Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 9023 OF 2018
Parsa Kente Collieries Limited ..Appellant
Versus
Rajasthan Rajya Vidyut Utpadan Nigam Limited ..Respondent
J U D G M E N T
M.R. SHAH, J.
Feeling aggrieved and dissatisfied with the impugned
judgment and order dated 28.02.2018 passed by the Commercial
Appellate Court/Division Bench of the High Court of Judicature
for Rajasthan, Bench at Jaipur in D.B. Civil Miscellaneous
Signature Not Verified
Digitally signed by
MANISH SETHI
Date: 2019.05.27
16:34:10 IST
Reason:
Appeal No. 3785 of 2017, by which the High Court has allowed
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the said appeal preferred by the respondent herein – Rajasthan
Rajya Vidyut Utpadan Nigam Limited and has quashed and set
aside the award passed by the learned Arbitrator, confirmed by
the Commercial Appellate Court at Jaipur, the appellant – the
original claimant – Parsa Kente Collieries Limited has preferred
the present appeal.
2. That in the month of March, 2006, the respondent floated a
tender for joint venture to undertake coal block development,
mining and transportation of coal and delivery. That one Adani
Enterprises Limited (AEL) submitted a bid which was accepted on
12.05.2006. A Letter of Intent was issued to AEL by the
respondent on 23.10.2006. Respondent and AEL entered into a
joint venture, namely, Parsa Kente Collieries Limited, the
appellant herein. A Coal Mining Service Agreement was entered
into between the said Parsa Kente Collieries Limited and AEL.
That a Coal Mining and Delivery Agreement (hereinafter referred
to as ‘CMDA’) was executed between the appellant and the
respondent on 16.07.2008 for supply of coal.
2.1 As per CMDA, the date of commencement of the contract
was 25.06.2011. As per CMDA between the appellant and the
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respondent, the coal supply was to commence at the earliest
within 42 months, or within 48 months from the date of
allotment of coal blocks, i.e., by 25.06.2011. CMDA also provided
a clause for extending the date of commencement. Clause 3.2.1
of the CMDA provided for scope of work; Clause 4.1.3 and 4.1.4
provided for responsibility of the respondent to inform the
appellant as regards the requirement of coal in advance. Clause
4.5 provided for commencement of the date; clause 5.1 provided
for contract of price; clause 5.2.2. provided for calculation of
basic price; clause 5.4.3 provided for escalation in price; clause
7.1 provided for force majeure and clause 7.3 provided for effect
of force majeure. There was a delay of 21 months in obtaining
the forest clearance and environmental clearance. The appellant
started supply of coal to the respondent with effect from
25.3.2013, i.e., after a delay of 21 months. It appears that the
date of commencement was extended by mutual agreement from
25.6.2011 to 25.3.2013. However, certain disputes arose
between the parties, more particularly the escalation price, fixed
costs, amount lying in Escrow account and cost of construction
of railway siding. Therefore, the appellant invoked clause 10.2 of
the CMDA and sought arbitration. A retired Hon’ble Judge of the
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Rajasthan High Court was appointed as the sole arbitrator. The
appellant submitted the statement of claim and thereafter filed
another statement of claim.
2.2 Before the learned Arbitrator, the claim was bifurcated into
four heads, namely, (1) Price Adjustment; (2) Fixed Costs; (3)
Escrow Account; and (4) Construction of Railway Siding. The
learned Arbitrator passed an award dated 27.05.2015 allowing
the claims under the heads of ‘Price Adjustment’, ‘Fixed Costs’
and ‘Escrow Account’ and rejected the claim under the head
‘Construction of Railway Siding’. While allowing the claim under
the head ‘Price Adjustment’, the learned Arbitrator held that the
date of commencement of the first operating year for the
purposes of clauses 5.2.2 read with 5.4.3 would be 25.06.2011.
