Allowed

Rungta Projects Limited v. Central Coalfields Limited

Jharkhand HC15 Feb 2023Arb. Appeal/25/2011

Case brief

AI extract

What is this about?

On arbitration appeal, the High Court set aside an impugned order that had struck down an arbitral award awarding Rs. 44,54,057 for diesel price escalation. Holding that the award was a possible interpretation of the contract and that a no-dues certificate did not bar arbitration, the Court upheld the award and allowed the appeal.

What did the court decide?

Impugned order setting aside the arbitral award is set aside; the arbitral award is upheld.

Rungta Projects Limited Vs Central Coalfields Limited — Arbitration | Jharkhand HC (2023)

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IN THE HIGH COURT OF JHARKHAND AT RANCHI

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Arbitration Appeal No. 25 of 2011

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Rungta Projects Limited, a Company duly registered under the provisions of the Companies Act, 1956, having its registered office at 301, Mangalam Building, 24 Hemanka Basu Sarani, P.O. – G.P.O Kolkata, P.S. – Hare Street, District – Kolkata – 700001 and its office at Vikash Bhawan, Bariatu Road, Bariatu P.S. – Lalpur, P.O. – Ranchi University, District – Ranchi – 834008, Jharkhand, through its Director Sri Ram Swaroop Rungta, son of late Ram Kumar Rungta at Vikash Bhawan, Bariatu Road, Bariatu, P.S. – Lalpur, P.O. – Ranchi University, District – Ranchi - 834008

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… … Claimant/Opposite Party/Appellant Versus

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Central Coalfields Limited, a subsidiary of Coal India Limited and a Government of India undertaking having head office at Darbhanga House, P.S. – Kotwali, P.O. – G.P.O Ranchi, District – Ranchi, through its Chairman cum Managing Director at Darbhanga House, P.S. – Kotwali, P.O. G.P.O Ranchi, DistrictRanchi … … Respondent/Petitioner/Respondent

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CORAM: HON’BLE MRS. JUSTICE ANUBHA RAWAT CHOUDHARY

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--For the Appellant : Mr. Pandey Neeraj Rai, Advocate For the Respondent : Mr. A.K. Das, Advocate : Mr. Sahay Gaurav Piyush, Advocate

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11 /15.02.2023 Heard Mr. Pandey Neeraj Rai, learned counsel appearing on behalf of the appellant.

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2. Heard Mr. A.K. Das, learned counsel appearing on behalf of the respondent along with Mr. Sahay Gaurav Piyush, Advocate. 3. This appeal has been filed under section 37 of the Arbitration and Conciliation Act, 1996 (hereinafter referred to as the Act of 1996) arising out of order passed in Misc Case No. 64 of 2010 whereby the arbitral award dated 28.10.2010 passed by the learned sole arbitration Sri Uday Shankar (former chief general manager, central coalfields limited) has been set aside pursuant to objection filed under section 34 of the aforesaid Act of 1996. The learned arbitrator had directed that the Respondent (hereinafter referred to as CCL) would pay an amount of Rs. 44,54,000/- by 31.10.2010 under clause 36 and 36.3 of the agreement of contract dated 08.04.2004

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failing which interest @ 12% per annum would be payable with effect from 01.11.2010 till the date of actual payment.

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Arguments of the Appellant

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4. The learned counsel for the appellant has submitted that the learned court below has travelled beyond the permissible grounds for interference under section 34 of the provisions of the Arbitrations and Conciliation Act, 1996 to set aside the award and has not appreciated the findings of the award which is well reasoned and based on interpretation of the contract as well as conduct of the parties and the attending circumstances.

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5. The learned counsel for the appellant has submitted that the key issue involved in the present case is as to whether the award was beyond the terms of the contract and a further issue is as to whether the appellant having accepted certain amount on 14.12.2008 during the pendency of the arbitration proceedings by making an endorsement “no claim of the claimant is outstanding as on date as per provision of agreement” can be said to be a final settlement of claim between the parties and whether the arbitrator could not have gone ahead and awarded any further amount at all pursuant to the arbitration agreement.

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6. The learned counsel has also submitted that the impugned order has to be examined in the light of permissible scope of interference under Section 34 of Arbitration and Conciliation Act, 1996. The specific case of the appellant is that the award has been passed in terms of the contract and the payment made on 14.12.2008 with the aforesaid endorsement has no bearing in the matter. The further case of the appellant is that the learned Arbitrator while passing the award has interpreted the various terms of contract and considering the terms of contract, the learned arbitrator has given the award within the terms of reference and in terms of the clauses of the agreement and has not travelled beyond the contract of the parties.

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7. The learned counsel has placed the entire award before this Court and has submitted that the entire process was in three parts

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namely extraction, loading, transportation & unloading. He submits that the loading part was executed partly by pay loaders. He has submitted that the dispute involved in the present case which remained for the Arbitrator to decide was whether price escalation in diesel was payable on the diesel used in pay loaders. The learned counsel submits that the Arbitrator after going through the materials and the various clauses of contract, has recorded a specific finding in para 30 (c) that in terms of clause 36 of the contract, all diesel consuming machines were eligible for payment to the contractor of compensation for increase or decrease in the price of diesel.

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8. The learned counsel has placed clause 36 of the contract and he submits that clause 36 of the contract is not confined to use of diesel in surface miner. The learned counsel further submits that so far as the formula is concerned, clause 36.3 gives the formula and the learned Arbitrator has held that clause 36.3 will be deemed to be applicable for operation 1 and 2 and the value of ‘C’ in the formula was decided by the learned Arbitrator on the basis of materials.

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9. Learned counsel submits that the learned Arbitrator was of the specific view that so far as diesel consumption is concerned, the excavation and loading could not be segregated. The learned counsel submits that the learned Arbitrator having interpreted the contract and having taken a plausible and possible view, there was no scope for interference in the award under Section 34 of the Arbitration and Conciliation Act.

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10. Learned counsel has submitted that the principles of interpretation of contract is well settled that the contract is to be interpreted not only on the plain reading of the contract, but also taking into consideration the attending facts of the case. He submits that the learned Arbitrator has taken the entire facts and the terms of the contract to interpret the contract and has passed the award.

