Gujarat High Court
Government Of Gujarat vs M/S Watrak Infrastructure Private … on 2 January, 2025
Author: Sunita Agarwal
Bench: Sunita Agarwal
NEUTRAL CITATION
C/FA/1980/2023 ORDER DATED: 02/01/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/FIRST APPEAL NO. 1980 of 2023
With
CIVIL APPLICATION (FOR STAY) NO. 1 of 2022
In
R/FIRST APPEAL NO. 1980 of 2023
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GOVERNMENT OF GUJARAT
Versus
M/S WATRAK INFRASTRUCTURE PRIVATE LIMITED & ANR.
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Appearance:
MS MAITHILI MEHTA ASSISTANT GOVERNMENT PLEADER for the Appellant(s)
No. 1
MR RS SANJANWALA SR. ADVOCATE with MR HARDIK P MODH & MR AMIT
LADHIYA for the Defendant(s) No. 1
NOTICE SERVED for the Defendant(s) No. 2
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CORAM:HONOURABLE THE CHIEF JUSTICE MRS. JUSTICE SUNITA
AGARWAL
and
HONOURABLE MR. JUSTICE PRANAV TRIVEDI
Date : 02/01/2025
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE PRANAV TRIVEDI)
1. The present appeal under Section 37 of the Arbitration and
Conciliation Act, 1996 impugning the judgment and order passed by
the learned 3rd Additional District Judge, Kheda at Nadiad in Civil
Misc. Application No. 273 of 2019, whereby the learned District
Court rejected the application filed under Section 34 of the
Arbitration and Conciliation Act, 1996 (hereinafter referred to as the
“Act”) and confirmed the award dated 25.08.2012 passed by the
learned Arbitral Tribunal.
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2. The relevant facts in the present case are that the Government
of Gujarat (hereinafter referred to as the “appellant”) acting for and
on behalf of the Government of India (hereinafter referred to as the
“GoI”) invited tenders in the month of April 1997 for construction of
‘two lane bridge across River Watrak’ at Ahmedabad – Vadodara
section of the National Highway no. 8 on ‘Build Operation Transfer’
(BOT) basis. The offer and tender of the Larsen & Turbo was
accepted. Thereafter a formal agreement (hereinafter referred to as
the “concession agreement”) was executed in respect of the project
between the appellant, GoI and Larsen and Turbo on 01.03.1999.
Under the agreement, the commencement date was fixed on
01.05.199 and the concession period was fixed as 128 months. The
date of handing over the project by the Larsen and Turbo to the
appellant and GoI was 31.12.2009. Sometime after the execution of
the contract, Larsen and Turbo incorporated a wholly owned
subsidiary, namely Larsen and Turbo Western India Toll Bridge
Limited (hereinafter referred to as the ‘respondent’) as ‘Special
Purpose Vehicle’ for execution of the contract work. In furtherance,
Larsen and Turbo assigned all its rights and obligations under the
contract by executing deed of assignment on 15.07.1999.
3. Pursuant to the assignment deed, construction work was
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started by the respondent. There were some changes which were
required for the design of the bridge. As per the respondent, the
changes were significant changes in the design of both the road and
bridge works There was no response either from the appellant or the
GoI. Further, the GoI issued notification on 26.02.2001 authorizing
the respondent to collect the toll tax as per the rates provided
therein. The respondent thus, became entitled to collect toll tax and
from 27.02.2001 till the end of concession period. However,
difference of opinion arose and communications were exchanged
between the parties. As there was no response from either the
appellant or the GoI, the respondent referred the dispute to the
‘Steering Group’ as provided in clause-9 of the concession
agreement. The Steering Group accepted these changes as variations
and also agreed that the respondent was entitled to compensate for
the cost incurred in executing these extra works and further it was
observed that the concession period deserves to be extended.
Further, as no final decision was taken on this issue till 31.12.2019,
the date on which the concession period ended, the National
Highways Authority of India (NHAI) took over the project from the
respondent.