The learned Arbitrator further held that thus the Zero year for
the purpose of price escalation has to be 20112012. The learned
Arbitrator accordingly held that because the date of
commencement of the agreement for the purpose of price
escalation is 25.06.2011, the appellant shall be entitled to the
enhanced amount as applicable in 20132014. Accordingly, the
learned Arbitrator held that the appellant is entitled to the coal
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price at Rs.837/ PMT in F.Y. 201314 and thereafter the
escalated price in the subsequent years as per the relevant
clauses of the contract – CMDA.
2.3 That while allowing the claim with respect to ‘Fixed Costs’,
the learned Arbitrator held that the respondent could not take
the required delivery of the coal from the appellant, thus causing
loss to the appellant. The learned Arbitrator held that therefore
the appellant is entitled to compensation as claimed for Rs.78
crores.
2.4 That while allowing the claim with respect to ‘Escrow
Account’, the learned Arbitrator held that the undertaking given
by the appellant was limited to a contingency where on account
of failure of completion of mine closure activity by the appellant
led to the forfeiture of any amount deposited in the escrow
account, the respondent would be entitled to recover the same
from the monthly running bills of the appellant. The learned
Arbitrator observed, however, as no such occasion has arisen,
the question of any deduction on the said count does not arise.
Consequently, the learned Arbitrator directed the respondent to
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return that amount which was lying in the escrow account which
was deducted from the monthly running bills of the appellant.
2.5 As observed hereinabove, the learned Arbitrator rejected
claim no.4, namely, under the head ‘Construction of Railway
Siding’. The award declared by the learned Arbitrator came to be
confirmed by the learned Commercial Court, Jaipur in an
application under section 34 of the Arbitration and Conciliation
Act.
3. Feeling aggrieved, the respondent preferred an appeal under
Section 37 of the Arbitration Act before the Commercial Appellate
Court/Division Bench of the High Court of Rajasthan at Jaipur.
By the impugned judgment and order dated 28.02.2018, the High
Court has allowed the said appeal and has set aside the award
passed by the learned Arbitrator and confirmed by the
Commercial Court, Jaipur.
4. Feeling aggrieved by the impugned judgment and order
passed by the Division Bench of the High Court, the original
claimant – the appellant has preferred the present appeal.
5. Shri Ranjit Kumar, learned Senior Advocate has appeared
on behalf of the appellant and Shri Tushar Mehta, learned
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Solicitor General of India has appeared on behalf of the
respondent.
5.1 Shri Ranjit Kumar, learned Senior Advocate appearing on
behalf of the appellant has vehemently submitted that in the
facts and circumstances of the case, the High Court ought not to
have interfered with the concurrent findings of the learned sole
Arbitrator and the learned Commercial Court under Section 34 of
the Arbitration Act by giving an alternate construction to the
CMDA. It is vehemently submitted that by passing the impugned
judgment and order, the High Court has exceeded in its
jurisdiction in interfering with the award passed by the learned
Arbitrator, confirmed by the learned Commercial Court, while
exercising the powers under Section 37 of the Arbitration Act.
5.2 It is further submitted by the learned Senior Advocate
appearing on behalf of the appellant that under Section 37 of the
Arbitration Act, the scope of judicial inquiry is narrow and does
not entail giving own construction to the contract. It is
submitted by disturbing the findings, the High Court has gone
beyond the limited scope of inquiry contemplated under Section
37 of the Arbitration Act.
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5.3 It is further submitted by the learned Senior Advocate
appearing on behalf of the appellant that the Division Bench of
the High Court has failed to appreciate that the interpretation
made by the learned sole Arbitrator on the clauses of CMDA was
plausible construction/interpretation and therefore the same
could not have been substituted by the High Court in exercise of
powers under Section 37 of the Arbitration Act.