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11. He has referred to a judgment reported in (2016) 12 SCC 592 para 13 to submit that construction of the terms of contract is primarily within the domain of the Arbitrator. He has further referred

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to the judgment reported in (2018) 1 SCC 718 para 10 to submit that if the Arbitrator has taken one of the plausible view, the award is to be sustained. The learned counsel has also referred to judgment passed by Hon'ble Supreme Court reported in (2012) 5 SCC 306 para 43 to submit that even if it is not a plausible view and if it is a possible view, then also the award is required to be sustained. The learned counsel has also relied upon a judgment reported in (2018) 1 SCC 718 para 11 to submit that the question of interference in the award would arise only when the interpretation given by the Arbitrator shocks the conscience of the court. He has relied upon another judgment reported in (2015) 3 SCC 49 para 56 to submit that the court’s view with regard to interpretation of contract will not prevail as the courts are not sitting in appeal to the arbitral award.

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12. The learned counsel has also referred to the judgment passed by Hon'ble Supreme Court reported in (2003) 8 SCC 154 para 9 with regard to payment made during the pendency of the arbitral award. He submits that this judgment has been specifically referred to by the learned Arbitrator and considered while proceeding further with the award and rejecting the contention of the respondent that the claim was finally settled between the parties.

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Arguments of the Respondent

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13. The learned counsel for the respondent, on the other hand, while opposing the prayer of the appellant has submitted that the impugned order does not call for any interference. The learned court has considered the award and has found that the same is fit to be set aside. He submits that the award is beyond the terms of the contract. He has also submitted that there was no question of making payment of any diesel escalation for the purposes of diesel use in pay loaders as the formula prescribed for calculation of diesel escalation specifically mentioned the use in surface miners and he submits that the formula takes care of the entire gamut of affairs irrespective of where the diesel is used. The learned counsel submits that once the formula has

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been prescribed, the formula by itself could not have been interfered and given a different interpretation by the learned Arbitrator.

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14. The learned counsel submits that the learned Arbitrator has not only misinterpreted the contract, but has travelled beyond the contract and has re-written the agreement between the parties.

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15. The learned counsel has also submitted that the learned Arbitrator could not have taken into consideration the study carried out by the respondent on the basis of the report dated 29.11.2005 as the agreement was concluded as back as on 08.04.2004. He submits that subsequent circumstances cannot be used to interpret an agreement.

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16. The learned counsel has heavily relied upon the aforesaid note put by the appellant at the time of receiving the payment on 14.12.2008, though during the pendency of the arbitration proceedings. He submits that there is no bar in law for making payment of the entire dues during the pendency of the arbitration agreement, the same having been received without any protest, there was no scope for the learned Arbitrator to proceed further and pass any award.

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17. The learned counsel submits that since the arbitration proceeding was pending, the appellant ought to have received the amount under protest and such amount was admittedly received without any protest, therefore, the learned Arbitrator has wrongly passed the award.

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18. The learned counsel has referred to the judgments passed by Hon'ble Supreme Court reported in (1994) Supp. (3) SCC 126 para 5; (2000) 8 SCC 1 para 5 to submit that the claim beyond the agreement cannot be entertained. He has also referred to a judgment passed by this Court reported in (2001) 1 JLJR 48 para 16 and 17 to submit that in the said case, the reference to arbitration was itself rejected on account of no dues certificate given by the claimant. He has referred to judgment reported in (2011) 15 SCC 101 para 11 to submit that the learned Arbitrator cannot rewrite the terms of the contract. He has also

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referred to judgments reported in (2006) 4 SCC 445 para 13 and 14 and AIR 2003 SC 2629 para 14, 22, 73 and 74 to submit that the award is fit to be set aside when it is against the substantive provision of law and contrary to the contract.

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Findings of this Court

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19. Before proceeding with the merits of the case, it would be important to refer to the scope of interference in arbitral award under section 34 of the aforesaid Act of 1996. It is also important to note that the petition under section 34 of the aforesaid Act of 1996 was filed prior to 23.10.2015 i.e before coming into force of the 2015 Amendment Act in the aforesaid Act of 1996. (reference may be made to para 19 of the judgement passed by the Hon’ble Supreme Court in the case reported in (2019) 15 SCC 311 [Ssangyong Engineering and Construction Company Limited versus National Highway Authority of India)] .

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On the point of interpretation of contract by the arbitrator and scope of interference in the arbitral award under section 34 of the aforesaid Act of 1996, the following judgements have been cited by the parties:-

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20. In the judgment passed by Hon’ble Supreme Court reported in ( 2011) 5 SCC 758 (J.G. Engineers (P) Ltd. v. Union of India), the nature of exercise of power by the civil court in the matter of validity of arbitral award has been stated to be as under in para 10:-

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“10.A civil court examining the validity of an arbitral award under Section 34 of the Act exercises supervisory and not appellate jurisdiction over the awards of an Arbitral Tribunal. A court can set aside an arbitral award, only if any of the grounds mentioned in Sections 34(2)(a)(i) to (v) or Sections 34(2)(b)(i) and (ii), or Section 28(1)(a) or 28(3) read with Section 34(2)(b)(ii) of the Act, are made out. An award adjudicating claims which are “excepted matters” excluded from the scope of arbitration, would violate Sections 34(2)(a)(iv) and 34(2)(b) of the Act. Making an award allowing or granting a claim, contrary to any provision of the contract, would violate Section 34(2)(b)(ii) read with Section 28(3) of the Act.”

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21. In the judgment passed by Hon’ble Supreme Court in the case of N ational Highways Authority of India –vs- JSC Centrodorstroy reported in (2016) 12 SCC 592, it has been held in para 13 that it has

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consistently been laid down that construction of the terms of a contract is primarily for an arbitrator or Arbitral Tribunal to decide and unless the arbitrator or Arbitral Tribunal construes the contract in such a way that no fair minded or reasonable person could do, no interference by Court is called for.

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22. In the judgment passed by Hon'ble Supreme Court in the case of Rashtriya Ispat Nigam Ltd. –vs- Dewan Chand Ram Saran reported in (2012) 5 SCC 306 in para 43, it has been held that if the term of the contract was capable of two interpretations, the view of the arbitrator would sustain if it was a possible view, if not a plausible one. In such circumstances, it is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract and under such circumstances, the court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator.

