Trans Engineers INDIA Private Limited vs. Otsuka Chemicals (INDIA) Private Limited

Facts

The petitioner, Trans Engineers India Private Limited, was engaged by the respondent, Otsuka Chemicals (India) Private Limited, for the expansion of its plant, referred to as the "Lion project." Two purchase orders dated September 16, 2016, totaling Rs. 71 crores, were issued, followed by an agreement dated January 20, 2017, for the supply, erection, manufacture, and commissioning of equipment and materials. Disputes arose concerning the petitioner's claim for additional works performed at the respondent's instance. The petitioner raised 26 proforma invoices for these additional works, which the respondent refused to pay, leading to arbitration. The petitioner claimed Rs. 28,37,09,384/- for additional works, plus statutory dues, costs, and interest. The respondent filed counter-claims for liquidated damages, pending and remedial work, and price difference.

Held

The Court held that the impugned arbitral award is unsustainable and is therefore set aside. The Court found that the arbitral tribunal erred in its assessment of the petitioner's claim for additional works. The tribunal's finding that equipment claimed as "extra" was reflected in the P&IDs dated July 26, 2016, or the offer dated August 30, 2016 (based on P&IDs dated August 20, 2016), was flawed, particularly as the P&IDs dated August 20, 2016, were not on record. The Court noted that the P&IDs dated August 20, 2016, though a basis for the offer, were consciously not made the basis for the purchase orders dated September 16, 2016, which were issued based on the P&IDs dated July 26, 2016. The award also failed to properly consider that the P&IDs were subject to continuous revisions, which the petitioner was bound to abide by, and that such revisions entailed entitlement for additional payment. The Court found that the award acknowledged the execution of "additional work" but erroneously concluded the petitioner failed to prove it was "major" or to establish its price. The Court concluded that the award vitiates the arbitral award in its entirety by omitting to assess the claim based on the correct contractual framework.

Key Issues

1. Whether the arbitral tribunal erred in holding that the petitioner was not entitled to recover amounts for additional works performed, by incorrectly determining the contractual basis for assessing such claims? (Section 34 of the Arbitration and Conciliation Act, 1996). The petitioner argued that the arbitral award failed to consider the correct contractual framework, specifically the P&IDs dated July 26, 2016, as the baseline for assessing additional work, and that the tribunal's reliance on P&IDs dated August 20, 2016, and the offer dated August 30, 2016, was erroneous, especially since the P&IDs dated August 20, 2016, were not even on record. The petitioner contended that the award acknowledged "additional work" and that the respondent never denied its execution until arbitration was invoked. The respondent argued that the P&IDs dated August 20, 2016, and the offer dated August 30, 2016, were part of the contract, and that the petitioner failed to prove the additional work was "major" or to establish its price.