tribunal was based on two
components :-
a. Measurement
The Actual Measurement of ‘M-15 Concrete’
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site.
b. Rates Payable
The rates to be payable for the said ‘M-15
Concrete’ and other extra items executed at site.
19. CIDCO caused the measurements at actual site as
executed by the contractor in February 2016, to be
undertaken in the presence of its officials, which F. A.
Enterprises filed before the Arbitral Tribunal as Claimant
Document No.9 i.e. CD-9 which was exhibited as ‘C-119’. The
said measurements are reflected as under :-
CIDCO Measurements as reflected in ‘CD-9’
Sr.No. Description Work executed in
Volume (Cu.M.) as
per CIDCO
1. M-15 Concrete item 1,29,850.594
2. Excavation Item 42,31,917.240
3. Embankment (Earth Work) 41,97,341,280
20. The issues were framed by the Arbitral Tribunal on
8th March 2017. The stand of CIDCO before the Arbitral
Tribunal is that they have no privity with F. A. Enterprises. F. A.
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Enterprises examined three witnesses i.e. CW-1, CW-2 and
CW-3. KIDC examined one witness namely Mr. D. M. Godse
and CIDCO examined one witness namely Mr. Pranik Mul.
21. In the light of the depositions, F. A. Enterprises in
May 2018, preferred an application under Section 23 of the
said Act, for amending its monetary claim restricting the same
to payment for M-15 concrete only to the quantity of 1,46,000
CuM. The amendment was allowed by the Arbitral Tribunal.
KIDC filed additional statement of defense on 5 th June 2018
duly affirmed by the Superintendent Engineer of KIDC, thereby
submitting that in February 2016 CIDCO had carried out
measurement which was certified by IIT Mumbai, according to
which quantity of M-15 concrete comes to 1,29,851 CuM. KIDC
further submitted that CIDCO has omitted and restricted the
measurement, and the actual quantity of M-15 concrete
executed on site is 1,36,634 CuM and quantity of excavation is
found to be actually done on site is 44,44,564 CuM. The
additional statement of defense was filed by KIDC post
evidence of all witnesses before the Arbitral Tribunal. Before
filing the said additional statement of defense dated 5 th June
2018, KIDC carried out actual measurements at site as
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executed by F. A. Enterprises, in the month of May 2018.
These measurements of KIDC were carried out after evidence
of all the parties.
22. On the basis of the said stand and admission of
KIDC in the additional statement of defense, F. A. Enterprises
filed a detailed application under Section 31(6) of the said Act,
for partial award only against KIDC for an amount of Rs.222.83
crores inclusive of Claim No.1 and Claim No.2 along with
interest and other outstanding amount. KIDC filed a detailed
reply to the said application through its Superintendent
Engineer thereby admitting that F. A. Enterprises has executed
work at site. Further, it was stated that, KIDC had suggested a
rate of Rs.12,073/- per CuM for M-15 concrete during the
Revised Estimate on 10th June 2011. However, KIDC further
submitted that, the rate finalized by R. G. Kulkarni Expert
Committee appointed by CIDCO i.e. 8756 per CuM for M-15
concrete can be considered for the purpose of interim relief to
be granted to F. A. Enterprises. The Arbitral Tribunal did not
decide the application under Section 31(6) of the said Act.
The Arbitral Tribunal deemed it fit to hear the matter finally in
view of the fact that entire evidence was already over.
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23. CIDCO in its written notes of argument apart from
its various submissions categorically contended that it has no
privity of contract with F. A. Enterprises and it is not a party to
the contract entered between KIDC and F. A. Enterprises.
Hence, there cannot be any claim against CIDCO. KIDC in its
written notes of arguments admitted that the claim of F. A.
Enterprises through its submission which included M-15
concrete and other extra items as mentioned in Claim No.1. As
regards Claim No.2, KIDC admitted that vide its revised
estimates prepared on 10th June 2011 KIDC had approved the
rate of Rs.12073 CuM for M-15 concrete. KIDC submitted the
conduct of CIDCO during the work in progress for inspecting
the site on various occasion and releasing approximately
Rs.150 crores over and above the original tender cost thereby
reflecting its tacit approval for the additional work as executed
by F. A. Enterprises at site.
24. The learned Members of the Arbitral Tribunal by a
majority passed the award dated 3 rd April 2019 thereby partly
allowing the claims of F. A. Enterprises and two members of
the Arbitral Tribunal passed minority award dated 3 rd April
2019 thereby dismissing the claims of F. A. Enterprises.
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25. KIDC, CIDCO and State being aggrieved by the
majority award dated 3rd April 2019, approached this Court by
filing Arbitration Petitions under Section 34 of the said Act
bearing Commercial Arbitration Petition No.79 of 2021
(preferred by KIDC) along with Commercial Arbitration Petition
No.921 of 2019 (preferred by CIDCO) and Commercial
Arbitration Petition No.793 of 2019 (preferred by State) for
challenging the same on various grounds.
26. The learned Single Judge of this Court vide its order
dated 19th May 2020 allowed the three applications filed by
KIDC, CIDCO and State and set aside the majority award dated
3rd April 2019 and also directed F. A. Enterprises to refund
Rs.50 crores with interest within eight weeks from the date of
the order.
27. Mr. Chinoy, learned Senior Advocate for F. A.
Enterprises, in challenge to the order passed by the learned
Single Judge submitted that the learned Single Judge did not
properly appreciate the scope of an Arbitration Petition under
Section 34 of the said Act in its challenge to the award passed
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by the Arbitral Tribunal. It is submitted that the Arbitral
Tribunal has for valid and cogent reasons allowed the claim of
F. A. Enterprises. Having regard to the findings rendered by
the Arbitral Tribunal being based on the materials on record,
the same cannot be regarded as perverse to warrant
interference in the limited scope that this Court has in a
Petition filed under Section 34 of the said Act. It is submitted
that Executive Engineer of KIDC had specifically required F. A.