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23. Para 56 of the judgment passed by Hon'ble Supreme Court in the case of Associate Builders –vs- DDA reported in ( 2015) 3 SCC 49 is quoted as under:

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“56. Here again, the Division Bench has interfered wrongly with the arbitral award on several counts. It had no business to enter into a pure question of fact to set aside the arbitrator for having applied a formula of 20 months instead of 25 months. Though this would inure in favour of the appellant, it is clear that the appellant did not file any cross-objection on this score. Also, it is extremely curious that the Division Bench found that an adjustment would have to be made with claims awarded under Claims 2, 3 and 4 which are entirely separate and independent claims and have nothing to do with Claims 12 and 13. The formula then applied by the Division Bench was that it would itself do “rough and ready justice”. We are at a complete loss to understand how this can be done by any court under the jurisdiction exercised under Section 34 of the Arbitration Act. As has been held above, the expression “justice” when it comes to setting aside an award under the public policy ground can only mean that an award shocks the conscience of the court. It cannot possibly include what the court thinks is unjust on the facts of a case for which it then seeks to substitute its view for the arbitrator's view and does what it considers to be “justice”. With great respect to the Division Bench, the whole approach to setting aside arbitral awards is incorrect. The Division Bench has lost sight of the fact that it is not a first appellate court and cannot interfere with errors of fact.”

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24. In the judgment passed in the case of Sutlej Construction Ltd. –vs- State (UT of Chandigarh) reported in ( 2018) 1 SCC 718, it has been held that the Hon’ble Supreme Court had opined that when it

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comes to setting aside of an award under the public policy ground, it would mean that the award should shock the conscience of the Court and would not include what the Court thinks is unjust on the facts of the case seeking to substitute its view for that of the arbitrator to do what it considers to be “justice”. Reference was made to the judgement of Associate Builders v. DDA reported in (2015) 3 SCC 49 . Vide para 10, the Hon’ble Supreme Court disagreed with the approach of the High Court and sustained the arbitral award by observing that t he dispute in question had resulted in a reasoned award. It was not as if the arbitrator had not appreciated the evidence. The arbitrator had taken a plausible view.

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25. Para 14, 22, 73 and 74 of the judgment passed by Hon'ble Supreme Court in the case of ONGC Ltd. –vs- Saw Pipes Ltd. reported in AIR 2003 SC 2629 : (2003) 5 SCC 705 are quoted as under:

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“14. The aforesaid interpretation of the clause (v) would be in conformity with the settled principle of law that the procedural law cannot fail to provide relief when substantive law gives the right. The principle is — there cannot be any wrong without a remedy. In M.V. Elisabeth v. Harwan Investment & Trading (P) Ltd. [1993 Supp (2) SCC 433] this Court observed that where substantive law demands justice for the party aggrieved and the statute has not provided the remedy, it is the duty of the court to devise procedure by drawing analogy from other systems of law and practice. Similarly, in Dhannalal v. Kalawatibai [(2002) 6 SCC 16] this Court observed that wrong must not be left unredeemed and right not left unenforced.

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22. The aforesaid submission of the learned Senior Counsel requires to be accepted. From the judgments discussed above, it can be held that the term “public policy of India” is required to be interpreted in the context of the jurisdiction of the court where the validity of award is challenged before it becomes final and executable. The concept of enforcement of the award after it becomes final is different and the jurisdiction of the court at that stage could be limited. Similar is the position with regard to the execution of a decree. It is settled law as well as it is provided under the Code of Civil Procedure that once the decree has attained finality, in an execution proceeding, it may be challenged only on limited grounds such as the decree being without jurisdiction or a nullity. But in a case where the judgment and decree is challenged before the appellate court or the court exercising revisional jurisdiction, the jurisdiction of such court would be wider. Therefore, in a case where the validity of award is challenged, there is no necessity of giving a narrower meaning to the term “public policy of India”. On the contrary, wider meaning is required to be given so that the “patently illegal award” passed by the Arbitral Tribunal could be set aside. If narrow meaning as contended by the learned Senior Counsel Mr Dave is given, some of the provisions of the Arbitration Act would become nugatory. Take for illustration a case wherein there is a specific provision in the contract that for delayed payment of the amount due and payable, no interest would be payable, still however, if the arbitrator has passed an award granting interest, it would be

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against the terms of the contract and thereby against the provision of Section 28(3) of the Act which specifically provides that “Arbitral Tribunal shall decide in accordance with the terms of the contract”. Further, where there is a specific usage of the trade that if the payment is made beyond a period of one month, then the party would be required to pay the said amount with interest at the rate of 15 per cent. Despite the evidence being produced on record for such usage, if the arbitrator refuses to grant such interest on the ground of equity, such award would also be in violation of sub-sections (2) and (3) of Section 28. Section 28(2) specifically provides that the arbitrator shall decide ex aequo et bono (according to what is just and good) only if the parties have expressly authorised him to do so. Similarly, if the award is patently against the statutory provisions of substantive law which is in force in India or is passed without giving an opportunity of hearing to the parties as provided under Section 24 or without giving any reason in a case where parties have not agreed that no reasons are to be recorded, it would be against the statutory provisions. In all such cases, the award is required to be set aside on the ground of “patent illegality”.

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73. It is to be reiterated that it is the primary duty of the arbitrators to enforce a promise which the parties have made and to uphold the sanctity of the contract which forms the basis of the civilized society and also the jurisdiction of the arbitrators. Hence, this part of the award passed by the Arbitral Tribunal granting interest on the amount deducted by the appellant from the bills payable to the respondent is against the terms of the contract and is, therefore, violative of Section 28(3) of the Act.

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74. In the result, it is held that:

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(A) (1) The court can set aside the arbitral award under Section 34(2) of the Act if the party making the application furnishes proof that:

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(i) a party was under some incapacity, or

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(ii) the arbitration agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law for the time being in force; or

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(iii) the party making the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise unable to present his case; or

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(iv) the arbitral award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration.

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(2) The court may set aside the award:

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(i)(a) if the composition of the Arbitral Tribunal was not in accordance with the agreement of the parties,

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(b) failing such agreement, the composition of the Arbitral Tribunal was not in accordance with Part I of the Act.

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(ii) if the arbitral procedure was not in accordance with:

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(a) the agreement of the parties, or

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(b) failing such agreement, the arbitral procedure was not in accordance with Part I of the Act.

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However, exception for setting aside the award on the ground of composition of Arbitral Tribunal or illegality of arbitral procedure is that the agreement should not be in conflict with the provisions of Part I of the Act from which parties cannot derogate.

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(c) If the award passed by the Arbitral Tribunal is in contravention of the provisions of the Act or any other substantive law governing the parties or is against the terms of the contract.

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(3) The award could be set aside if it is against the public policy of India, that is to say, if it is contrary to:

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(a) fundamental policy of Indian law; or

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(b) the interest of India; or

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(c) justice or morality; or

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(d) if it is patently illegal.

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(4) It could be challenged:

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(a) as provided under Section 13(5); and

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(b) Section 16(6) of the Act.