3.1. Due to the said aspect, a dispute arose between the parties and
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it was submitted by the respondent that during the concession period
the toll could not be collected due to circumstances which were
beyond the control. Many other issues were also raised by the
respondent. These disputes were thus referred to the Steering
Committee Group. As no final decision on the issues was taken by the
Steering Committee Group, the respondent invoked arbitration on
29.01.2010. Pursuant to the invocation of the arbitration, arbitration
panel was constituted. The Arbitration Tribunal by award dated
25.08.2012 allowed the claim as raised by the respondent.
4. Being aggrieved by the arbitral award, the appellant as well as
GoI preferred an application under Section 34 of the Act. The learned
District Court by way of impugned order dated 04.10.2021 dismissed
the application preferred under Section 34 of the Act. Being
aggrieved by the order passed by the learned District Court, the
appellant has preferred the present appeal under Section 37 of the
Act. However, GoI who was also one of the party in the application
under Section 34 of the Act before the learned District Court has not
preferred any appeal. As a matter of fact GoI is assignee as a party
respondent in the present First Appeal. Be that as it may, the present
appeal is preferred by the appellant under Section 37 of the Act,
impugning the order dated 04.10.2021 and the arbitral award dated
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25.08.2012.
5. We have heard Ms. Maithili Mehta, learned Assistant
Government Pleader appearing for the State appellants and Mr. R. S.
Sanjanwala, learned Senior Counsel assisted by Mr. Hardik Modh
and Mr. Amit Ladhiya, learned counsels for the respondent.
6. It was submitted by the learned Assistant Government Pleader
appearing for the State appellants that the learned District Court has
failed to consider that the arbitral award is without jurisdiction as
the award dated 25.08.2012 is passed in favour of the respondent
who is not a party to the concession agreement. The arbitration
clause can only be invoked by the parties to the agreement.
Therefore, the award is without jurisdiction and the learned District
Court has failed to consider this fact. It was further submitted that
the Steering Committee Group held its meeting on 05.11.2009 and
agreed to compensate by extending the period of concession.
However, during the pendency of such proceedings, the respondent
had invoked arbitration which is completely contrary to the terms of
the agreement. Therefore, when the dispute was pending before the
Steering Committee Group, the Arbitral Tribunal could not have
assumed the jurisdiction. It was further submitted that the learned
District Court has not appreciated the fact with regard to the
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additional compensation. It was further submitted that it is a wrong
presumption that the appellant having denied the claim before the
Steering Committee Group and therefore, deemed to have accepted
the liability. Therefore, the entire award showcase the concession
and its against the morality. Based on such submissions and
referring to the observations made by the learned District Court, the
learned Assistant Government Pleader has prayed to allow the
present appeal.
7. Per contra, Mr. R.S. Sanjanwala, learned Senior Counsel
assisted by Mr. Hardikh Modh, learned advocate for the respondent
would submit that the Arbitral Tribunal has considered all the
documentary evidence available on record and thereafter has passed
the arbitral award on 25.08.2012. The award being legal, just and
proper, ought not to be interfered with. The scope of Section 34 of
the Act is very limited and further the scope of Section 37 of the Act
is even more very limited. Therefore, when the award is just, legal
and proper, the same is not required to be interfered with. Mr. R.S.
Sanjanwala, learned Senior Counsel has further referred to clause 15
i.e. variations of the contract period in the concession agreement
dated 01.03.1999. By referring to clause 15.2 it was submitted by
learned Senior Counsel that authorized variations shall be valued at
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the prevailing schedule of rates of National Highway Division and
the concession period may be extended in place of making any cash
payment to the entrepreneur. If the concession period is not
extended, there is no absolute bar on the execution of the cash
compensation. Referring to clause 15.2, it was submitted by Mr.