Enterprises to continue with the said concrete work in
anticipation of sanction, in order to maintain the progress of
the work and accordingly F. A. Enterprises had proceeded with
the said concreting work. It is submitted that at no point of
time KIDC informed F. A. Enterprises that the rate of Rs.12073
and Rs.12836 had not been approved/was not applicable. It is
pointed out that in June 2011, KIDC submitted a revised cost
proposal to CIDCO which provided for the extra items which
KIDC’s Executive Engineer had required F. A. Enterprises to
undertake inter alia including M-15 cement at the rate of
Rs.12073 per CuM. KIDC’s proposal and the “Recap Sheet” of
the same, was approved and signed by the Chief Engineer,
WRD, Government of Maharashtra, the Executive Director,
KIDC and other senior officers. It is submitted that the original
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design of the Dam was for four gates/spillways and a width of
70 meters which was altered to provide for six spillways and a
width of 120 meters. By a letter dated 13th January 2011 the
Executive Engineer required F. A. Enterprises to carry out the
work of six gates and 120 meters. Mr. Chinoy, learned Senior
Advocate extensively invited our attention to the findings of
the Arbitral Tribunal. He emphasised that after parties had led
oral evidence F. A. Enterprises were permitted to amend the
claim Nos.1 and 2. Mr. Chinoy, learned Senior Advocate invited
our attention to the confirmation by the Executive Engineer of
KIDC about the extra work that was done by F. A. Enterprises
as per the instructions of KIDC’s Executive Engineer and even
the CIDCO’s 3-member Expert Committee had recommended
a particular rate which was conditionally accepted by F. A.
Enterprises in their RA Bill No.11. On 3 rd April 2019 the
Arbitrators made an award awarding F. A. Enterprises a total
sum of approximately Rs.303 crores against KIDC. It is
submitted that the claim awarded by the Arbitrators was on
valid grounds. It is submitted that the learned Single Judge set
aside the award on untenable grounds contrary to the well
established principles of law.
28. Mr. Govilkar, learned Senior Advocate for KIDC
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invited our attention to the findings of the learned Single
Judge. Learned Senior Advocates Mr. Govilkar for KIDC, Mr.
Chavan for State and Mr. Hegde for CIDCO argued in support
of the order passed by the learned Single Judge. Learned
Senior Advocates extensively relied upon the findings of the
learned Single Judge and were at pains to submit that the
learned Single Judge had meticulously examined the rival
claims and on the basis of well considered findings recorded
in the impugned order, thought it fit to interfere with the order
passed by the Arbitral Tribunal. Mr. Govilkar, learned Senior
Advocate relied upon the decision of the Hon’ble Supreme
Court in Konkan Railway Corporation Limited vs. Chenab
Bridge Project Undertaking1 which authoritatively deals
with the scope and ambit of interference with an award
passed by the Arbitrator under Sections 34 and 37 of the said
Act. Our attention is also invited to the decision of the Hon’ble
Supreme Court in Somdatt Builders-NCC-NEC(JV) vs.
National Highways Authority of India and others2
regarding the scope of interference with an arbitral award
under Section 34 of the said Act.
29. Mr. Chavan, learned Senior Advocate in support of
1 (2023) 9 SCC 85
2 2025 SCC OnLine SC 170
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the elaborate submissions advanced relied on the following
decisions :-
1. Booz Allen and Hamilton Inc. vs. SBI
Home Finance Ltd. and Ors.3
3. Konkan Railway Corporation Ltd. (supra).
5. Jaiprakash Associates Ltd. vs. Tehri
Hydro Development Corporation Ltd.6
6. National Building Construction vs.
State of Maharashtra and Ors.7
8. Rajasthan State Mines & Minerals Ltd.
vs. Eastern Engineering Enterprises & Anr.9 9. M/s. Satjas Glorocks Pvt. Ltd. vs. Bharat Aluminium Co. Ltd.10 10. Siemens Public Communication Pvt. Ltd. & Anr. vs. Union of India & Ors.11 11. Ssangyong Engineering & Construction Ltd. vs. NHAI12 12. State of Maharashtra & Ors. vs. 3 (2011) 5 SCC 532 4 (2025) SCC OnLine 218 5 (2024) 9 SCC 476 6 (2019) 17 SCC 786 7 (2018) 13 SCC 200 8 AIR (1995) Himachal Pradesh 107 9 (1999) 9 SCC 283 10 (2011) SCC OnLine Chh 351 11 (2008) 16 SCC 215 12 (2019) 15 SCC 131 PMB 23 comapl.4915-2020 & ors(4).odt Saifuddin Mujjaffarali Saifi13 13. Union of India vs. Manraj Enterprises14 14. Ramnath International Construction (P) Ltd. vs. Union of India15
30. It must in all fairness to the learned Senior
Advocates for the Respondents, it needs to be stated that
extensive notes of written arguments have been placed on
record in support of their stand that the learned Single Judge
was justified in interfering with the award of the Arbitral
Tribunal, as the award was rightly found by the learned Single
Judge to be perverse.
31. Heard learned Senior Advocates for the parties.
32. Before we proceed to consider the rival
submissions, it would be important to bear in mind the scope
of interference in an Appeal under Section 37 of the said Act.
The law is well settled. In Larsen Air Conditioning and
Refrigeration Company vs. Union of India16 in paragraph
15 the Hon’ble Supreme Court held thus :-
13 (1993) SCC OnLine Bom 203
14 (2022) 2 SCC 331
15 (2007) 2 SCC 453
16 (2023) 15 SCC 472
PMB 24
comapl.4915-2020 & ors(4).odt“15. The limited and extremely circumscribed
jurisdiction of the court under Section 34 of the Act,
permits the court to interfere with an award, sans the
grounds of patent illegality i.e. that “illegality must go
to the root of the matter and cannot be of a trivial
nature”; and that the Tribunal “must decide in
accordance with the terms of the contract, but if an
arbitrator construes a term of the contract in a
reasonable manner, it will not mean that the award can
be set aside on this ground” [ref : Associate Builders
[Associate Builders v. DDA, (2015) 3 SCC 49 : (2015) 2
SCC (Civ) 204], SCC p.81, para 42]. The other ground
would be denial of natural justice. In appeal, Section 37
of the Act grants narrower scope to the appellate court
to review the findings in an award, if it has been
upheld, or substantially upheld under Section 34.”