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(B)(1) The impugned award requires to be set aside mainly on the grounds:

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(i) there is specific stipulation in the agreement that the time and date of delivery of the goods was of the essence of the contract;

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(ii) in case of failure to deliver the goods within the period fixed for such delivery in the schedule, ONGC was entitled to recover from the contractor liquidated damages as agreed;

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(iii) it was also explicitly understood that the agreed liquidated damages were genuine pre-estimate of damages;

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(iv) on the request of the respondent to extend the time-limit for supply of goods, ONGC informed specifically that time was extended but stipulated liquidated damages as agreed would be recovered;

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(v) liquidated damages for delay in supply of goods were to be recovered by paying authorities from the bills for payment of cost of material supplied by the contractor;

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(vi) there is nothing on record to suggest that stipulation for recovering liquidated damages was by way of penalty or that the said sum was in any way unreasonable.

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(vii) In certain contracts, it is impossible to assess the damages or prove the same. Such situation is taken care of by Sections 73 and 74 of the Contract Act and in the present case by specific terms of the contract.”

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The respondent has submitted that in this judgment, it has been, interalia , held that the award can be set aside if it is in contravention to the provisions of Act or other substantive law governing the parties or is against the terms of the contract.

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26. Para 13 and 14 of the judgment passed by Hon'ble Supreme

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Court in the case of Hindustan Zinc Ltd. –vs- Friends Coal Carbonisation reported in (2006) 4 SCC 445 are quoted as under:

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“13. This Court in ONGC Ltd. v. Saw Pipes Ltd. [(2003) 5 SCC 705] held that an award contrary to substantive provisions of law or the provisions of the Arbitration and Conciliation Act, 1996 or against the terms of the contract, would be patently illegal, and if it affects the rights of the parties, open to interference by the court under Section 34(2) of the Act. This Court observed: (SCC pp. 718 & 727-28, paras 13 & 31)

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“13. The question, therefore, which requires consideration is—whether the award could be set aside, if the Arbitral Tribunal has not followed the mandatory procedure prescribed under Sections 24, 28 or 31(3), which affects the rights of the parties. Under sub-section (1)(a) of Section 28 there is a mandate to the Arbitral Tribunal to decide the dispute in accordance with the substantive law for the time being in force in India. Admittedly, substantive law would include the Indian

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Contract Act, the Transfer of Property Act and other such laws in force. Suppose, if the award is passed in violation of the provisions of the Transfer of Property Act or in violation of the Indian Contract Act, the question would be—whether such award could be set aside. Similarly, under sub-section (3), the Arbitral Tribunal is directed to decide the dispute in accordance with the terms of the contract and also after taking into account the usage of the trade applicable to the transaction. If the Arbitral Tribunal ignores the terms of the contract or usage of the trade applicable to the transaction, whether the said award could be interfered. Similarly, if the award is a non-speaking one and is in violation of Section 31(3), can such award be set aside? In our view, reading Section 34 conjointly with other provisions of the Act, it appears that the legislative intent could not be that if the award is in contravention of the provisions of the Act, still however, it couldn't be set aside by the court. If it is held that such award could not be interfered, it would be contrary to the basic concept of justice. If the Arbitral Tribunal has not followed the mandatory procedure prescribed under the Act, it would mean that it has acted beyond its jurisdiction and thereby the award would be patently illegal which could be set aside under Section 34.

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***

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31. … in our view, the phrase ‘public policy of India’ used in Section 34 in context is required to be given a wider meaning. It can be stated that the concept of public policy connotes some matter which concerns public good and the public interest. What is for public good or in public interest or what would be injurious or harmful to the public good or public interest has varied from time to time. However, the award which is, on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such award/judgment/decision is likely to adversely affect the administration of justice. Hence, in our view in addition to narrower meaning given to the term “public policy” in Renusagar case [Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supp (1) SCC 644] , it is required to be held that the award could be set aside if it is patently illegal. The result would be—award could be set aside if it is contrary to:

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(a) fundamental policy of Indian law; or

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(b) the interest of India; or

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(c) justice or morality; or

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(d) in addition, if it is patently illegal.

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Illegality must go to the root of the matter and if the illegality is of trivial nature it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.”

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14. The High Court did not have the benefit of the principles laid down in Saw Pipes [(2003) 5 SCC 705], and had proceeded on the assumption that award cannot be interfered with even if it was contrary to the terms of the contract. It went to the extent of holding that contract terms cannot even be looked into for examining the correctness of the award. This Court in Saw Pipes [(2003) 5 SCC 705] has made it clear that it is open to the court to consider whether the award is against the specific terms of contract and if so, interfere with it on the ground that it is patently illegal and opposed to the public policy of India.”

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27. In the judgment relied upon by the respondent passed by the Hon’ble Supreme Court reported in (2011) 15 SCC 101, there was a contract by which the contractor was to be paid at specified rate for earth cutting, but he spent huge amount on rock blasting work and consequently claimed additional amount. The Hon’ble Supreme Court was of the view that once the rate was fixed in the contract for a particular work the contractor was not entitled to claim additional amount merely because he had to spent more to carry out such work and in such circumstances it was held that it was not open to the Arbitrator to rewrite the terms of the contract and award the contractor a higher rate for the work for which a rate was already fixed in the contract and consequently, it was held that the Arbitrator had exceeded his authority and power and the High Court could not be said to have committed any error in offsetting the award passed by the Arbitrator with regard to such claim.

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28. In the other judgement relied upon by the learned counsel for the respondent reported in (2006) 4 SCC 445 , it has been clearly held and reiterated that the award could be set aside if it is contrary to:

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(a) fundamental policy of Indian law; or

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(b) the interest of India; or

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(d) in addition, if it is patently illegal.

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Illegality must go to the root of the matter and if the illegality is of trivial nature, it cannot be held that award is against the public policy. Award could also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court. Such award is opposed to public policy and is required to be adjudged void.

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On the point of no dues certificate, the following judgements have

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been cited by the parties.

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29. In the judgment passed by Hon’ble Supreme Court in the case of Bharat Coking Coal Ltd. –vs- Annapurna Construction reported in (2003) 8 SCC 154 , it was held that o nly because the respondent had accepted the final bill, the same would not mean that it was not entitled to raise any claim. It was not the case of the appellant that while accepting the final bill, the respondent had unequivocally stated

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that he would not raise any further claim. In absence of such a declaration, the respondent cannot be held to be estopped or precluded from raising any claim.

