Case Note & Summary
The State of Jharkhand and its officers (petitioners) entered into a consultancy agreement with M/s HSS Integrated SDN and another (respondents) on 28.08.2007 for construction of a six-lane divided carriageway of Ranchi Ring Road. The work period was 36 months from 01.10.2007 to 30.09.2010. Disputes arose regarding non-performance and unsatisfactory work, leading to two extensions of contract. On 25.11.2011, the Executive Engineer issued a letter granting a second extension and calling for compliance, warning of suspension of payment under Clause 2.8 of the General Conditions of Contract (GCC) if deficiencies were not removed. A review meeting was held on 05.12.2011, and the respondents replied on 07.12.2011. Without properly considering this reply, the petitioners issued a letter on 12.12.2011 invoking Clause 2.8 for suspension of payment. The respondents replied on 27.12.2011, but the petitioners issued further letters on 23.12.2011 and 28.12.2011. On 09.02.2012, the petitioners terminated the contract with effect from 12.03.2012 under Clause 2.9.1(a) and (d) of the GCC. The respondents replied on 16.02.2012 and 24.02.2012 requesting reconsideration, but the dispute remained unresolved. The respondents invoked the arbitration clause on 10.03.2012, and an Arbitral Tribunal was constituted. The respondents claimed Rs.5,17,88,418 under 13 heads, and the petitioners filed a counterclaim for Rs.6,00,78,736. The Arbitral Tribunal found the termination illegal and without following due procedure (paras 17-36), allowed claims partly to Rs.2,10,87,304, and dismissed the counterclaim. The award was confirmed by the First Appellate Court under Section 34 and by the High Court under Section 37 of the Arbitration and Conciliation Act, 1996. The petitioners appealed to the Supreme Court. The Supreme Court held that the Arbitral Tribunal's finding on illegal termination was a plausible view based on evidence, and concurrent findings of fact should not be interfered with. The Court dismissed the special leave petition, upholding the award.
Headnote
A) Arbitration Law - Scope of Interference under Section 34 - Plausible View - Even if two views are possible, the view taken by the Arbitral Tribunal which is reasonable should not be interfered with in proceedings under Section 34 of the Arbitration and Conciliation Act, 1996 - Held that the Arbitral Tribunal's finding that termination was illegal was a plausible view based on evidence, and courts below rightly declined to interfere (Paras 6.1-6.2). B) Contract Law - Termination of Contract - Compliance with Contractual Procedure - Termination without following due procedure as required under the General Conditions of Contract (GCC) is illegal - The Arbitral Tribunal found that the termination letter dated 09.02.2012 invoking Clause 2.9.1(a) and (d) of the GCC was issued without proper compliance with the suspension and notice requirements - Held that the termination was illegal and contrary to the terms of the contract (Paras 6, 2.2). C) Arbitration Law - Findings of Fact - Concurrent Findings - Concurrent findings of fact recorded by the Arbitral Tribunal, First Appellate Court under Section 34, and High Court under Section 37 of the Arbitration and Conciliation Act, 1996, that termination was illegal, are binding and not to be re-examined in special leave petition unless perverse - Held that no interference is warranted (Paras 6, 6.1).
Issue of Consideration
Whether the High Court erred in dismissing the appeal under Section 37 of the Arbitration and Conciliation Act, 1996 and confirming the arbitral award that held the termination of contract illegal.
Final Decision
The Supreme Court dismissed the special leave petition, upholding the impugned judgment of the High Court and the arbitral award. The Court held that the Arbitral Tribunal's finding that termination was illegal was a plausible view based on evidence, and concurrent findings of fact should not be interfered with.
Law Points
- Arbitral award not to be interfered with if based on plausible view of evidence
- Scope of Section 34 of Arbitration Act is limited
- Concurrent findings of fact binding unless perverse
- Termination of contract must follow contractual procedure