In support of his above submissions, Shri Ranjit Kumar,
learned Senior Advocate has heavily relied upon the decisions of
this Court in the cases of Associate Builders v. Delhi Development
Authority, reported in (2015) 3 SCC 49; Steel Authority of India
Limited v. Gupta Brother Steel Tubes Limited, reported in (2009)
10 SCC 63 and the recent decision of this Court in the case of
Ssangyong Engineering & Construction Co. Limited v. National
Highways Authority of India (NHAI), rendered on 08.05.2019 in
Civil Appeal No. 4779 of 2019, reported in 2019 SCC Online SC
677.
5.3.1 It is further submitted by the learned Senior Advocate
appearing on behalf of the appellant that admittedly there was a
delay of 21 months in supply of coal, which was due to the force
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majeure as there was a delay in obtaining the forest clearance
and environmental clearance. It is submitted that the price
which was agreed by the appellant in the year 2008 to be paid in
the year 2011 would never remain the same in the year 201314.
It is submitted that therefore though the commencement date as
per CMDA was extended due to an admitted fact of
force majeure
to 25.3.2013, the commencement date would remain as the date
defined under the CMDA, i.e., 25.06.2011 and therefore the price
escalation ought to be considered from that date.
5.3.2 It is further submitted by the learned Senior Advocate
appearing on behalf of the appellant that though by mutual
agreement the commencement date was extended due to an
admitted fact of force majeure to 25.03.2013, there was no
agreement to supply the coal at the same price which was to be
supplied in the year 2011. It is submitted that there is a specific
clause – clause 4.5.2 which allows extension of commencement
date in cases of force majeure , however, no such corresponding
clause has been provided in clause 5.4.3, which is a clause for
price escalation. It is submitted that the intention of parties was
never to unilaterally extend the first operating year referred to in
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clause 5.2.2. It is submitted that therefore the price escalation
has to be necessarily applied from the contractually stipulated
date, i., 25.06.2011.
5.3.3 It is submitted that in any case the interpretation by
the learned Arbitrator was plausible and as such was equitable
also. Merely because some other view was possible, the High
Court is not justified in interfering with the
interpretations/findings recorded by the learned sole Arbitrator
and that too in exercise of powers under Section 37 of the
Arbitration Act. It is submitted that the interpretation of the
relevant clauses of the CMDA with respect to claim no.1 was
actually in consonance with the relevant clauses of the CMDA. It
is submitted therefore the High Court has erred in interfering
with the award passed by the learned Arbitrator, confirmed by
the learned Commercial Court.
5.4 Now so far as claim no.2 under the head ‘Fixed Costs’ is
concerned, Shri Ranjit Kumar, learned Senior Advocate has
heavily relied upon clause 8.2(iii) of the CMDA. It is submitted
that due to the lapse on the part of the respondent, the
respondent was unable to take delivery of the coal for the
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financial year 201314. It is submitted that there was an event of
default by the respondent as contemplated in clause 8.2(iii) of the
CMDA.
5.4.1 It is submitted that due to inability of the respondent
to take coal as per the stipulated delivery schedule, the appellant
had to operate its plant at a suboptimal level which resulted in
incurring fixed costs. It is submitted that it was mandatory for
the coal to be lifted within 3 months of production to prevent
spontaneous combustion and to ensure that there is no hazard to
the plant. It is submitted that despite this, the respondent failed
to take delivery.
5.4.2 It is further submitted by the learned Senior Advocate
appearing on behalf of the appellant that the High Court has
committed an error by not granting the said claim on the ground
that the loss was incurred by AMPL (subcontractor) under Coal
Mining Services Agreement to which the respondent was not a
party and secondly that loss of Rs.78 crores is not substantiated
beyond the Chartered Accountant’s certificate. It is further
submitted by the learned Senior Advocate appearing on behalf of
the appellant that CMDA does not prohibit appointment of AMPL
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as a subcontractor and in fact any such appointment was
approved by the appellant and therefore AMPL cannot be said to
be a complete third party to the CMDA. It is submitted that
therefore when the respondent failed to lift the fixed quantity of
the coal and there was a delay in taking the delivery of the coal
for the F.Y. 201314, the appellant shall be entitled to the loss
suffered to the extent of Rs.78 crores. It is submitted therefore
the High Court has committed a grave error in disallowing the
said claim.