Sanjanwala, learned Senior Counsel that either the concession period
had to be extended or compensation had to be paid. The appellant
had no right to deny the extension as well as the compensation. The
contract is on BOT basis. The execution was effected due to the
reasons which were beyond the control of the parties and therefore,
either the concession period had to be extended or compensation had
to be given. The appellant has taken a very rigid view in not
considering any of the option in favour of the respondent. Even the
Steering Committee Group had accepted the applicability of
compensation. Therefore, the appellant cannot be denied the
compensation. On the basis of such submissions, the learned Senior
Counsel has prayed to dismiss the appeal preferred by the State –
appellants.
8. Having heard the learned counsels for the parties and having
perused the material on record, the first contention raised by the
appellant is with regard to the respondent not being party to the
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contract and in that context it is to be observed that it is not in
dispute that the respondent is an assignee of the concession
agreement. The respondent is also performing in respect of terms of
the contract. The appellant had accepted assignment and got
performance of the contract. Therefore, it would not be open for the
appellant to contend at this stage that only the contracting party can
invoke arbitration. Once the appellant has been assigned the
performance of the concession agreement and the parties have
accepted the same and performance qua the concession agreement
was done by the respondent, there cannot be dispute with regard to
the applicability of the covenants of the contract vis-a-vis the
respondent. The Arbitral Tribunal has categorically observed on such
aspect which has been confirmed by the learned District Court and
we see no reason to differ to such conclusion drawn by the Arbitral
Tribunal as well as the learned District Court. Once the execution of
the contract is assigned to the respondent, it is bound by the
covenants of the contract. Therefore, the issue raised by the
appellant with regard to the applicability of the contract vis-a-vis the
respondent is absolutely meritless contention.
8.1. The second aspect which needs to be observed is that pursuant
to the award passed by the Arbitral Tribunal, the Steering Committee
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Group had also accepted the compensation aspect and had
categorically communicated to the appellant to accept the same.
Therefore, once the Committee had agreed upon the compensation
aspect, the appellant ought not to have stretched the issue further.
The other glaring aspect is that after the dispute was referred to the
Steering Committee Group as per the terms of the contract, the
Committee sat tight on the dispute for a long time. Therefore, there
was no option to the appellant except to seek reference of the
dispute to the arbitral Tribunal. Therefore, the contention raised by
the learned Assistant Government Pleader that the issue ought not
have been referred to the arbitration when it was pending at large
before the Steering Committee Group, does not deserve any merit.
8.2. Apart from the above aspect, the appellant has raised other
issues of quantum of compensation. Unfortunately, this aspect
cannot be looked into as it goes to the root of appreciating the
categorical reasons given by the Arbitral Tribunal. Once it is
confirmed that the Arbitral award as well as the order passed by the
learned District Court which was as per the law and within
jurisdiction, re appreciation of the evidence and substitution of
quantum of compensation cannot be looked into. Therefore, the
issues raised by the appellant are wholly misconceived and meritless.
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In the present case, the learned Assistant Government Pleader could
not make out any case with regard to the illegality in the Arbitral
Award. On a perusal of the award,it can be categorically found that
the learned Arbitrator has dealt with all the issues on merits. In view
of the same, it would not be possible under Sections 37 and 34 of the
Act to re appreciate the evidence.
9. We may note the decision of the Apex Court in UHL Power
Company Limited vs. State of Himachal Pradesh reported in
[(2022) 4 SCC 116], wherein the Apex Court has held that the
jurisdiction conferred on the Courts under Section 34 of the
Arbitration Act is fairly narrower, when it comes to the scope of
exercise of powers under Section 37 of the Arbitration Act. Noticing
its earlier decision in MMTC Ltd. vs. Vedanta Ltd., reported in
[(2019) 4 SCC 163], it was noticed that the reasons for vesting
such a limited jurisdiction on the Courts in exercise of powers under
Section 34 of the Act, 1996, have been explained therein in para ’11’
as under :-
“11. As far as Section 34 is concerned, the position is well-
settled by now that the Court does not sit in appeal over the
arbitral award and may interfere on merits on the limited
ground provided under Section 34(2) (b) (ii) i.e. if the award
is against the public policy of India. As per the legal position
clarified through decisions of this Court prior to the
amendments to the 1996 Act in 2015, a violation of Indian
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fundamental policy of Indian law, a violation of the interest
of India, conflict with justice or morality, and the existence
of patent illegality in the arbitral award. Additionally, the
concept of the “fundamental policy of Indian law” would
cover compliance with statutes and judicial precedents,
adopting a judicial approach, compliance with the principles
of natural justice, and Wednesbury reasonableness.