33. In case of Konkan Railway Corporation Ltd. (supra)
in paragraph 18 the Hon’ble Supreme Court held thus :-
“18. The Single Judge of the High Court affirmed the
findings of the Arbitral Tribunal. The reason for
upholding the decision of the Tribunal is not that the
Single Judge exercising jurisdiction under Section 34
of the Act is in complete agreement with the
interpretation of the contractual clauses by the
Arbitral Tribunal. The Learned Judge exercising
jurisdiction under Section 34 of the Act kept in mind
the scope of challenge to an Arbitral Award as
elucidated by a number of decisions of this Court.
Section 34 jurisdiction will not be exercised merely
because an alternative view on facts and
interpretation of contract exists. In its own words, the
conclusion of the Single Judge Bench of the High Court
is as follows:
“10. … The ambiguity does not come from
clause 5.1.1, but from the fact that there are
other clauses in the contract, such as clauses
7.1.1 and 7.1.2. One way to look at the co-
existence of these clauses is to treat clauses
7.1.1 and 7.1.2 merely as an exclusion for
working out price variation, since it isPMB 25
comapl.4915-2020 & ors(4).odtspecifically provided for in clause 5.1.2.
Equally, there is another way of looking at
these three clauses, and that is : clauses 7.1.1
and 7.1.2 make it clear that no increase in tax
in the case of any component forming part of
BoQ rates, which was considered by the
contractor for quoting his rates for any
particular item, should be allowed to the
contractor; it is only when particular taxes
were actually to be paid on the deliveries of
the contractor, these would be included for
reimbursement by the employer under clause
5.1.2. The arbitrator adopted the latter view. It
cannot be said either that it is an unreasonable
view or a view which is either impossible or
which no fair and judiciously minded person
would have taken. The award on this dispute,
thus, does not merit any interference under
Section 34 of the Act, having regard to the law
stated by the Supreme Court in the case of
Associate Builders (supra).”
34. Thus, the scope of interference by this Court in an
Appeal under Section 37 of the Act, in examining an award,
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 said Act. The limited and extremely
circumscribed jurisdiction of the Court under Section 34 of the
Act, permits the Court to interfere with an award, sans the
grounds of patent illegality i.e. that “illegality must go to the
root of the matter and cannot be of a trivial nature”; and that
the Tribunal “must decide in accordance with the terms of the
contract, but if an arbitrator construes a term of the contract
in a reasonable manner, it will not mean that the award can
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be set aside on this ground”. It has been held by Their
Lordships that the award of the Arbitral Tribunal should not be
interfered with, when the view taken by the Arbitrator is a
plausible view.
35. The majority award and the final award of the
Arbitral Tribunal proceeded on the following premise. As
indicated earlier, the subject matter of dispute was a dispute
between the parties in respect of construction of a Dam. The
Arbitral Tribunal at the outset made a brief reference to the
order passed by this Court in Writ Petition No.11019 of 2013
filed by F. A. Enterprises for a direction to CIDCO to fund KIDC
for payment of all the pending bills for work done by F. A.
Enterprises. The order dated 7th October 2014 passed by the
Division Bench of this Court as reproduced by the Arbitral
Tribunal reads thus :-
4. It appears that in the past, several committees
were appointed to assess the value of the work done
by the petitioner. One three-member Committee
comprising retired Secretary, (PWD), retired Secretary
(Water Resources Department) and retired Chief
Engineer and General Manager, (CIDCO) assessed the
total cost of the project at Rs.972.17 crores in
February, 2012. However, CIDCO did not accept the
said report and it’s Chief Engineer and General
Manager (Technical) recommended that the cost of
the project be assessed at only Rs.632.73 crores. The
said assessment was not acceptable to the petitioner.
Therefore, another five-member Committee was
appointed. The said Committee had as its members,
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two Professors of Civil Engineering Department, IIT
Mumbai, one Chief Engineer of Water Resources
Department, Konkan and two Chief Engineers of
CIDCO. The said five-member Committee assessed the
cost of the project at Rs.808 crores in June, 2014.
5. As regards the percentage of work completed
by the petitioner, there does not appear to be much
dispute that the petitioner has done 80% of the work.
The dispute is mainly on the rates at which the
payment should be made to the petitioner. It appears
that in view of the disputes, still another threemember
Committee headed by Mr. M. G. Gaikwad, former
Judge of this Court was appointed and that Committee
has recommended lower rates than the rates
recommended by the previous Committees. But that
Committee recommended appointment of another
Committee to assess the work actually done by the
petitioner so far.
6. In view of the above dispute and absence of any
final finding/decision and inability expressed by the
petitioner for continuing the work without getting
payment as per the pending bills or at least as per the
report submitted by the five-member Committee on
09/06/2014, the project has not made any further
progress beyond 80% and the important work of
construction of the dam for providing drinking water
to the people in Navi Mumbai and Raigad District has
remained incomplete. The investment of Rs.494
crores remains idle without any returns to CIDCO or
any drinking water being provided to the people of the
area.”
36. The Arbitral Tribunal then referred to the order
dated 17th July 2015 of this Court which reads thus :-
“6. … … … …
(A) All the disputes and differences between the
parties regarding construction of Balganga Dam in
taluka Pen, District Raigad and payments/non-
payments for the same are referred to the Arbitral
Tribunal comprising the following:
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(i) Mr. Justice V. G. Palshikar, Presiding
Arbitrator;
(ii) Mr. Justice A. V. Sawant, Arbitrator appointed
by the petitioner-contractor;
(iii) Mr. H. T. Mendegiri, Arbitrator appointed by
the State Government;
(iv) Mr. C. S. Modak, Arbitrator appointed by
CIDCO and
(v) Mr. D. M. More, Arbitrator appointed by
KIDC.