5.5 Now so far as claim no.3 under the head ‘Escrow Account’ is
concerned, it is submitted by the learned Senior Advocate
appearing on behalf of the appellant that the High Court has
erroneously held that the respondent was entitled to make
deductions from the appellant’s bills for payments made in the
escrow account. It is submitted that as such the learned sole
Arbitrator rightly came to a conclusion that the stage of closing of
mines had not been arrived at and therefore the deductions to
make the payments into escrow account were premature. It is
submitted that the issue of deduction would arise only after a
passage of 30 years at the time of closure of the mining plant. It
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is further submitted that the deposit of amount in the escrow
account had arisen due to the guidelines issued by the Ministry
of Coal, which was subsequent to the execution of the CMDA. It
is submitted that therefore the said circular issued by the
Ministry of Coal would not bind the parties to the CMDA. It is
submitted therefore the High Court has committed a grave error
in rejecting claim no.3.
5.6 Making the above submissions and relying upon the above
decisions, it is prayed to allow the present appeal.
6. Shri Tushar Mehta, learned Solicitor General of India, while
opposing the present appeal, has vehemently submitted that in
the facts and circumstances of the case and having found that
the claims allowed by the learned sole Arbitrator, confirmed by
the learned Commercial Court, were just contrary to the relevant
clauses of the CMDA, the High Court is justified in reversing the
award passed by the learned Arbitrator, confirmed by the learned
Commercial Court.
6.1 It is vehemently submitted by the learned Solicitor General
that as per the settled proposition of law, the learned Arbitrator
cannot substitute the terms of the contract and/or interpret the
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relevant clauses of the contract, which would make the relevant
clauses of the contract nugatory. It is submitted that the award,
by standing in complete contravention of clear and express
provisions of the CMDA, is in conflict with the public policy of
India. It is submitted that in the present case, according to the
respondent, regarding the “commencement date”, there was only
one possible interpretation that could have been accepted by the
learned arbitrator. It is submitted that however the
interpretation that has been upheld by the learned arbitrator,
apart from being devoid of any reasoning in its support, is wholly
incompatible with the terms of the CMDA and the conduct of the
parties. It is submitted that any award, by standing in complete
contravention of clear and express provisions of the CMDA, is in
conflict with the public policy of India and therefore is liable to be
set aside. It is submitted therefore the High Court has rightly set
aside the award in exercise of powers under Section 37 of the
Arbitration Act. In support of his above submissions, Shri
Tushar Mehta, learned Solicitor General of India has heavily
relied upon the decision of this Court in the case of ONGC v. Saw
Pipes Limited, reported in (2003) 5 SCC 705; Hindustan Zinc
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Limited v. Friends Coal Carbonisation, reported in (2006) 4 SCC
445 and Associate Builders v. DDA, reported in (2015) 3 SCC 49.