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30. In the judgment passed by Hon'ble Supreme Court in the case of P.K. Ramaiah & Co. –vs- NTPC reported in (1994) Supp (3) SCC 126, it was not in dispute that the appellant had settlement with the respondent in writing. The question emerged as to whether there exists arbitrable dispute between the parties for reference. In the said case, Civil Court after hearing the parties, appointed an Arbitrator and the order of appointment of arbitrator was challenged. The High Court held that the claimant had acknowledged the final measurement and accepted the payment in full and final settlement of the contract, therefore, there was no subsisting contract for reference. It was also held by the high court that after 3 years from the date of rejecting the claim, the claim was barred by limitation, and set aside the order of the civil court giving rise to this appeal. It was held that the claimant having acknowledged the settlement and also accepted measurements and having received the amount in full and final settlement of the claim, there was accord and satisfaction and consequently, there was no existing arbitrable dispute for reference to the arbitration.

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31. In the judgement passed by Hon'ble Supreme Court in the case of Union of India –vs- Popular Builders reported in ( 2000) 8 SCC 1, it was held that existence of a dispute being the condition precedent for appointment of an arbitrator and on the facts of the said case, it transpired from the award itself that only as against Claim Item 2, the Union of India had pleaded that the said claim cannot be entertained in view of the receipt of the final bill by the Contractor without any protest, though the arbitrator had rejected the said plea of the Union of India. The Hon’ble Supreme Court thought it appropriate to hold that so far as Claim Item 2 was concerned, the same could not have been a matter of reference of an arbitrable dispute and as such, had set-aside the award of the arbitrator to that extent.

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32. In the judgment passed in the case of Krishna Associates –vsCentral Coalfield Ltd. reported in (2001) 1 JLJR 48, this Court held that the petitioner after having received the amount in full and final settlement of the claim cannot be permitted to raise additional claim and demand reference of the dispute for arbitration and in such circumstances the dispute raised will not be arbitrable.

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33. Keeping the aforesaid proposition of law with regards to interference in the arbitral award, the key issue involved in the present case is as to-

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I. Whether the award was beyond the terms of the contract and whether the interpretation to the contract given by the learned arbitrator was a possible view?

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II. Whether the arbitrator was within his right to award any amount after the appellant issued a no claim certificate on 14.12.2008 during the pendency of the arbitration proceedings, to the respondent?

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III. Whether the learned court below was justified in setting aside the award considering the scope of section 34 of the aforesaid Act of 1996?

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Issue No. I

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34. The appellant had entered into a contract with the respondent for extraction and transfer of coal/coal measures strata by deploying “Surface Miner” and other allied equipment on hiring basis at Ashoka OCP Mine of CCL and also for transporting the coal by appellant’s tipping trucks to RCM/Bachra siding and unloading mechanically.

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35. Dispute arose between the parties and the matter was referred to learned Arbitrator by an order passed by this Court in Arbitration Application No. 11 of 2007. The learned Arbitrator was a former Chief General Manager (Civil), CCL. The Award was published on 30.08.2010.

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36. It is not in dispute that the price of diesel exceeded by more than 5% over base price and CCL was to compensate as per price variation clause in terms of Clause 36 of the Contract. The formula was also provided under clause 36 of the contract. The dispute boiled down to interpretation and applicability of the formula with particular reference to component ‘C’ in the formula. The claimant-appellant

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asked for the compensation against diesel escalation with respect to loading/transfer done by pay loaders, but the respondent-CCL has refused to give such compensation. It has given the same for extraction or scrapping (by Surface Miner) and for transportation (by tipping trucks). The ground for denial is that according to CCL’s interpretation of the terms of the contract diesel escalation was not compensatable for loading by pay loader and the contractor should have used the loading device attached with Surface Miner itself which was used for extraction.

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37. Important clauses of the agreement referred to by the learned arbitrator and referred to by the counsel for the parties are as follows: -

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14. Offered Rates

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14.1 All taxes, whether Local, Municipal, Provincial or Central and Sales Tax on work contract etc., which are payable or many become payable during the entire period of contract, shall be to the contractor/contractor’s account and shall be deemed to have been included in the offered “rates” in the tender for the work to be executed by him/them.

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14.2 The “rates” quoted should be inclusive of all expenditure relating to wages, maintenance, fuel & lubricant charges, wear and tear and all incidental charges thereon and also inclusive of the elements of supervision and contractor’s profit, which shall be deemed to be firm and non-variable during the entire tenure of the contract.

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14.3 Whenever, the price of diesel exceeds/decreases by more than 5% over the “base price”, the Company will compensate/recover, for such increase/decrease in price as per the “Price Variation clause” provided in Clause-36.

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14.4. The tenderer shall submit “analysis of the offered rate(s)” in the cover containing Part-II (Rate Offer).

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16 SUPPLY OF DIESEL

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16.1. The contractor shall at his own expenses, provide all materials required for the work including diesel, lubricants and spare-parts and the 'rates’ quoted by the contractor shall be inclusive of all material required for completion of the work as specified in the contract.

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16.2. In case of general shortage of diesel in the local market or in emergency/extraordinary circumstances where the Area G.M, has agreed to supply diesel for the contract, the contractor shall give in writing of his requirement in accordance with the agreed phased programme on the basis of actual consumption. The value of diesel so supplied shall be set off or deducted from the payment to be made for the item of work in which such diesel has been consumed, or from any sum then due or to become due to the contractor thereof.

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The contractor shall bear the cost of loading, transportation, unloading and storing etc. of diesel supplied to him. The departmental supply of

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diesel will be charged at the rate of purchase price plus Sales Tax as applicable and storage & Administration Charges @20%.

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36 PRICE VARIATION CLAUSE FOR INCREASE/INCREASE IN PRICES OF DIESEL & LUBRICANTS

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36.1 If the prices of diesel, lubricants increase/decrease by more than 5% from the prices as prevailing on the base date, the same shall be neutralized in the form of compensation/recovery for such increase/decrease as per provision detailed below.

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Escalation/recovery in price of Diesel & Lubricants is admissible only when the price variation exceeds 5%. The base date for working out such variation shall be the date on which tenders were stipulated to be received. The price prevailing on base date shall be reckoned for computation of price variation.

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36.2 The contractor shall submit certified copy of prie of Diesel, Lubricant from IOC/IBP as the case may be.

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36.3 The formula for calculation of compensation/recovery for variation in diesel price shall be as under (for Surface Miner): - Diesel Variation rate per Cu.m.

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VF = Cx (FL – Flo) Where VF – Variation ‘rate’ ……due to variation in cost of diesel to be paid or recovered.

