Mansimran Kaur

New Delhi, May 17, 2022:  Observing that an arbitral award can be set aside under Section 34(2)(b)(ii) of the Arbitration and Conciliation Act, 1996 if it is found to be in conflict with the public policy of India or under Section 34(2A) if it is vitiated by patent illegality, the Delhi High Court has dismissed the petition instituted by GAIL assailing the impugned arbitral award. 

Holding that the decision of the Arbitral Tribunal regarding the evidentiary value of the two documents produced by GAIL one of which was prior to the date of the Agreement and the other which was unsigned and undated, could not be said to be patently erroneous, the Bench of Justice Vibhu Bakhru said, “The decision of the Arbitral Tribunal as to the evidentiary value of any material is clearly within the jurisdiction of the Arbitral Tribunal and no interference is called for unless it is found that the Arbitral Tribunal’s decision is manifestly erroneous and its view is one that is impossible for any person to accept.”

Facts in brief for perusal of the present petition were that a tender was invited by GAIL for the work pertaining to setting up of a Dematrialised Water Plant and Condensate Polishing Unit for GAIL Petrochemical Complex – II at Pata, Uttar Pradesh. Consequently, the respondent’s bid was accepted but the execution of the project was deferred, and thus GAIL withheld amounts as reduction of price as stipulated under Clause 27 of the GCC and as the value of Cathodic Protection System. Subsequently, dispute arose between the parties which was referred to arbitration. However, the impugned award was assailed by the GAIL by way of petition before this Court.

On the question of illegality of the award, the Court observed that EIL was given the responsibility to determine the applicability of PRS (liquidated damages). It was further opined that each time the respondent asked for extension it was granted by EIL on a provisional basis with the presumption that GAIL will not exercise its right to impose PRS, even if the same was leviable. 

It was also observed by the Arbitral Tribunal that since EIL was obligated to proceed with the analysis of the day, it was beyond the realm of GAIL to levy liquidated damages, when EIL even found that the delay was attributable to the respondent.  The Court also considered the letter dated July 2, 2016 wherein it was explicitly stated that respondent was granted extension till December 31, 2015 for completion of the agreement along with condition that the PRS shall not be levied until this time. Thus, considering the above stated findings, the Court observed that the Arbitral Tribunal was right in its ruling and there was no reason found to interfere with the findings of the Tribunal. 

The Court in reference to the same considered the findings of the Arbitral Tribunal wherein the Tribunal found that CPS was included in the scope of work and was a part of the contract signed by both the parties. However, it also observed that respondent did not breach the aforesaid agreement for the reason that the installation of CPS was not directed by the EIL. Thus, the Tribunal accepted the contention of GAIL with respect to reduction in cost of CPS; however the valuation offered by GAIL was not accepted by the Tribunal.  Ultimately, it allowed the GAIL to retain an amount of Rs.40, 00,000 in view of the respondent’s admission in its letter dated May 4, 2017 issued to EIL.

Therefore, in light of the above observations made by the Arbitral Tribunal and the same being reconsidered by this Court with no objection, this Court asserted that  the impugned  award required no interference or modification. In addition, the Court observed that none of the contentions submitted by the GAIL were  within  the ambit of Section 34. Reliance was also placed on some judgments of Apex Court in Builders v. Delhi Development Authority, Dyna Technologies Private Limited v. Crompton Greaves Limited and Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail Corporation Ltd. Hence, the present petition was dismissed.

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