6.2 Now so far as claim no.1, namely, price escalation is
concerned, it is vehemently submitted by Shri Tushar Mehta,
learned Solicitor General that the term “commencement date” has
been defined in the agreement to have the same meaning as given
to it in clause 4.5.1. It is submitted that as per clause 4.5.3 the
date of commencement is the essence to the contract. It is
submitted that as per the relevant clauses of the CMDA, the
commencement date was extendable and in fact with the mutual
agreement the same was extended to 25.03.2013. It is submitted
that the term “commencement date” is defined to be the date on
which the actual supply of coal begins. It is submitted that in
the present case, admittedly, the date of supply of the coal is
25.03.2013, and therefore, the appellant shall be entitled to
escalation in price only after the completion of 12 months from
the commencement date, i.e., 25.03.2013. It is submitted under
the CMDA, the appellant is entitled to the escalation in price in
each operating year provided that the first escalation shall occur
only after completion of 12 months from the commencement
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date, i.e., 25.03.2013. It is submitted that thus any escalation in
price is linked to the date of commencement of coal supply. It is
submitted that thus if the coal supply is commenced as planned
on 25.06.2011, the first operating year would have been
25.06.2011 to 31.03.2012. However, since coal supply only
commenced on 25.03.2013, the first operating year ought to have
been 25.03.2013 to 31.03.2013. It is submitted therefore that
when the commencement date is 25.06.2011, the first price
escalation would be applicable for the F.Y. 201314. It is
submitted that however if the commencement date is held to be
25.03.2013 (which in fact was extended by mutual agreement),
the first price escalation would occur in F.Y. 201415. It is
submitted that it is evident from clause 5.4.3 of the CMDA that
an escalation in price was to be made only after the delivery of
coal had commenced and it is an admitted fact that actual supply
of coal started on 25.03.2013. It is submitted therefore that
there is no question of price escalation for F.Y. 201314. It is
submitted that therefore the award passed by the learned
Arbitrator was just contrary to the relevant clauses of the CMDA
and therefore the same is rightly set aside by the High Court.
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6.3 It is further submitted by the learned Solicitor General of
India that in fact the respondent lifted the full quantity of the
fixed quantity and therefore there was no loss and in fact the
appellant failed to adduce any evidence with respect to the actual
loss either due to delay in lifting the coal and/or lifting the loss
quantity of the coal than they agreed. The same is rightly set
aside by the High Court.
6.4 It is further submitted by the learned Solicitor General
appearing on behalf of the respondent that similarly the High
Court has rightly set aside the claim with respect to “escrow
account”. It is submitted that as such the “escrow account” was
required to be opened as per the circular issued by the Ministry
of Coal. It is submitted that, in fact, the appellant consented to
open the escrow account which as such was required to be
opened as per the guidelines issued by the Ministry of Coal. It is
submitted that therefore in fact the appellant consented that the
money is being recovered from its running bills to be deposited in
the escrow account. It is submitted that even the same is in
consonance with clause 3.2.1 of the CMDA. It is submitted
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therefore the High Court has rightly disallowed the said claim
made in escrow account.
6.5 Making the above submissions and relying upon the above
decisions, it is prayed to dismiss the present appeal.
7. We have heard the learned counsel for the respective parties
at length.
8. At the outset, it is required to be noted that by the
impugned judgment and order, the Division Bench of the High
Court in exercise of its powers under Section 37 of the
Arbitration Act has set aside the award passed by the learned
Arbitrator, confirmed by the learned Commercial Court.
Therefore, the short question which is posed for
consideration before this Court is, whether in the facts and
circumstances of the case, the Division of the High Court is
justified in interfering with the award passed by the learned
Arbitrator, confirmed by the learned Commercial Court, in an
appeal under Section 37 of the Arbitration Act?
9. While answering the aforesaid question, certain decisions of
this Court and the law declared on the jurisdiction of the
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appellate Court while considering the award passed by the
learned Arbitrator are required to be considered.