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C – Consumption of diesel in Litre / to be determined by the Company Hqrs. Depending on the model, type, capacity of the Surface Miners. FL – Revised price of diesel/litre

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Flo – Base Price of diesel/litre

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In addition to above variation, further revision of rate on account of transportation element in the awarded rate, shall be applicable as per the formula to be decided by the management.

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36.4 The compensation/recovery for variation of price of lubricants shall depend on the model, type, capacity of the Surface Miners and the lubricants used in such equipments, compensation/recovery to be made for variation on prices of different lubricants will be decided by the Company Hqrs., on the basis of actual working of the surface Miners in the field. 36.5 Such compensation/recovery variation for escalation in prices of diesel and lubricants shall be available only for the work done during the stipulated period of the contract including such period for which the contract is validly extended under the provisions of the contract without any penal action.”

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38. The learned Arbitrator recorded that the contract in dispute was essentially based on following three work components stated in sequence:

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(i) Scrapping coal by surface miner,

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(ii) Loading the scrapped coal product into tipping trucks.

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(iii) Transporting the coal by tipping trucks to pre-determined destination and unloading the same at required location.

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39. The learned Arbitrator observed that scrapping and loading i.e. aforesaid Item Nos. (i) and (ii) can be combined, if surface miner is equipped with combination for loading the tipping trucks. The combination was used in the project as was evident from the industrial engineering study carried out by CCL in the said project. The Arbitrator also observed that the combination of surface miner and attached loading equipment consumed more diesel than surface miner alone and this was revealed from the industrial engineering study.

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40. The learned Arbitrator also observed that the sequence operation of scrapping and loading by the combined system could not be split into two parts and the operation of combination of surface miner and attached loading equipment has to be taken as one joint operating unit and therefore, as a combination, this joint operating unit which consumed diesel had to be legitimately entitled to payment of compensation for increase in price of diesel during contract period.

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41. Upon interpretation of the contract, the learned Arbitrator was of the view that stipulation made in the contract, splitting the two parts of the combined equipment unit into surface miner and attached loading contrivance for purpose of paying compensation towards increase in price of diesel, was illegal.

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42. Upon perusal of the Award, it further appears that the Central Coalfields Limited (CCL), who was respondent before the learned Arbitrator filed a two page document to submit that as per the study report on determination of diesel consumption norms of surface miner with loading arrangement, a Committee was constituted consisting of three representatives of the company and one representative of the contractor and the Committee adopted methods to determine the surface miner loading arrangement combination at 0.494 liter per cubic meter. Such study was carried out on 29.11.2005. The learned Arbitrator recorded that the report did not bear the signature of the contractor’s representative and also observed that in a bipartite contract, presence of the other party in every decision making is required to ensure transparency in the contract. It was also observed

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by the learned Arbitrator that the study of 29.11.2005 was placed before the functional director of CCL who deliberated on the issue and approved 0.3529 liter per cubic meter as the value of component ‘C’ for calculation of diesel variation rate for surface miner only and the learned arbitrator posed a question as to why the value of ‘C’ from 0.4984 liter per cubic meter as determined by the authorized committee of specialized people was reduced without giving any reason for cutting down the norm to 0.3529 liter per cubic meter.

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43. The learned Arbitrator recorded that there was no explanation from the side of the CCL and therefore, it was for the arbitrator to make his own interpretation and inferences. The learned Arbitrator rejected the contention of CCL that functional directors’ decision was final and the functional directors could override any Committee’s decision. The Arbitrator further went on to record that for unknown reasons, the financial directors decided to postpone their decision on diesel norms for value of ‘C’ for loading arrangement part and therefore, the learned Arbitrator had to deal with it.

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44. It has been recorded by the learned Arbitrator that the claimant had protested against the lowering of value of ‘C’ in their claim petition and the reason for denial by CCL was perhaps their interpretation of Clause A (10) of general terms and condition which enjoins on the contractor’s responsibility for transfer of loading/transfer of coal/coal measures strata into contractor’s tipping trucks/dumpers. However, the learned Arbitrator observed that Clause 10.12 of General Terms and Conditions (GTC) said that no manual work shall be engaged by the contractor for loading/unloading of the trucks under any circumstances whatsoever.

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45. The learned Arbitrator recorded following factual findings by a well-reasoned award: -

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(a) The terms of the contract were interpreted to mean that diesel escalation was for entire work including loading;

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(b) The terms of the contract were interpreted to mean that loading/transfer was permissible to be done by other devices including pay loader; (c)

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(c) In fact, use of pay loader for loading was allowed by CCL for the entire period of about 3 years of work;

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(d) The consumption factor 'C' for Surface Miner with attached loading device (as per CCL's study) was 0.4984 litre/CUM;

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(e) The consumption factor 'C' for Surface Miner only was 0.3529 litre/CUM;

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(f) In other contracts for similar work CCL treated the consumption factor for loading either by Surface Miner or by pay loader to be same;

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(g) So, diesel consumption attributable to the use of loading device (0.49840.3529) litre/CUM = 0.1455 litre/CUM;

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(h) Diesel consumption in the use of Surface Miner with loading device is more than the consumption in case of use of Surface Miner;

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(i) So, contractor using Surface Miner only for extraction and pay loader for loading should get diesel escalation compensation for loading by pay loader by considering the consumption factor 'C' as 1.465 litre/CUM (which is equivalent to 0.9387 litre/Ton.) Upon this, the total amount payable could come to 56 lakhs plus;

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(j) The contractor however offered to accept a lessor consumption factor ‘C’ which was allowed by CCL in other contracts of similar nature for loading by pay loader i.e. 0.30 litre/ton (which is equivalent to 0.465 litre/CUM). Upon this the amount payable would be 44 lakhs & odd;

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(k) So, ultimately Arbitrator allowed compensation at such lessor consumption factor (0.30 litre/ton which is equivalent to 0.465 litre/CUM) amounting to Rs. 44,54,057/- payable on or before 31.10.2010, otherwise to fetch simple interest @ 12% p.a. with effect from 01.11.2011.

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46. The claimant-appellant asked for the compensation against diesel escalation with respect to loading/transfer done by pay loaders, but the respondent-CCL has refused to give such compensation. It has given the same for extraction or scrapping (by Surface Miner) and for transportation (by tipping trucks). The ground for denial is that according to CCL’s interpretation of the terms of the contract diesel escalation was not to be compensated for loading by pay loader and the contractor should have used the loading device attached with Surface Miner itself which was used for extraction.

