State Of Hp And Another vs. M/S Tenzin Constructions Co. PVT. LTD.

Held

The High Court held that the arbitral award was based on admissions and reconciliations made by the Petitioner's department, which were duly signed and approved by competent authorities. The Court found no reason to interfere with the award, as the Petitioner failed to demonstrate that the awarded amounts were outside the scope of the agreement or that the award contravened Section 34 of the Arbitration and Conciliation Act. Specifically, regarding Claim A, the Arbitrator relied on joint verification (Ext. X1, X2, X3) where department representatives admitted Rs. 71,71,098/- as payable. For Claim B (price escalation under Clause 10CC), the Arbitrator relied on the department's recommendations of Rs. 93,24,007/-. Claim C (GST liability) was allowed to the extent of Rs. 2,42,96,266/- based on the department's verified and admitted GST figures in its reconciliation. Claim D (extra and substituted items) was allowed for Rs. 45,48,258/- based on admitted and verified measurements. Claim E (Sales Tax deducted but not deposited) was allowed for Rs. 6,54,270/- as admitted by departmental documents. Claims F and G were rejected due to lack of evidence. Claim H (security deposit) was allowed for Rs. 37,55,483/- as admitted. The Court found that the Arbitrator rightly awarded interest (Claim I) and costs (Claim J) because the admitted dues were not paid by the Petitioner, compelling the Respondent to refer the matter to arbitration. The Court concluded that the award was fair, reasoned, and based on the department's own records and recommendations, thus calling for no interference under Section 34.

Facts

The State of Himachal Pradesh (Petitioner) filed a petition under Section 34 of the Arbitration and Conciliation Act challenging an arbitral award dated May 29, 2023. The award was passed in favour of M/s Tenzin Constructions Co. Pvt. Ltd. (Respondent) for a sum of Rs. 4,97,49,382/- with interest. The dispute arose from a contract awarded to the respondent on October 5, 2016, for the construction of a Civil Hospital at Rohru. The respondent claimed delays were caused by the petitioner's failure to provide a hindrance-free site, required drawings, and timely payments, leading to increased material costs and GST reimbursement issues. The Arbitrator appointed by the High Court awarded the sum after considering the pleadings and evidence, including joint reconciliations and recommendations made by the petitioner's officials.

Key Issues

1. Whether the arbitral award is in conflict with the basic notion and fundamental policy of Indian law, warranting setting aside under Section 34 of the Arbitration and Conciliation Act? Petitioner's arguments: The Petitioner contended that the Arbitrator failed to properly appreciate the pleadings and contract terms, wrongly allowing claims A through I. Specifically, they argued that price escalation under Clause 10CC was wrongly awarded as the delay was not proven to be the Petitioner's fault, and the Respondent had abandoned the work. They also argued that the Arbitrator assumed jurisdiction not vested in him regarding price escalation, allowing it based merely on the Executive Engineer's recommendation, which does not constitute acceptance. The Petitioner further argued that the GST claim was allowed without proper appreciation of records, as the Respondent did not prove filing GST returns. Claims for extra substituted items were also allegedly allowed without proper examination, relying solely on recommendations. Finally, the Petitioner argued that interest and costs were wrongly awarded as the underlying claims were not applicable. Respondent's arguments: The Respondent argued that the award was founded on admissions, reconciliations, and recommendations made by the Petitioner's department itself. They highlighted joint reconciliations (Ext. X1, X2, X3) prepared by the Respondent and the Petitioner's Divisional Accountant and Executive Engineer, asserting no illegality. The Respondent also contended that the Court's power under Section 34 is narrow, and it should not sit in appeal over the award, interfering only on limited grounds.