9.1 In the case of Associate Builders (supra) , this Court had an
occasion to consider in detail the jurisdiction of the Court to
interfere with the award passed by the Arbitrator in exercise of
powers under Section 34 of the Arbitration Act. In the aforesaid
decision, this Court has considered the limits of power of the
Court to interfere with the arbitral award. It is observed and held
that only when the award is in conflict with the public policy in
India, the Court would be justified in interfering with the arbitral
award. In the aforesaid decision, this Court considered different
heads of “public policy in India” which, inter alia, includes patent
illegality. After referring Section 28(3) of the Arbitration Act and
after considering the decisions of this Court in the cases of
McDermott International Inc. v. Burn Standard Co. Ltd., reported in
(2006) 11 SCC 181 (paras 112113) and Rashtriya Ispat Nigam
Limited v. Dewan Chand Ram Saran, reported in (2012) 5 SCC
306 (paras 4345) , it is observed and held that an arbitral
tribunal must decide in accordance with the terms of the
contract, but if an arbitrator construes a term of the contract in a
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reasonable manner, it will not mean that the award can be set
aside on this ground. It is further observed and held that
construction of the terms of a contract is primarily 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 is further observed by
this Court in the aforesaid decision in paragraph 33 that when a
court is applying the “public policy” test to an arbitration award,
it does not act as a court of appeal and consequently errors of
fact cannot be corrected. A possible view by the arbitrator on
facts has necessarily to pass muster as the arbitrator is the
ultimate master of the quantity and quality of evidence to be
relied upon when he delivers his arbitral award. It is further
observed that thus an award based on little evidence or on
evidence which does not measure up in quality to a trained legal
mind would not be held to be invalid on this score.
9.2 Similar is the view taken by this Court in the cases of
National Highways Authority of India v. ITD Cementation India
Limited, reported in (2015) 14 SCC 21(para 25) and Steel Authority
20
of India Limited v. Gupta Brother Steel Tubes Limited, reported in
(2009) 10 SCC 63 (para 29) .
10. Applying the law laid down by this Court, we have to
examine whether the Division Bench of the High Court has
exceeded in its jurisdiction in setting aside the arbitral award
impugned before it.
11. For convenience, we shall deal with the impugned judgment
and order passed by the High Court claimwise. The first claim is
with respect to “price adjustment/escalation”; the second claim is
with respect to “fixed costs” and the third claim is with respect to
“escrow account”.
11.1 Now so far as the claim with respect to “price
adjustment/escalation” is concerned, the learned arbitrator held
that the date of commencement of the first operating year for the
purposes of clauses 5.2.2 read with 5.4.3 would be 25.06.2011
and therefore zero year for the purpose of price escalation has to
be 201112. Accordingly, the learned arbitrator considered the
escalated price in F.Y. 201314 at Rs.895/ per MT. However,
according to the respondent, as the date of commencement was
changed from 25.06.2011 to 25.03.2013, the zero year for the
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purpose of price escalation would be 201314. It is required to
be noted that it is not in dispute that price escalation is
permissible under the contract/agreement itself and there shall
be price escalation every year as per the formulae mentioned in
the agreement, commencing from the date of commencement.
However, it is true that the initial date of commencement, i.e.,
25.06.2011 came to be extended to 25.03.2013 by mutual
agreement. However, the same was due to force majeure as there
was a delay of 21 months in obtaining the forest clearance and
environmental clearance. The price was quoted in the year 2007
08, applicable from 2011. However, there was a delay in
obtaining the forest clearance and environmental clearance and
therefore the date of commencement of supply came to be
changed. In between there would be hike in labour charges,
transportation charges, etc. Though the date of commencement
of supply was extended, there was no corresponding amendment
in the relevant clauses of the agreement with respect to price
escalation. There was no specific agreement that in the year
2013, the appellant would supply the coal at the same price,
without any price escalation. Therefore, considering the overall
facts and circumstances of the case and by giving cogent
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reasons, the learned arbitrator interpreted the relevant clauses of
the contract and specifically held that the date of commencement
of the first operating year for the purposes of clauses 5.2.2 read
with 5.4.3 would be 25.06.2011 and accordingly the zero year for
the purpose of price escalation would be 201112 and therefore
the appellant shall be entitled to the enhanced amount as is
applicable in the year 201314 (the price escalation). Having
considered the reasoning given by the learned arbitrator, we are
of the opinion that the interpretation by the learned arbitrator
was both possible as well as plausible. Therefore, merely
because some other view could have been taken, the High Court
is not justified in interfering with the interpretation made by the
arbitrator which as observed was possible and plausible.
