Meghalaya High Court Imposes ₹10L Cost On PWD For Unnecessary Litigation, Says "Voluminous Tomes" Won't Dissuade Judges From Looking Deep

The Meghalaya High Court while upholding an arbitral award has ordered the Public Works Department (National Highway) to pay a contractor Rs. 10 lakh over and above the award amount, saying that PWD put the contractor through unnecessary litigation.

"This is a complete waste of time and a reckless exercise undertaken by an irresponsible appellant...It has become fashionable, particularly for public sector undertakings and government litigants, to throw sheafs of paper at the court and believe that such voluminous tomes would dissuade judges from looking deep into the matter and be frightened enough to grant an adjournment and delay the inevitable. It is time that unworthy litigants with frivolous causes give up the habit of preying on the court‟s delays and the only way this can be ensured is by imposing actual and primitive costs for such misadventure," a bench of Chief Justice Sanjib Banerjee and Justice Justice W. Diengdoh remarked.

The observations were made while hearing a challenge under Section 37 of the Arbitration and Conciliation Act, 1996 to an order dated May 17, 2023 passed by the Commercial Court, Shillong on a plea under Section 34 of the Act challenging an arbitral award rendered on July 27, 2021.

The dispute revolved around a contract for the two-laning of a highway whereby PWD had engaged the respondent Joint Venture for the project. The contract included a two-tier mechanism for dispute resolution, as outlined in clause 25.1 of the agreement. It required disputes to be referred to a Dispute Review Expert (Board), whose decision would be final and binding unless challenged within 28 days.

However, PWD failed to comply or contest the decision of the Dispute Review Expert Board (DREB) made on February 19, 2017, which found that the contractor was entitled to a sum in excess of Rs.117 crore on account of interest for delayed payments and unpaid bills. Consequently, the contractor invoked clause 25.3 of the contract, referring the matter to arbitration. However, PWD responded by stating that it would appeal against DREB's decision, disregarding the contract's provision that required disputes to be referred to arbitration within a specified period.

An arbitral tribunal was eventually constituted and during the initial proceedings, PWD did not raise objections regarding the inclusion of the DREB's decisions in the arbitration. However, several months later, it filed an application under Section 16 of the Arbitration Act arguing that claims related to the DREB's decisions were not arbitrable.

In the award, the arbitral tribunal reckoned that since no dispute had been raised at all by the PWD in respect of the decisions rendered by DREB, it could no longer object to the total amount decided in favour of the contractor being made the subject-matter of an award.

Scrutinizing these actions of the PWD in appeal, the bench questioned its failure to raise disputes regarding duplication of interest in the previous decisions of the DREB. The court also found it curious that these matters were not brought up by PWD, especially since they were being hyper-critical of the arbitral tribunal's consideration of these issues.

Court said the arbitral tribunal had correctly read PWD's conduct as acquiescence, given their silence and failure to respond to important correspondence.

“It is evident that the arbitral award read the conduct of the appellant herein exactly as this Court has done in inferring that upon the appellant herein not responding the letter of February 1, 2019 and not indicating the bounds of the arbitral tribunal‟s authority in course of previous hearings in the reference, the authority of the arbitrators extended to the entirety of the contract between the parties”, the bench reasoned.

Accordingly, the court dismissed the appeal with costs assessed at Rs.10 lakh which will have to be paid over and in addition to the amount awarded.

Case Title: Public Works Department Vs. M/s BSC-CC & JV, 6-2-913/914

Citation: 2023 LiveLaw (Meg) 23

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