HC holds that an appeal u/s 37 of Arbitration Act is like a second appeal, hence interference by court, with arbitral awards, is very limited

Rail Land Development Authority vs. Parsvnath Developers Ltd & Anr.

HC dismisses appeal finding no infirmity in the impugned judgment, finds the appeal as mere attempt to reargue and re-interpretation of the same clauses adjudicated before the Arbitral Tribunal and the learned Single Judge.

In the present matter, Rail Land Development Authority (Appellant) filed an appeal under Section 37(1)(c) of the Arbitration and Conciliation Act, 1996 (‘the Act’) read with Section 13(1) of the Commercial Courts/Commercial Division and Commercial Appellate Division of High Courts Act, 2015 against the order dated 03.04.2018 passed by the learned Single Judge which dismissed the objections to the Arbitral Award dated 25.11.2017.

Parsvnath Developers Limited & Anr (Respondent) was the successful bidder for the tenders floated by the appellant for commercial development of land and a Development Agreement (Agreement) was entered into between the parties. A dispute arose and an arbitration proceeding was effected. The respondents alleged that the appellant was responsible for significant delay in the execution of the work and resultantly, the appellant was responsible to provide the respondent with the relief in terms of extension of the time period of the contract along with the damages. However, the respondent failed to pay the fourth installment of lease premium. As recorded by the learned Single Judge, the parties exchanged a series of letters seeking extension of time and refund of payments including restraining from invoking the Performance Bank Guarantee (PBG).  Thereafter, the appellant vide letter dated 06.08.2015 terminated the agreement retrospectively w.e.f 23.02.2015 on the account of default in payment. Consequently, appellant claimed the same default as breach of the agreement and forfeited the entire payment made by the respondents till date. The Arbitral Tribunal upheld the contention of the respondents regarding the termination of the contract under the provisions of the agreement. The Arbitral Award referred the appellant’s claim for terminating the contract retrospectively and concluded that the agreement stood terminated w.e.f 15.06.2015 due to non- achievement of financial close by the respondents. In lieu of the termination, the Arbitrator further upheld that the appellant’s claim for the forfeiture of the entire amount of Rs. 1166,65,85,913/- (One Thousand One Hundred Sixty Six Crores Sixty Five Lakhs Eighty Five Thousand Nine Hundred and Thirteen Only) towards the liquidated damages was not sustainable as the actual damages were not suffered. The tribunal awarded the appellant a sum of Rs. 1034,53,77,913/- along with interest at the rate of 4% per annum w.e.f 16.06.2015.

Upon examining the facts and submissions, HC observes that Learned Single Judge has rightly upheld that no extension beyond 15.06.2015 was applied or granted by the appellant. HC further observes that the appellant had vested right in terminating the contract post the lapsing of the cure period and vide the letter dated 22.05.2015 it is evident that, the respondent had explicitly showed his intention of either seeking an extension or to consider the same communication as an intimation of deemed termination of the Agreement and that the right of the appellant to terminate the contract cannot be exercised retrospectively. HC additionally observes that a mere reading of the agreement explicitly states that a waiver cannot be exercised post the lapse of the financial close. 

Thereafter HC referenced the judgement in Maharashtra State Electricity Distribution Company Ltd. Vs. Datar Switchgear Limited, (2018) 3 SCC 133 Para 19 wherein the SC had observed that – 

…The High Court also held that the question of waiver or acquiescence is a question of fact and since there was finding of fact by the Arbitral Tribunal (which was upheld by the Single Judge as well) that there was no waiver or acquiescence on the part of the respondent, such an argument was not even available to the appellant in appeal under Section 37 of the Act.”

In the present case, HC finds that the agreements are pure questions of interpretation and court has a limited jurisdiction vested under Section 37 of the Arbitration Act is narrower to reinterpret the terms of the agreement. HC opines that the present appeal is mere attempt to reargue and re-interpretation of the same clauses adjudicated before the Arbitral Tribunal and the learned Single Judge, which is prohibited under Section 37 of the Act. 

Further HC relied on Mahanagar Telephone Nigam Ltd. vs Finolex Cables Limited FAO(OS) 227/2017, 2017(166) wherein it was held that, 

“It is apparent, therefore, that, while interference by court, with arbitral awards, is limited and circumscribed, an award which is patently illegal, on account of it being injudicious, contrary to the law settled by the Supreme Court, or vitiated by an apparently untenable interpretation of the terms of the contract, requires to be eviscerated. In view thereof, the decision of the ld. Single Judge that reasoning of the arbitral award in this regard was based on no material and was contrary to the contract, cannot be said to be deserving of any interference at our hands under Section 37 of the Act. In a pronouncement reported at MANU/DE/0459/2015, MTNL v. Fujitshu India Pvt. Ltd. (FAO(OS) No. 63/2015), the Division Bench of this court has held that “an appeal under Section 37 is like a second appeal, the first appeal being to the court by way of objections under Section 34”. Being in the nature of a second appeal, this court would be hesitant to interfere, with the decision of the learned Single Judge, unless it is shown to be palpably erroneous on facts or in law, or manifestly perverse.”

HC therefore, dismissed the appeal finding no infirmity in the impugned decision of the learned Single Judge

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