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Case Title : National Highways Authority of India vs M/s Hindustan Construction Company Ltd.

 Case no :CIVIL APPEAL NO. 4702 OF 2023

 Order no : 7th May, 2024

 Quorum : Hon’ble Mr. Justice Abhay Shreeniwas Oka

 FACTS OF THE CASENATIONAL HIGHWAYS AUTHORITY OF INDIA THROUGH PROJECT DIRECTOR

The appellant- National Highways Authority Of India, Ltd awarded a contract to the respondent i.e, Allahabad bypass project. The project involves construction of a road from 158 to 198 kms and a bridge over the river.

There was a dispute between the parties which was referred to the Arbitration Tribunal. The three claims were Reimbursement of additional expenditure due to increase in royalty rates, Non-payment of executed work and reimbursement of additional costs due to increase in forest transit fees. The Arbitral Tribunal granted an award of reimbursement to respondent with interests and additional costs to respondent with interest and future interests. 

The Appellant filed a petition under sec 34 of Arbitration Act challenging the award. The Single Judge confirmed the majority award Later the appellant appealed under sec 37 of the act before the Division bench in Delhi. The appeal was dismissed

ISSUES

whether the claim for the construction of embankment forms part of the activity of clearing and grubbing and was not payable as embankment work. 

LEGAL PROVISIONS

1. Section 34 of the Arbitration and Conciliation Act, 1996 : Recourse to a Court against an arbitral award may be made only by an application for setting aside such award in accordance with subsection (2) and sub-section (3). (ii) the arbitral award is in conflict with the public policy of India. (iii) it is in conflict with the most basic notions of morality or justice.
2. Section 37 of Arbitration and Conciliation Act, 1996 : provides for an appeal against orders passed under Sections 9, 34, 16 and 17 of the Act.

CONTENTION OF THE APPELLANT

The learned counsel for Appellant contended that the raised royalty rates for soil, sand, stones as notified should be adjusted as per sub clause 70.3. The appellant accepted this condition while submitting the bid and the division bench had misinterpreted the sub clause 70.8. The counsel also argued that the increased tax was not based on legislation.The counsel even stated that additional costs will not be separately paid if already factored into indexing inputs for price adjustments.

The counsel contended that it was not the sole liability of the appellant under clause 70.8 because the respondent incurred expenditure without clear evidence that it was required by the engineer.

The counsel for appellant finally stressed on the need for strict interpretation of contract by the Tribunal and the Court.

CONTENTION OF THE RESPONDENT

The counsel for the respondents pointed out that there is limited scope of Sec 34 to intervene the jurisdiction of the court and even narrower jurisdiction under sec 37.

The learned Counsel embarked that the majority of the view of the Tribunal was based on expert opinions, warranting non interference.

COURT’S ANALYSIS AND JUDGMENT

The issue relates to interpreting the terms of contract between the parties. Referring to legal precedents the SC limited the scope of interference in Sec 34 and Sec 37 of the Arbitrations Act. According to established legal precedents the courts should generally refrain from overturning the awards by the tribunal unless there is clear violation of public policy or illegal patents.

The Supreme Court here emphasized the authority of the Arbitral Tribunal as a principal party of autonomy and respecting its process.

The Division Bench’s decision aligned with the view of the Arbitral Tribunal, therefore it upheld the decision of the Tribunal indicating consistency in legal interpretation, the court found no fault in the tribunal’s award ultimately leading to dismissal of  the appeal. 

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 JUDGMENT REVIEWED BY – Nagashree N M