Non-Adjudication Upon An Issue Going To The Root Of The Matter Would Make The Arbitral Award Opposed To 'Public Policy': Delhi High Court

The High Court of Delhi has held that non-adjudication, by the arbitral tribunal, upon an issue that goes to the root of the matter would make the arbitral award opposed to public policy. It held that such an award would be set aside under Section 34 of the A&C Act. The bench of Justice Chandra Dhari Singh held that once the tribunal duly notes the submissions of a party on an issue central to the dispute but renders no finding on such submission/contentions, it would result in violation of principles of natural justice. The Court also held that an award would become suspect to setting aside under Section 34 of the Act when the tribunal makes an award inherently contradictory. Facts The Petitioner (National Highway Authority of India -NHAI) invited bids for construction of Highway in Madhya Pradesh. The bid of the Respondent (Ssangyong Engineering) was accepted and a letter of award dated 30.12.2005 was issued in its favour. Pursuant thereto, the parties entered into a package agreement dated 12.04.2006 (Subject Agreement). Clause 67 of the agreement provided for resolution of dispute through arbitration. Clause 60.1 of the agreement provided for monthly payments through Interim Payment Certificates (IPC) for the work executed in the previous month after due verification/measurement by the Independent Engineer in accordance with Clause 56.1 & 57.1 of the agreement. Clause 60.9 granted Engineer, the discretion to revise the IPCs in cases of an inadvertent error. Clause 48.1 of the agreement provided for 'Taking over Certificate' which could be issued by the Engineer after the contractor had completed substantial work. In terms of Clause 60.10, the Contractor, within 84 days of issuance of taking over certificate, had to provide the Engineer with the Statement of Completion which would include details about the value of work, sum due, etc. Clause 62.1 provided for issuance of 'Defect Liability Period' which would confirm that the contractor had completed the project work. Clause 60.11 of the agreement provided that within 56 of issuance of Defect Liability Certificate, the respondent would submit a 'Draft Final Settlement' to the engineer proving details about the total value of the work done and the amount due, if any, under the agreement for verification by the Engineer. If the parties mutually agreed on the amount, the contractor would then have to give a 'Written Discharge'. Thereafter, the Engineer could issue a Final Payment Certificate under Clause 60.13. If there remained any dispute between the parties with respect to the amount due under the Draft Final Settlement, it had to resolved as per Clause 67 and till the issue was resolved, only an interim payment with respect to the admitted amount could be made through an IPC. In terms of the agreement, the Engineer issued a TOC on 06.04.2013. Thereafter, the respondent submitted a Statement of Completion on 28.05.2013. Pursuant thereto, the Engineer directed payment of 90% claimed amount through an IPC. Thereafter, the Engineer issued a Defect Liability Certificate to the respondent on 04.04.2014. Accordingly, the respondent submitted the Draft Final Statement to the Engineer on 24.06.2014 claiming an amount of Rs. 160,71,89,930/- as amount due under Final Payment Certificate. However, the Engineer approved only a payment of Rs. Rs.14,24,50,311 vide a payment certificate dated 31.08.2014. A dispute arose between the parties with respect to the payment due, accordingly, the respondent invoked arbitration. Before the arbitral tribunal, the respondent, as claimant, filed its statement of claim. The petitioner filed its statement of defence and also preferred counter-claims. It contended that the payment certificate dated 31.08.2014 was only an IPC and there were certain errors in it which stood cured by the Engineer vide revised payment certificates dated 13.07.2017 and 31.12.2017.It also contended that certificate dated 31.08.2014 cannot be considered to be final payment certificate since the same could only be issued when prerequisites of 'written discharge' was completed and no dispute existed between the parties. It contended that since a dispute existed between the parties, the agreement provided only for an IPC till the time disputes were resolved under Clause 67. The arbitral tribunal held that the certificate dated 31.08.2014 was a 'Final Payment Certificate' and the amount as admitted therein is due to the respondent. It accordingly awarded the amount in favour of the respondent. Aggrieved thereby, the Petitioner preferred a challenge under Section 34 of the Act. Submissions of the Parties The petitioner challenged the award on the following grounds: Findings in the impugned award are self-contradictory. As after noting that the pre-requisite for issuance of final certificate were not fulfilled, the tribunal treated the...

Non-Adjudication Upon An Issue Going To The Root Of The Matter Would Make The Arbitral Award Opposed To 'Public Policy': Delhi High Court

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Non-Adjudication Upon An Issue Going To The Root Of The Matter Would Make The Arbitral Award Opposed To 'Public Policy': Delhi High Court

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