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47. Upon perusal of the award, this Court finds that the award is a well-reasoned award. The learned arbitrator elaborately considered the entire gamut of affairs between the parties, clauses of the contract including bar from using manual labor, scope and ambit of the escalation clause etc., conduct of the parties, usages in the trade by referring to another contract which was brought on record. The deliberations with regards to component ‘C’ in the formula which provided that C – i.e Consumption of diesel in Litre / to be determined

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by the Company Hqrs. Depending on the model, type, capacity of the Surface Miners. The escalation formula at the end also provided that in addition to above variation, further revision of rate on account of transportation element in the awarded rate, shall be applicable as per the formula to be decided by the management. The learned Arbitrator clearly recorded that the sequence operation of scrapping and loading by the combined system could not be split into two parts and the operation of combination of surface miner and attached loading equipment has to be taken as one joint operating unit and therefore, as a combination, this joint operating unit which consumed diesel had to be legitimately entitled to payment of compensation for increase in price of diesel during contract period. The escalation clause was taken into consideration which vide clause 36 clearly provided that if the prices of diesel, lubricants increase/decrease by more than 5% from the prices as prevailing on the base date, the same shall be neutralized in the form of compensation/recovery for such increase/decrease as per provision detailed below. The learned Arbitrator also considered that the contract clearly barred use of manual labour.

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48. This Court is of the considered view that the learned arbitrator was within his right to interpret the contract in the manner it has been done. The interpretation of the contract as given by the learned Arbitrator was certainly a possible view and such view is backed by reasons reflecting from the award itself. The learned Arbitrator has neither travelled beyond the contract nor has taken any material into consideration which were not brought on record by the parties to which the other party never had the opportunity to respond. Nor the interpretation given by the learned Arbitrator shocks the conscience of this court. The learned Arbitrator has also recorded in the award that certain questions remained unanswered by the CCL. This Court is of the considered view that the claim was not beyond the agreement, rather the interpretation given by the learned Arbitrator indicates that the claim was within the terms of the agreement upon conjoint reading of the various clauses of the agreement and the attending

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circumstances and other materials. The learned Arbitrator has not rewritten the agreement but has interpreted the clauses of the agreement and then allowed the claim of the appellant.

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49. All the aforesaid three judgements relied upon by the respondent on the point of interpretation of contract and scope of Section 34 of the aforesaid Act of 1996 i.e (2011) 15 SCC 101, (2006) 4 SCC 445 and AIR 2003 SCC 2629 , do not help the respondent in any manner. The present case is not a case where any rate has been fixed and the appellant claimed any additional amount for execution of work. Rather, the appellant has been awarded escalation for the diesel used in pay loaders used with surface miners by interpreting the contract to mean that diesel escalation was for entire work including loading. Such interpretation of contract was within the domain of the learned arbitrator. The respondents were interpreting the contract to mean that the price escalation of diesel was payment only for use in surface miners and not for the diesel used in pay loaders. The interpretation of the contract as given by the learned arbitrator was neither in contravention to the provisions of Act or other substantive law governing the parties or is against the terms of the contract nor the award can be said to be contrary to fundamental policy of Indian law; or the interest of India; or justice or morality; or patently illegal. It has also been held by the Hon’ble Supreme Court that in the point of patent illegality, it must go to the root of the matter and if the illegality is of trivial nature, it cannot be held that award is against the public policy. This Court is of the considered view that the award was neither unfair, nor unreasonable so that it could shock the conscience of the court. The matter remains that what has been awarded to the appellant by the learned Arbitrator was only escalation on the portion of diesel used in pay loaders used as an attachment with mining loaders. The diesel having been used is also not in dispute. This Court finds that the learned Arbitrator while interpreting the contract has found that the claims was within the terms of the contract between the parties and such view was one of possible view when

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seen in the light of the reasons assigned by the learned Arbitrator and upon conjoint reading of the various clauses of the contract which has been referred to and considered by the learned Arbitrator. 50. The learned Arbitrator clearly recorded its findings at paragraph Nos. 10, 11, 14 to 23. The learned Arbitrator also recorded the conduct of the parties that the CCL maintained complete silence in spite of full knowledge that the pay loaders were being used by the contractors with advantage. The learned Arbitrator also recorded that the deployment of pay loaders with surface miner was to factual appointment of both the parties. In the subsequent contract also, the CCL had decided to allow use of pay loaders for loading the scrapped coal into the contractor’s tipping trucks and had also declared the value of “C” for compensation of price rise in diesel. This information was revealed by the claimant in the pleading and the learned Arbitrator found this information relevant in absence of any other evaluation of “C” factor for using loaders and took cognizance of this vital information and accordingly determined the escalation in price of diesel oil for loading of scrapped coals into tipping coals by pay loaders and quantified the amount of Rs. 44,54,057/- under clause 36 and 36.3 of the agreement dated 08.04.2004.

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51. This Court finds that the learned Arbitrator had considered the materials on record by the parties and interpreted the various clauses of contract between the parties. This Court also finds that the clause 36.1 of the contract clearly provides that if the price of diesel increased/decreased by more than 5% from the price on the base date, the same shall be neutralized in the form of compensation/recovery for such increase/decrease as per the provision details thereunder. Clause 36.3 also provided that in addition to the various further revision of rate on account of transportation element in the awarded rate shall be applicable as per the formula to be decided by the Management. 52. This Court is of the considered view that the interpretation given by the learned Arbitrator was certainly a possible interpretation taking into consideration the various clauses of the contract as has

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been done by the learned Arbitrator. The learned Arbitrator has taken aid of other materials which were duly brought on record by the parties and has also considered the attending circumstances to finally determine that escalation of diesel would be payable on the pay loaders and surface miners as a composite whole.

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53. The issue no.I is accordingly decided in favour of the appellant and against the respondent. 54. Issue no. II- This Court also finds that the claimant had given a certificate on 14.12.2008 directly to the CCL that there was nothing outstanding against agreement and this happened in the midst of the arbitration proceedings. The learned Arbitrator has applied his mind, dealt with this issue by referring to the judgment passed by the Hon’ble Supreme Court in the case of reported in ( 2003) 8 SCC 154 , and rejected the objection of the CCL. In the present case, the contract was subject to interpretation and the claim of the appellant was crystalized and quantified only upon publication of the award . The summary of the judgments relied upon by the parties on this point has been mentioned in para 29 to 32 above of this judgement. The judgement passed by this Court reported in (2001) 1 JLJR 48 does not apply as in the said case, reference to arbitrator itself was denied on account of no dues certificate. In the judgment reported in (2008) 8 SCC 1, with regard to one of the claims, the final bill was received by the contractor without any protest and therefore, the Hon’ble Supreme Court held that dispute with regard to such claim could not have been referred for arbitration. In the judgment reported in (1994) Supp 3 SCC 126 , the claimant had acknowledged not only the final measurement, but also the payment for full and final settlement of the contract and therefore, there was no existing arbitral dispute for reference. In the present case, the learned arbitrator has applied his mind and rejected the plea of the respondent on the basis of said certificate that nothing was payable and now it can be scrutinized only within the limited scope of interference at the stage of setting aside the award. In the present case, the claim of the