(B) The parties agree that all disputes/claims/counter
claims, etc. arising out of and between the parties in
respect of the above Irrigation Project are referred for
arbitration to the above Arbitral Tribunal.”
37. The Arbitral Tribunal then referred to the facts. The
Arbitral Tribunal in terms of the order passed by this Court
observed that there is not much of a dispute, that 80% of the
work of the Dam has actually been carried out by F. A.
Enterprises. Further, the forest land is required mainly for the
rehabilitation of the project affected persons. Only a small
area of the Dam which comes under left bank embankment
and which is yet to be constructed, requires forest land. The
Tribunal summarised the chronology and referred to the
pleadings. Upon considering the pleadings and the evidence
on record and after hearing the learned counsel, the Tribunal
found that the main issue is (i) : “Whether the Claimant – F. A.
Enterprises is entitled to its Claim Nos.1 to 8 as stated in the
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Statement of Claim?”. The Tribunal noted that the Issue No.(i)
covers eight claims raised by the Claimant – F. A. Enterprises
which are as under :-
Claims under Issue No.(i):
Claim Particulars Amended Claim as
No. Claim restricted
(Rs. Crores) (Rs. Crores)
1. RA Bill No.11 186.89 177.65
KIDC
2. Difference in Rate of M- 75.81 45.30
15 Concrete KIDC
3. Refund of Claimant's 23.79 23.79
Security Deposit from
KIDC
4. Payment made to Police 0.75 0.75
Authorities for Police
Protection on the site
5. Machinery and Labour 48.58 48.58
idling charges
6. Loss of Profit 40.66 40.66
7. Interest 160.08 160.08
8. Costs to be worked out
38. The Tribunal then recorded its findings on the
issues framed. The Tribunal granted Claim No.1 to the tune of
Rs.177.65 crores only and rejected the claim in respect of
balance of Rs.9.24 crores as not pressed. So far as Claim No.2
for Rs.75.81 crores is concerned, the Tribunal granted Claim
No.2 to the tune of Rs.45.30 crores only and rejected the
balance of Rs.30.51 crores as not pressed. So far as Claim
PMB 30
comapl.4915-2020 & ors(4).odtNo.3 for Rs.23.79 crores towards the refund of F. A.
Enterprises’s security deposit lying with KIDC is concerned,
the Tribunal left the claim open to be adjudicated at the
appropriate stage. As regards Claim No.4 for Rs.75 lakhs
towards the payments made by F. A. Enterprises to the State
Police Authorities for police protection at the site is concerned,
the Tribunal granted a claim of Rs.50 lakhs and rejected the
balance claim of Rs.25 lakhs. So far as Claim No.5 for Rs.48.58
crores towards machinery and labour idling charges are
concerned, the Tribunal granted Rs.18.35 crores and rejected
the balance of Rs.30.23 crores. As regards the Claim No.6 for
Rs.40.66 crores for loss of profit is concerned, the finding on
the said claim was deferred. Claim No.7 is for interest on
Claim No.1 which was worked out at Rs.160.08 crores by F. A.
Enterprises. However, it was later on revised to 133.29 crores.
The Tribunal granted Rs.44,43,00,000/- by way of interest
under Claim No.7. In respect of interest on Rs.45.30 crores
awarded on Claim No.2, the Tribunal granted claim of interest
at the rate of 6% per annum.
39. We have perused the judgment and order of the
learned Single Judge. For the reasons hereinafter recorded, in
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our opinion there is no patent illegality in the award of the
Arbitral Tribunal to warrant an interference in Petitions filed
under Section 34 of the said Act. The learned Single Jude has
virtually proceeded to re-appreciate the evidence on record
which is impermissible given the fact that a reading of the
findings of the Arbitral Tribunal coupled with the materials on
record make it appear that the decision of the Arbitral Tribunal
is a plausible view. It is well settled that the scope of
jurisdiction under Section 34 and Section 37 of the said Act is
not akin to normal appellate jurisdiction.
40. The Arbitral Tribunal awarded F. A. Enterprises a
total sum of approximately Rs.303 crores against KIDC. As
regards Claim No.1 for the amount of RA Bill No.11 the Arbital
Tribunal awarded Rs.177 crores that is on the basis of 136,634
CuM of M-15 cement at Rs.8756.85 per CuM as specifically
admitted by KIDC in its reply to F. A. Enterprises Section 31(6)
application and its written submissions dated 1 st February
2019. The findings are at paragraph 36 of the award.
41. So far as Claim No.2 is concerned, claimed for M-15
cement that is the difference between the rate of Rs.14,000
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claimed and Rs.8756 already covered by Claim No.1. The
Arbitral Tribunal awarded the claim on the basis of rate of
Rs.12073 (i.e. difference of Rs.3316 per CuM meaning thereby
Rs.12073 less Rs.8756) and the admitted quantity of
Rs.136,634 CuM which was confirmed by KIDC as the work
having been done. The Arbitral Tribunal noted that a rate of
Rs.12073 per CuM for M-15 concrete work who has been
contemporaneously communicated to F. A. Enterprises by
KIDC’s Executive Engineer’s letter dated 14th December 2010
and F. A. Enterprises had been asked to proceed with the work
in expectation of sanction. Moreover, the rate of Rs.12073 had
also been reflected in the revised proposal of June 2011
submitted by KIDC to CIDCO which had been signed by the
KIDC officers at every level upto the Executive Director. It
appears that after December 2010 KIDC had never informed F.
A. Enterprises that a proposed rate was not accepted/not
applicable. On the basis of the materials the Arbitrator
awarded the admitted quantity of Rs.136,634 CuM at the said
of Rs.12073 per CuM communicated by KIDC’s Executive
Engineer which comes to Rs.45.30 crores. A reference was
made to the Executive Engineer of KIDC letter dated 14 th
December 2010 and the revised proposal of KIDC to CIDCO.