Furthermore, “patent illegality” itself has been held to
mean contravention of the substantive law of India,
contravention of the 1996 Act, and contravention of the
terms of the contract.”
28. By referring to various decisions of the Apex Court, it
was noticed from para Nos. ’18’ to ’21’in UHL Power
Company Limited (supra) that it has been held time and
again by the Apex Court that if there are two plausible
interpretations of the terms and conditions of the contract,
then no fault can be found, if the Arbitrator proceeds to
accept one interpretation as against the others. The
construction of the terms of contract is primarily is for an
Arbitrator to decide unless the Arbitrator construes the
contract in such a way that it could be said to be something
that no fair-minded or reasonable person could do. It was
further noted that when the Court is applying ” ‘public
policy test’ to the arbitration award, it does not act as a
court of appeal and consequentially, errors on facts cannot
be corrected”. A possible view by the learned Arbitrator on
facts has necessarily to pass muster as the Arbitrator is the
ultimate master of the quality and quantity of evidence to
be relied upon when he delivers his arbitral award. Thus,
the award based on little evidence or on evidence which
does not measure up in quantity to a trained legal, would
not be held to be involved on this score.
29. The requirement is that the Arbitral Tribunal must
decide in accordance with the terms of the contract, but if
the test is that arbitral tribunal must decide in accordance
with the terms of the contract, but if term of the contract is
construed in reasonable manner within the award ought not
to be set aside on the ground of unreasonableness only. It
was further noticed in paragraph Nos. 20 and 21 as under :-
“20. In Dyna Technologies (P) Ltd. (supra), the view taken
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above has been reiterated in the following words:
“25. Moreover, umpteen number of judgments of this Court
have categorically held that the courts should not interfere
with an award merely because an alternative view on facts
and interpretation of contract exists. The courts need to be
cautious and should defer to the view taken by the Arbitral
Tribunal even if the reasoning provided in the award is
implied unless such award portrays perversity
unpardonable under Section 34 of the Arbitration Act.”
21. An identical line of reasoning has been adopted in South
East Asia Marine Engg. & Constructions Ltd.[SEAMAC
Limited] V. Oil India Ltd. and it has been held as follows:
“12. It is a settled position that a court can set aside the
award only on the grounds as provided in the Arbitration
Act as interpreted by the courts. Recently, this Court in
Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd. [Dyna
Technologies (P) Ltd. v. Crompton Greaves Ltd., (2019) 20
SCC 1 : 2019 SCC OnLine SC 1656] laid down the scope of
such interference. This Court observed as follows : (SCC pp.
11-12, para 24)
24. There is no dispute that Section 34 of the Arbitration
Act limits a challenge to an award only on the grounds
provided therein or as interpreted by various Courts. We
need to be cognizant of the fact that arbitral awards should
not be interfered with in a casual and cavalier manner,
unless the Court comes to a conclusion that the perversity
of the award goes to the root of the matter without there
being a possibility of alternative interpretation which may
sustain the arbitral award. Section 34 is different in its
approach and cannot be equated with a normal appellate
jurisdiction. The mandate under Section 34 is to respect the
finality of the arbitral award and the party autonomy to get
their dispute adjudicated by an alternative forum as
provided under the law. If the Courts were to interfere with
the arbitral award in the usual course on factual aspects,
then the commercial wisdom behind opting for alternate
dispute resolution would stand frustrated.”