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appellant was dependent upon the interpretation of the agreement which was to be done by the Arbitrator. The parties had joined issues on the point of interpretation of the contract in such circumstances it could not said that the appellant was estopped from claiming any amount arising out of the interpretation of contract by virtue of issuance of aforesaid certificate by the appellant directly to the respondent, that too during the pendency of the arbitration proceedings. In such circumstances, this court is of the considered view that the learned arbitrator was within his right to go ahead and pass an award inspite of the certificate. The learned arbitrator has considered the certificate and rejected the plea by referring to the case number of the judgement reported in (2003) 8 SCC 154.

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55. Considering the findings of the learned arbitrator based on the certificate issued on 14.12.2008, the facts of the case and the nature of claim, by no stretch of imagination it can be said that the award passed by the learned Arbitrator called for any interference under section 34 of the act of 1996 on this count or that the finding of the learned arbitrator in this regards was suffering from any patent illegality which could shock the conscience of the court. This Court is of the considered view that the findings of the learned arbitrator was certainly a possible view and was essentially a question of fact seen in the light of the facts and circumstances and that there can be no straight jacket formula with regards to consequences of such certificate which essential depends upon facts and circumstances of a case.

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The issue no.II is accordingly decided in favour of the appellant and against the respondent.

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Issue no. III

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56. The respondent in the petition under Section 34 of the Arbitration and Conciliation Act, 1996 had taken ground that the arbitrator had completely travelled beyond the terms of the contract and that the observation and interpretation of the learned Arbitrator was in conflict with the terms and conditions of the agreement. Such

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plea was raised on the ground that the rate mentioned in the agreement was combined rate and there was no additional rate for loading by pay loaders and consequently failed to take into consideration that factor ‘C’ for formula of compensation for various in diesel price for surface miner was approved by the Fund Directors (FD) of the respondentCCL, which was final over all committee’s recommendations. It was also raised that the learned Arbitrator wrongly recorded that the work had three components, namely, scraping coal by surface miner, loading the scrapped coal product into tipping trucks and transporting the coal to tipping trucks. It was also mentioned in the ground that the second component, namely, loading the scrapped coal was beyond the terms of the work. The CCL in the petition under Section 34 of the Act raised that the contract as components scraping and loading the scrapped coal was in fact the first part of the work and transporting the coal was the second part of the work. Further point raised in Section 34 application was that during the pendency of the matter before the learned Arbitrator, the contractor/claimant had given unequivocally in writing to CCL Management on 14.12.2008 making endorsement that there was nothing outstanding against the agreement and therefore, on this point, it was the case of the CCL that the dispute was neither maintainable nor arbitrable and it was submitted that the arbitrator had completely misinterpreted the certificate furnished by the claimant on 14.12.2008. It was also submitted that the value of ‘C’ as determined by the learned Arbitrator was not based upon the terms and conditions of the contract.

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57. The learned court below in paragraph-1 gave the details of the case from which the matter arose. In paragraph-2, the case of CCL, who was the petitioner before the court, was mentioned. The case of the claimant was mentioned in paragraph-3 of the impugned order. The finding of the learned court below started thereafter. The learned court below mentioned about the contents of the arbitral award and referred to Sections 2(e), 2(h) and 9 of the Indian Contract Act and recorded that in the judgment passed by the Hon’ble Supreme Court, it

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has been held that the award contrary to the terms of the contract would be open to interference by the court under Section 34(2)(b)(ii) as being patently illegal and being opposed to public policy. Thereafter, the learned court below concluded that in the present case, the Arbitrator has made an award that was in conflict with the price variation formula as contained in clause ‘C’ of the purchaser order. The learned court below observed that in the opinion of the court, the rate given in the agreement was of combined one and there was no additional rate for loading by pay loader and that there was no distinction between pay loader and belt conveyor. It was also held that scrapping and loading the scrapped coal was the first part of the work and loading part itself was to be carried out by the surface miner.

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58. The learned court below observed that the award contrary to provision of substantive law or act or terms of contract could be setaside and was liable to be set-aside, if it is not in consonance with the terms of the contract. The learned court below referred to the judgements which have been relied upon by the learned counsel for the respondent during the course of hearing but did not discuss as to how the judgements would be applicable to the facts of the present case and did not even discuss as to how the award was in conflict with the price variation formula in the light of the interpretation of the contract made by the learned Arbitrator. The learned court below did not pronounce on the issue as to whether the interpretation of contract put forth by the learned Arbitrator was a possible or a plausible view and whether the interpretation was so illegal so as to shock the conscience of the court to bring it within the concept of patent illegality in the light of the judgements of the Hon’ble Supreme court. 59. The learned court below while deciding the second aspect of the matter with regard to the certificate i.e. ‘there is nothing outstanding against agreement’ on 14.12.2008 ( i.e when the matter was pending before the learned Arbitrator) held that the claimant having given such certificate, nothing was outstanding against the agreement as the claimant had received the payment. After recording the aforesaid

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findings, the learned court below has set-aside the impugned award. The learned court below did not deal with the findings of the learned Arbitrator in this regard by referring to the judgement passed by the Hon’ble Supreme Court and reject the plea of the CCL on this court. Thus, the learned Arbitrator had duly applied his mind and rejected the plea. The view of the learned Arbitrator was certainly a possible view.

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60. This Court is of the considered view that the judgment passed by the learned court below is ex-facie not sustainable in the eyes of law when seen in the light of law relating to the nature of scrutiny which a court has to undertake while considering the arbitral award under limited jurisdiction under section 34 of the Act of 1996 keeping in mind the fundamental principle that the court does not sit in appeal over the arbitral award. The learned court below had not recorded any finding as to how the learned Arbitrator has erred in arriving at its conclusions. The learned court below has not exercised the power in accordance with law while setting aside the arbitral award.

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The issue no.III is accordingly decided in favour of the appellant

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and against the respondent.

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61. As a cumulative effect of the aforesaid findings, the impugned order is set-aside and the arbitral award is upheld.

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62. This appeal is allowed.

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63. Pending interlocutory application, if any, is closed.

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64. Let a copy of this order be communicated to the learned court below through ‘FAX’.