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42. So far as the Claim No.4 as regards Rs.75 lakhs
payment made by F.A.Enterprises to police for providing
protection at site is concerned, the Arbitral Tribunal noted that
the payments had been made by F. A. Enterprises by demand
drafts and that both KIDC and CIDCO had confirmed that
police protection was required in view of protest/agitations
against the Dam work and land acquisition. The Arbitral
Tribunal hence awarded a sum of Rs.50 lakhs.
43. Claim No.5 was for idle machinery and labour to the tune
of Rs.48.58 crores. The Arbitral Tribunal found that F. A.
Enterprises had made a claim vide their letter dated 16 th
August 2013 and that KIDC had responded on 1 st March 2014
stating that the proposal had been submitted for approval.
The Arbitral Tribunal thus held that F. A. Enterprises would be
entitled to the claim under Clauses 34 and 69 of the special
conditions of contract. The Arbitral Tribunal further observed
that KIDC and CIDCO had opposed the claim and contended
that Clause 69 required a record to be maintained of idle
machinery and labour. Though such record had been
maintained by F. A. Enterprises, KIDC and CIDCO contended
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that F. A. Enterprises should have taken steps by the end of
first period, that is on 31st July 2013, to return the hired
machinery so as to mitigate the loss likely to be suffered. The
Arbitral Tribunal accepted this objection and granted the claim
only for the first period, that is till 31 st July 2013, and rejected
the claim regarding the two later periods viz. 1st August 2013
to 30th June 2014 and 1st July 2014 to 31st August 2016.
44. As regards Claim No.7 for interest on RA Bill amount
at 18% amounting to Rs.133 crores, the break up being
Rs.202 crores from 30th July 2012 to 30th July 2013 and for
Rs.177.65 crores [202.65 crores – 25 crores received in
November 2013] from 8th November 2013 to 31st August 2016,
the Arbitral Tribunal held 18% to be exorbitant and under
Section 31(7) awarded 6% on Rs.177 crores regarding Claim
No.1. Similarly interest was awarded at 6% on Claim No.2 as
awarded i.e. on Rs.45.30 crores. Interest was awarded at 9%
on the other two claims awarded. Interest was also awarded
pendent life i.e. from 31st August 2016 at 9% and at 12% after
60 days of the date of award. The Arbitral Tribunal noted that
Clause 17.4 of the contract which purported to bar any claim
for interest was not in support of the authorities, as it referred
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to a contract for depository work for the Thane Municipal
Corporation, Thane which provided that payments will be
subject to funds made available by Thane Municipal
Corporation and in that context it was stated that no interest
would be paid on any account. The Arbitral Tribunal
considered the issue “Does KIDC prove that the Government
Resolution dated 23rd September 2016 issued by the State of
Maharashtra directing KIDC to terminate the agreement with F.
A. Enterprises is valid?”. The other issue was “Does KIDC
prove that the purported termination of the agreement B-1/01
for 2009-10 vide notice dated 28 th October 2016 is legal and
valid?”. The Arbitral Tribunal took note that KIDC is an
autonomous statutory corporation established in accordance
with the provisions of Section 3 of the Konkan Irrigation
Development Corporation Act, 1997 (“the Corporation Act”, for
short). The Arbitral Tribunal then went on to consider in
paragraph 50 the objects of the Act and that in Section 18 of
the Corporation Act, the functions of the Corporation are
enumerated. The Arbitral Tribunal then dealt with Section 25
which are the powers of the State Government to issue
directions which read as under :-
“The State Government may issue to the
Corporation such general or special directions
PMB 36
comapl.4915-2020 & ors(4).odtas to policy or exercise of the powers or
performance of the functions by the
Corporation, excepting in respect of levying
and recovery of water charges by the
Corporation, as it may think necessary or
expedient for carrying out the purpose of this
Act and the Corporation shall be bound to
follow and act upon such directions.”
45. The Arbitral Tribunal was of the opinion that the
provisions of Section 25 of the Corporation Act does not give
wide and unbridled powers to the State Government to nullify
all contractual rights and obligations of the parties arising
under a valid contract which is enforceable in the Court of law,
as the contract in the present case. It was thus the case of F.
A. Enterprises that G.R. dated 27th September 2016 has been
issued without considering the fact that, as against a
sanctioned amount of Rs.594.45 crores for the entire project,
which includes the construction of Dam, an amount of
Rs.495.45 crores has already been paid to F. A. Enterprises
without any whisper or protest in respect of RA Bill Nos.1 to
10. The amounts sanctioned for the construction of Dam was
only Rs.374.07 crores out of the total of Rs.594.45 crores for
the entire project, which includes the cost of rehabilitation
also. The Arbitral Tribunal observed that admittedly, the
amount paid to F. A. Enterprises is only in respect of the
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construction of the 80% work of the Dam. The Arbitral Tribunal
observed that in the preamble of the G.R. which refers to 12
projects in the State and with regard to the direction to
terminate 41 contracts in accordance with the provisions of
the contract and the Indian Contract Act, 1872, there is no
specific reference in respect of any illegality or irregularity in F.
A. Enterprises’s contract. The Arbitral Tribunal was of the
opinion that the exercise of such power was absolutely casual,
wholly malafide and without jurisdiction and hence the G.R. is
null and void in the eyes of law. Based on the said G.R., KIDC
issued the notice of termination dated 28 th October 2016. The
Arbitral Tribunal observed that admittedly F. A. Enterprises was
only concerned with the construction of Dam, which is already
completed to the extent of 80% and did not involve any forest
land, as what is constructed is entirely on non-forest land. The
total forest land involved was 363 Hectors out of which, only a
small area comes under the left bank embankment and the
remaining area is required for submergence and resettlement
activities. The assumption in the notice is that there was a
breach of condition 70 while constructing the Dam. The notice
makes a reference to the requirement of obtaining forest
clearance which is the condition No.17 of the contract. It
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refers to the fact that in the last 7 years an amount of
approximately Rs.1095.63 crores was spent on the present
project, which includes rehabilitation of the project affected
persons, for which forest land was acquired. The Arbitral
Tribunal considered the documents on record which indicated
the requisite steps taken for acquisition in respect of the forest
land. The Arbitral Tribunal found that the last payment, that is
the payment due on the 10 th RA Bill was cleared by KIDC in
April 2011 and for more than one year there was no payment
received by F. A. Enterprises, hence, in June 2012, F. A.