13. It is also settled law that where two views are possible,
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the Court cannot interfere in the plausible view taken by
the arbitrator supported by reasoning. This Court in Dyna
Technologies (2019) 20 SCC 1 : 2019 observed as under :
“25. Moreover, umpteen number of judgments of this Court
have categorically held that the Court should not interfere
with an award merely because an alternative view on facts
and interpretation of contract exists. The Courts need to be
cautious and should defer to the view taken by the Arbitral
Tribunal even if the reasoning provided in the award is
implied unless such award portrays perversity
unpardonable under Section 34 of the Arbitration Act.”
[emphasis supplied]”
9.1. In MMTC Ltd. (supra), the Apex Court on the scope of
interference with an order made under Section 34, as per section
37, has held that such interference under Section 37 cannot travel
beyond the restrictions laid down under Section 34. The relevant
para 14 in MMTC Ltd. (supra) be noted :-
“As far as interference with an order made under Section
34, as per Section 37, is concerned, it cannot be disputed
that such interference under Section 37 cannot travel
beyond the restrictions laid down under Section 34. In other
words, the Court cannot undertake an independent
assessment of the merits of the award, and must only
ascertain that the exercise of power by the Court under
Section 34 has not exceeded the scope of the provision.
Thus, it is evident that in case an arbitral award has been
confirmed by the Court under Section 34 and by the Court
in an appeal under Section 37, this Court must be extremely
cautious and slow to disturb such concurrent findings.”
10. In Project Director, National Highways No. 45E and 220
National Highways Authority of India vs. M. Hakeem and
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Another reported in [(2021) 9 SCC 1], the Apex Court while
considering the question of scope of the powers of the Courts under
Section 34 of the Act, 1996 to set aside the award of the Arbitrator
including the power to modify such award, considered its earlier
decision in MMTC (supra) to record that it is settled that the Section
34 proceedings does not contain any challenge on the merits of the
award. It was held that Section 34 of the Arbitration Act, 1996 vary
from being in the nature of appellate provisions. It provides only for
setting aside the awards only on very limited grounds, as contained
in Sub-sections (2) and (3) of Section 34. The recourse to the Court
against arbitral award may be made only by application for setting
aside such award in accordance with Sub-sections (2) and (3).
10.1. It was observed that Section 34 of the Act, 1996 is modelled on
the UNCITRAL Model Law on International Commercial Arbitration,
1985, under which no power to modify the award is given to the
Court hearing a challenge to an award. Statutory scheme under
Section 34 of the Act, 1996 is in keeping with the UNCITRAL Model
Law and legislative policy of minimal judicial interference in arbitral
awards.
11. Referring to the decision of the Apex Court in McDermott
International Inc. vs. Burn Standard Co. Ltd. reported in
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[(2006) 11 SCC 181], it was noticed that 1996 Act makes
provisions for supervisory role of the Courts in the review of the
arbitral award only to ensure fairness. Interference of the Courts is
envisaged in few circumstances only, like in case of fraud or bias of
the Arbitrator, violation of principles of natural justice etc.. The
Courts cannot correct the terms of the Arbitrator. It can only quash
the awards leaving the parties to begin with the arbitration again, if
it so desires. The scheme of the provisions, namely Sections 34 and
37 of the Act, 1996, thus, aims at keeping supervising role of the
Courts at minimum level and this can be justified, as the parties to
the agreement make a conscious decision to exclude the Court’s
jurisdiction by opting for arbitration as they prefer expeditious and
finality over by it. It was, thus, held that there can be no doubt that
given the law laid down by the Apex Court, Section 34 of the 1996
Act cannot be held to include within it a power to modify the award.
12. In view of the same, the First Appeal is devoid of merits and
liable to be dismissed.
Consequently, the Civil Application also stands disposed of.
(SUNITA AGARWAL, CJ )
(PRANAV TRIVEDI,J)
phalguni
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