Therefore, in the facts and circumstances of the case, we are of
the opinion that the High Court has clearly exceeded in its
jurisdiction in interfering with the award passed by the learned
arbitrator with respect to claim no.1 – price
adjustment/escalation. At this stage, it is required to be noted
that though the High Court has observed that the award passed
by the learned arbitrator with respect to claim no.1 was against
the public policy, with respect, we do not see any element of
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public policy. It was pure and simple case of interpretation of the
relevant clauses of the agreement which does not involve any
public policy. Therefore, we are of the opinion that the impugned
judgment and order passed by the High Court for quashing and
setting aside the award passed by the learned arbitrator with
respect to claim no.1 – price adjustment/escalation cannot be
sustained and the same deserves to be quashed and set aside.
11.2 Now so far as claim no.2 – “fixed costs” and an amount
of Rs.78 crores awarded by the learned arbitrator with respect to
compensation of loss is concerned, having gone through the
relevant material on record, we are of the opinion that the High
Court has rightly set aside the award passed by the learned
arbitrator with respect to claim no.2. Except the CA’s certificate,
no further evidence had been led with respect to actual loss.
Considering the material on record, it is on the contrary found
that in the relevant year the quantity of the coal lifted by the
respondent was much above the fixed quantity. Thus, the award
passed by the learned arbitrator with respect to claim no.2 was
contrary to the evidence on record and therefore is rightly set
aside by the High Court.
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11.3 Similarly, even with respect to claim no.3 – “Escrow
Account” is concerned, the High Court has rightly interfered with
the award passed by the learned arbitrator with respect to claim
no.3. It is required to be noted that the escrow account was
required to be opened as per the guidelines issued by the
Ministry of Coal, Government of India for the preparation of mine
closure plant. The guidelines required, inter alia, the mining
company to open an escrow account with any schedule bank.
Accordingly, the respondent opened an escrow account and
executed an escrow agreement. From the correspondence
between the parties, it appears that even the appellant consented
for opening the escrow account. The appellant also agreed that
the amount to be deposited in the escrow account will be
recovered by the respondent from immediate next payment of the
coal bills of the joint venture company – PKCL raised towards
dispatches of coal from appellant’s coal blocks. Thus, thereafter it
was not open for the appellant to claim the amount lying in the
escrow account. If the amount lying in the escrow account is
returned to the appellant, the purpose and object of opening the
escrow account which was as per the guidelines of the Ministry of
Coal would be frustrated. The object and purpose of opening the
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escrow account was to see that the appellant company fulfils the
contract as per the agreement and till the closure of the coal
blocks. Therefore, the High Court has rightly interfered with the
award passed by the learned arbitrator with respect to claim no.3
– escrow account by observing that the reasoning is perverse or
so irrational that no reasonable person could have arrived at on
the material/evidence on record. We are in complete agreement
with the view taken by the learned Division Bench of the High
Court.
12. In view of the above and for the reasons stated above,
the present appeal succeeds in part. The impugned judgment and
order passed by the High Court insofar as quashing and setting
aside the award passed by the learned sole arbitrator, confirmed
by the learned Commercial Court, insofar as claim no. 1 – price
adjustment/escalation is hereby quashed and set aside and the
award passed by the learned arbitrator with respect to claim no.1
is hereby restored.
The impugned judgment and order passed by the High
Court insofar as quashing and setting aside the award passed by
the learned arbitrator with respect to rest of the claims, namely,
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claim no.2 – fixed costs and claim no.3 – escrow account is
hereby confirmed. The present appeal is partly allowed to the
aforesaid extent only. However, in the facts and circumstances of
the case, there shall be no order as to costs.
………………………….J.
[ARUN MISHRA]
NEW DELHI; ………………………….J.
MAY 27, 2019. [M.R. SHAH]
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