Enterprises was compelled to stop the work at site. The
Arbitral Tribunal thus found that all steps required for
obtaining forest clearance had to be taken by the concerned
authority and it was not for F. A. Enterprises to take steps. This
was a matter between the State Government and Central
Government. The Arbitral Tribunal took a note of the fact that
by a letter dated 28th January 2010 KIDC Executive Engineer
on the basis of discussions with the superior officers had
specifically required F. A. Enterprises to immediately
commence the Dam work on the non-forest land which had
been acquired through the consent of the farmers.
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46. As regards the claim for specific performance the
Tribunal ordered specific performance in view of earlier
findings that 80% of the Dam work had been completed and
that the work had stopped only because large amounts which
had become due and payable for the work done had not been
paid which KIDC later conceded were payable. KIDC and
CIDCO were directed to pay Rs.15 lakhs each to the Claimant
by way of costs.
47. The learned Single Judge set aside the order of the
Arbitral Tribunal. The learned Single Judge was of the view that
as the award permitted F. A. Enterprises to withdraw Rs.28.20
crores deposited by CIDCO and also directed CIDCO to pay
costs of Rs.15 lakhs, the Arbitration Petition filed by CIDCO
was maintainable. The learned Single Judge accepted the oral
submission of the Additional Government Pleader that the
minutes of the arbitration meetings/notices which had been
forwarded by the Arbitral Tribunal, had allegedly not been
served/received to the Government/ the Government Pleader,
Appellate Side. The learned Single Judge observed that “In my
view, the finding of the Arbitral Tribunal that State
Government did not appear though served is factually
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incorrect and contrary to the records produced by the parties
before this Court.” and on that basis held that “the State of
Maharashtra thus has made out a case for setting aside that
part of the award declaring the said Government Resolution as
invalid.” In our opinion, such a finding is unwarranted, as in
the Arbitration Petition filed by the Government had made no
such grievance or that a plea of non-service of the notices of
hearing or violation of natural justice was not raised. It needs
to be noted that in the reply of the State of Maharashtra to the
Interim Application in the Appeal, the State Government
stated that the notices were received by the Government
Pleader, Appellate Side. According to us, the Arbitral Tribunal
rightly held that the same has to be regarded as a valid
service under the circumstances.
48. The learned Single Judge has set aside the award
regarding Claim No.1 which had awarded Rs.177 crores. The
learned Single Judge referred to KIDC’s written submission
dated 1st February 2019 and its reply to the Section 31(6)
application where KIDC had specifically accepted/admitted
that the Claim No.1 deserves to be considered for M-15
concrete for 136,634 CuM at the rate of Rs.8765.85 per CuM
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which was a rate accepted by CIDCO’s 3-member Expert
Committee which was the rate claimed in the said Claim No.1.
The learned Single Judge upon considering the oral evidence
held that “A perusal of the oral evidence led by the Claimant,
KIDC and CIDCO clearly indicates that there was a serious
dispute raised by KIDC and CIDCO in respect of the
measurement submitted by the Claimants and the rates.
Further, the learned Single Judge took into consideration that
the Arbitral Tribunal had awarded Claim No.1 for Rs.177.65
crores “based on the alleged admissions on the part of KIDC.”
and then held that “the Arbitral Tribunal while awarding the
said claim of Rs.177.65 crores has not considered the dispute
raised by KIDC itself and also by CIDCO, not only in its
pleadings but also in the oral and documentary evidence led
before the Arbitral Tribunal disputing the said Claim No.1.” The
learned Single Judge thus held that the award “shows
perversity and patent illegality on the face of it while allowing
Claim No.1. Since there was dispute raised not only by CIDCO
in various parts of its written statement, amended written
statement and in the oral evidence led before the Arbitral
Tribunal specifically denying all claims, the Arbitral Tribunal
could not have allowed the said Claim No.1 on the basis of the
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alleged admissions on the part of KIDC, but ought to have
considered the pleadings and oral evidence”. The learned
Single Judge held that KIDC’s admissions could be explained
at the time of evidence and that KIDC’s witnesses had
disputed the claim in the oral evidence and also during the
course of cross-examination. While rejecting the submission of
re-appreciation of evidence, the learned Single Judge held that
“since the Arbitral Tribunal has not considered the vital oral
and documentary evidence at all, it discloses patent
illegality”. It was held by the learned Single Judge that “the
admissions if any in pleadings however can be explained in
the oral evidence. In this case the Arbitral Tribunal has
referred to the alleged admission of liability in few paragraphs
of pleading/written arguments of KIDC and has totally
overlooked the oral evidence led by all the parties including
KIDC and CIDCO who had clearly disputed the claim of the
Claimant”. We find ourselves persuaded by the arguments of
Mr. Chinoy, learned Senior Advocate for F. A. Enterprises that
these findings of the learned Single Judge are patently
erroneous. The construction contract of 2009 was entered into
only between F. A. Enterprises and KIDC. All claims were made
and all payments were received by F. A. Enterprises only from
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KIDC. Although the claimants were aware that KIDC had a
separate contract with CIDCO whereunder CIDCO was to pay
KIDC for getting the Dam constructed, this did not result in
any privity between F. A. Enterprises and CIDCO. In fact the
Arbitral award records CIDCO’s case that “Claimant is not a
party to that contract (between KIDC and CIDCO) and there is
no privity of contract between the Claimant and CIDCO.
Claimant received all the payments under RA Bill Nos.1 to 10
from KIDC and Claimant is not concerned with the internal
arrangement between KIDC and CIDCO”. In these
circumstances KIDC’s subsequent express admission of Claim
No.1 for Rs.177 crores i.e. for 136,634 CuM of M-15 cement at
the rate of Rs.8765.85, both in its reply to the Section 36(1)
application and in its final written submissions, cannot be
affected by the fact that CIDCO had in its pleadings and
evidence disputed the claim.
49. There is a patent illegality in the findings of learned
Single Judge that KIDC’s admissions could be and were
explained at the time of KIDC’s witness evidence. It ought to
have been considered by the learned Single Judge that KIDC
had made the said submissions/admissions in its reply to the
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Section 31(6) application and in its final written submissions,
both of which had been filed by KIDC after the evidence had
closed. The said finding therefore calls for interference.
50. The learned Single Judge then set aside the award
of Rs.45 crores in respect of Claim No.2. The Arbitral Tribunal
had allowed this claim of Rs.45 crores on the basis of the
admission on the part of KIDC. F. A. Enterprises had claimed
that KIDC’s Executive Engineer had approved/recommended a
rate of Rs.12073 for M-15 concrete and Rs.12836 for M-20
concrete. KIDC had in its written statement denied the claim.
CIDCO also in its written statement denied the claim. In
evidence/cross examination KIDC and CIDCO witnesses had
denied the claim. KIDC’s Executive Engineer though had not
accepted the rates demanded by F. A. Enterprises but had only
stated that the rates had been sent to CIDCO for approval. The
learned Single Judge was of the opinion that though the claim
was disputed by CIDCO and also by KIDC, F. A. Enterprises did
not prove the measurements as well as the rate
independently. Learned Single Judge held that the Arbitral
Tribunal had ignored the pleadings and the evidence in the
impugned award and simply allowed the claim on the basis of
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the alleged admission on the part of Executive Engineer of
KIDC in one letter recommending the said payment to CIDCO
for payment.
51. In our opinion the findings of the learned Single
Judge are beyond the scope of the Courts jurisdiction under
Section 34. The learned Single Judge has sought to re-
appreciate the evidence in the form of the letter of the
Executive Engineer requiring the Petitioners to commence and
carry on the work at the rate of Rs.12073 for M-15 concrete
and Rs.12836 for M-20 concrete. The quantity M-15 cement
work executed by F. A. Enterprises had been expressly
confirmed by KIDC in their additional written statement and in
the reply to the Section 31(6) application and in their final
written submissions that is 136,634 CuM. The rate of Rs.12073
per CuM was not based on any admission by KIDC. It was
based on documentary evidence, that is KIDC’s Executive
Engineer’s letter dated 14th December 2010. We thus find
merit in the submission of Mr. Chinoy, learned Senior Advocate
that the findings of the learned Single Judge in effect proceeds
to re-appreciate the evidence by discarding the KIDC’s letter.
The rate of Rs.12073 per CuM for M-15 cement had also been
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contemporaneously communicated to F. A. Enterprises by
KIDC’s Executive Engineer’s letter dated 14th December 2010
and the Executive Engineer had specifically asked F. A.
Enterprises to undertake the work in anticipation of sanction.
Thereafter, KIDC had never detracted from this
communication. Moreover, there was no question of the
Executive Engineer lacking authority, as the said rate of
Rs.12073 had also been stipulated in KIDC’s revised proposal
of June 2011 which had been signed by KIDC Executive
Director, the Chief Engineer WRD, Government of Maharashtra
and all the senior officers of KIDC. In these circumstances we
find that the Arbitral Tribunal’s award for the admitted
quantity of 136,634 per CuM at the said rate of Rs.12073 per
CuM to the extent of Rs.45.30 crores as justified based on the
materials on record which did not warrant any interference in
the exercise of learned Single Judge’s jurisdiction under
Section 34 of the said Act.
52. So far as the finding of the learned Single Judge
that the award was vitiated as the amendment of 2018 had
increased Claim No.2 and that the Arbitral Tribunal had not
dealt with the specific plea of limitation made by CIDCO
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regarding the amendment effected to Claim No.2, according to
us, the finding of the learned Single Judge is ex-facie
erroneous. The amendment application had itself explained
that Claim No.2 had by an arithmetical error been wrongly
stated as Rs.50.20 crores when on the basis stated in the
claim it should have been for Rs.106 crores. By the
amendment that claim was being reduced/restricted to
Rs.75.82 crores and hence the learned Senior Advocate for F.
A. Enterprises is justified in contending that there was no
occasion for the question of limitation to arise.
53. The learned Single Judge set aside the award
regarding Claim No.4 viz. Rs.50 lakhs paid for police protection
on the ground that F. A. Enterprises had not informed KIDC or
CIDCO that police protection was required. The learned Single
Judge observed that the Arbitral Tribunal had allowed the
claim “beyond the terms of the contract and without proof and
thus deserves to be set aside”. The Arbitral Tribunal while
rendering a finding in favour of F. A. Enterprises on this aspect
had recorded that the payments had been made by F. A.
Enterprises to the police authorities by demand drafts and
that both KIDC and CIDO had confirmed that police protection
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had been required in view of protests/agitations against the
Dam work and the land acquisition. In such view of the matter,
there was no reason for the learned Single Judge to have
interfered with the finding of the Arbitral Tribunal.
54. The learned Single Judge set aside Claim No.5
(Rs.18.35 crores awarded for idle machinery and labour) on
the basis (i) that proof had not been produced of the alleged
idle machinery and manpower; that the Claimant had not
proved mitigation and that the claim was not maintainable
under Clause 15(3) read with 69 as KIDC had not directed F. A.
Enterprises to stop the work. The Arbitral Tribunal has
recorded a finding that F. A. Enterprises had maintained a
record of idle machinery and labour and when they made the
claim vide their letter dated 16th August 2013, KIDC had
responded on 1st March 2014 that the proposal had been
submitted for scrutiny and approval. The award records that
the claim had been made for three periods and as was the
submission of KIDC and CIDCO that the machinery should
have been returned after the first period, the Arbitrators had
allowed the claim only for the first period i.e. till 31 st July 2013,
which finding in our opinion of the Arbitral Tribunal can not be
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said to be perverse to warrant interference. The Arbitral
Tribunal further observed that the stoppage of work had been
caused by KIDC’s failure to make the payment for work
already done by F. A. Enterprises and which amounts, were in
fact conceded by KIDC to have been payable to F. A.
Enterprises. In this view of the matter, the said finding of the
learned Single Judge in our opinion is therefore patently
erroneous.
55. The learned Single Judge set aside the award of
interest on the ground that both KIDC and CIDCO had relied on
Clause 17.4 of the contract which prohibited payment of
interest and that the Tribunal “has totally ignored the said
clause while awarding the claim for interest”. The learned
Single Judge nonetheless noted in paragraph 57 of the award
that the Arbitral Tribunal had held there were several mistakes
in the said Clause 17.4. We find that the Arbitral Tribunal held
that the said Clause 17.4 was “wholly inapplicable” as the
same did not refer to the contract work, or the contracting
parties, and instead stated that “the project is depository work
for Thane Municipal Corporation, Thane. Payments will be
made subject to funds made available by Thane Municipal
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Corporation, Thane and no interest will be paid on any
account”. Thus, the finding of the learned Single Judge is
completely erroneous as Clause 17.4 does not refer to the
contract work or the contracting parties.
56. Further, the learned Single Judge has set aside the
Arbitral Tribunal’s finding that “the G.R. issued under Section
25 was null and void”. The learned Single Judge held that the
Arbitral Tribunal did not have jurisdiction to consider the
validity of the G.R. as it constituted subordinate legislation.
The learned Single Judge held that the Arbitral Tribunal could
only determine the validity of the notice of termination and
not the validity of the G.R. The learned Single Judge found that
the said G.R. could not “be severed from the rest of the award
without affecting the legality and validity of the impugned
award”. We find substance in the submission of Mr. Chinoy,
learned Senior Advocate that the G.R. which was issued qua a
series of contracts did not constitute subordinate legislation
and was only an administrative direction to KIDC. The validity
of the G.R. had arisen incidentally as it had provided that the
contract, alongwith a number of other irrigation/construction
projects, be terminated “on merits and by taking action under
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the relevant contractual clauses”. Moreover, we find that the
Arbitral Tribunal had not considered the validity of the G.R. in
general but only insofar as it had nexus with this contract. The
findings of the Tribunal so far as the G.R. is concerned were
clearly severable and did not affect the validity of the rest of
the award. Moreover, KIDC purported to terminate the
contract not on the basis of the G.R. but on its merits under
Clause 15(1). The finding of the learned Single Judge
therefore should not have interfered with the findings of the
Arbitral Tribunal.
57. The learned Single Judge then set aside the
Tribunal’s finding holding the termination notice invalid in law
and held that the said finding “shows total perversity and
patent illegality” as the Arbitral Tribunal was “treating the
arbitration proceedings as a Writ Petition”. We find substance
in the submissions of Mr. Chinoy, learned Senior Advocate that
the learned Single Judge’s finding is ex-facie erroneous as it
only deals with one aspect of the award dealing with the
termination notice as regards the violation of nature justice in
terminating the contact without a prior show cause notice. The
other aspects recorded by the Arbitral Tribunal in its award
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holding that the termination invalid as (i) the termination
notice had for the first time falsely alleged breach of the
contract by F. A. Enterprises proceeding with the Dam work
without getting forest clearance, overlooking the fact that 363
Hectors of forest land was required only for submergence and
not for the Dam construction and although KIDC had
specifically required F. A. Enterprises to immediately
commence the Dam work on the non-forest land, (ii) F. A.
Enterprises had in fact taken substantial steps through the
Government agencies/officers from 2010-2012 to get forest
land clearance. There was therefore no legal basis for the
learned Single Judge to have upset this finding of the Arbitral
Tribunal.
58. Learned Single Judge next set aside the award of
specific performance holding that the Arbitral Tribunal could
not have exercised its discretion to award specific
performance as; (i) F. A. Enterprises had stopped work on their
own and had not resumed work even after the Court’s order
for deposit/provision of Rs.100 crores; (ii) F. A. Enterprises had
not obtained forest clearance and had accordingly not showed
readiness and willingness. The learned Single Judge held that
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in directing specific performance the Arbitral Tribunal “has not
considered vital evidence and the award discloses patent
illegality”.
59. In our opinion the learned Single Judge ought not to
have interfered with the findings of the Arbitral Tribunal when
pursuant to a detailed discussion and after recording specific
findings the Arbitral Tribunal had directed specific
performance holding (i) that the Claimants had admittedly
completed more than 80% of the Dam construction work; (ii)
the Claimants had been compelled to halt work in mid 2012
only because of KIDC’s failure to make payments even of the
amounts which KIDC had in the Arbitral Reference conceded
were payable to the Claimants; (iii) that the record established
that from 2011-12 the Claimants had through their
consultants at Government agencies taken diverse steps for
securing forest clearance. We are therefore inclined to
interfere with the order of the learned Single Judge.
60. No doubt learned Senior Advocate for the
Respondents with all vigour and vehemence at their command
submitted that the findings recorded by the Arbitral Tribunal
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are so patently illegal and erroneous that there is no warrant
to interfere with the jurisdiction exercised by the learned
Single Judge under Section 34 of the said Act. However, we
are of the firm view that the findings of the Arbitral Tribunal
are based on the materials on record and on a proper
appreciation of evidence. We are satisfied that the view taken
by the Arbitral Tribunal on the basis of the evidence on record
is a plausible view. In such circumstances there was no scope
for the learned Single Judge to have interfered with the award
of the Arbitral Tribunal in the exercise of its jurisdiction under
Section 34 of the said Act.
61. Consequently, the Appeals are allowed. The
impugned judgment and order dated 19 th May 2020 of the
learned Single Judge is quashed and set aside. The award of
the Arbitral Tribunal stands restored. Interim Applications are
disposed of.
(M. S. KARNIK, J.) (CHIEF JUSTICE)
Signed by: Pradnya Bhogale PMB 55
Designation: PA To Honourable Judge
Date: 18/08/2025 14:39:48