RELIANCE INFRASTRUCTURE LTD. v. STATE OF GOA

[DINESH MAHESHWARI, J.]

13.5. In the case of Haryana Tourism Ltd. (supra), this Court A yet again pointed out the limited scope of interference under Sections 34 and 37 of the Act; and disapproved interference by the High Court under Section 37 of the Act while entering into merits of the claim in the following words: - “8. So far as the impugned judgment and order passed by the B High Court quashing and setting aside the award and the order passed by the Additional District Judge under Section 34 of the Arbitration Act are concerned, it is required to be noted that in an appeal under Section 37 of the Arbitration Act, the High Court has entered into the merits of the claim, which is not permissible in exercise of powers under Section 37 of the Arbitration Act. C

9. As per settled position of law laid down by this Court in a catena of decisions, an award can be set aside only if the award is against the public policy of India. The award can be set aside under Sections 34/37 of the Arbitration Act, if the award is found to be contrary to: (a) fundamental policy of Indian Law; or (b) the interest of India; or (c) justice or morality; or (d) if it is patently illegal. None of the aforesaid exceptions shall be applicable to the facts of the case on hand. The High Court has entered into the merits of the claim and has decided the appeal under Section 37 of the Arbitration Act as if the High Court was deciding the appeal against the judgment and decree passed by the learned trial Court. Thus, the High Court has exercised the jurisdiction not vested in it under Section 37 of the Arbitration Act. The impugned judgment and order passed by the High Court is hence not sustainable.” 13.6. As regards the limited scope of interference under Sections F 34/37 of the Act, we may also usefully refer to the following observations of a 3-Judge Bench of this Court in the case of UHL Power Company Limited v. State of Himachal Pradesh: (2022) 4 SCC 116: - “15. This Court also accepts as correct, the view expressed by the appellate court that the learned Single Judge committed a gross G error in reappreciating the findings returned by the Arbitral Tribunal and taking an entirely different view in respect of the interpretation of the relevant clauses of the implementation agreement governing the parties inasmuch as it was not open to the said court to do so in proceedings under Section 34 of the Arbitration Act, by virtually acting as a court of appeal. H

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A 16. As it is, the jurisdiction conferred on courts under Section 34 of the Arbitration Act is fairly narrow, when it comes to the scope of an appeal under Section 37 of the Arbitration Act, the jurisdiction of an appellate court in examining an order, setting aside or refusing to set aside an award, is all the more circumscribed.” B 13.7. The learned Attorney General has referred to another 3- Judge Bench decision of this Court in the case of Sal Udyog Private Limited (supra), wherein this Court indeed interfered with the award in question when the same was found suffering from non-consideration of a relevant contractual clause. In the said decision too, the principles aforesaid in Delhi Airport Metro Express, Ssangyong Engineering C and other cases were referred to and thereafter, this Court applied the principles to the facts of that case. We shall refer to the said decision later at an appropriate juncture. 13.8. Keeping in view the aforementioned principles enunciated by this Court with regard to the limited scope of interference in an arbitral D award by a Court in the exercise of its jurisdiction under Section 34 of the Act, which is all the more circumscribed in an appeal under Section 37, we may examine the rival submissions of the parties in relation to the matters dealt with by the High Court. Questions relating to proceedings and procedure E

14. It has been argued on behalf of the State that in the arbitration proceedings, it had made an application for appointment of an expert under Section 26 of the Act but the same was not decided by the Arbitral Tribunal. In our view, the High Court has dealt with this issue in its proper perspective and this baseless objection has rightly been rejected. F We find it rather strange that such an objection standing at contradiction to its own stand before the Arbitral Tribunal and against its own amended pleading has at all been projected by the State as a ground of challenge to the award in question. It appears that in the counter claim filed by Government of Goa before the Arbitral Tribunal, initially it was prayed that all transactions and invoices raised by the claimant need to be re- examined through a technical cum financial expert so as to ascertain the correctness of the bills in terms of Section 26 of the Act but, thereafter, the Government itself amended its counter claim, as permitted under Section 23 of the Act by the Arbitral Tribunal, and dropped this prayer. It was then pleaded by the Government that it had engaged the services of an expert and with his assistance, had reworked the amount which was

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[DINESH MAHESHWARI, J.]

payable by the claimant to it. The High Court has held that after such deletion of the prayer, it was reasonable for the Arbitral Tribunal to proceed on the basis that the application under Section 26 of the Act was either rendered infructuous or was abandoned by Government of Goa; and that it had not been able to show any prejudice on account of non-disposal of the application. We are in agreement with the High Court on this score. It is also noticeable that in challenge to the award, the Government of Goa has not agitated the rejection of its counter claim. In fact, there remains no ambiguity as regards the Arbitral Tribunal attending on all the relevant aspects of the matter. In this regard, we may usefully reproduce paragraph 31 of the award where the Arbitral Tribunal specifically noticed the submissions made on behalf of the Government C of Goa about exercise having been undertaken to workout the details pertaining to the counter claim and permitted the Government to specify the amount with reference to different heads and with necessary particulars. Paragraph 31 of the award reads as under:- “31. In the course of hearing of the matter, on 18.10.2016, learned counsel appearing on behalf of the Respondent stated that his client has undertaken an exercise to work out the details pertaining to the counter claim, since no specified amount had been claimed by the Respondent in its counter claim. He submitted that he would like that the figures be placed before this Tribunal by way of amendment of the pleadings, if necessary. The Tribunal permitted the Respondent to convey to the Claimant in writing the amount which the Respondent claimed by way of counter claim in the instant proceedings under different heads and with necessary particulars. The Claimant was given liberty to file its objections.” 14.1. Another submission on behalf of the Government has been that for non-production of certain documents by the claimant, an adverse inference ought to have been drawn against them by the Arbitral Tribunal. It is again a rule of evidence as to whether adverse inference is to be drawn or not; and to what effect. The High Court has dealt with this issue and has held that most of the documents were made available to the Government of Goa. High Court has further held that the other documents sought for by Government of Goa were not made available to it because the claimant had clearly stated that such documents were not available with it at the relevant time or did not exist at the relevant time. It has further been held that in absence of Government of Goa establishing any serious prejudice, there was no breach of principles of H

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A natural justice merely because the Arbitral Tribunal had failed to make a formal order on the application seeking production of documents. We are in agreement with the said observations and findings of the High Court. 14.2. Government of Goa’s contention that opportunity was not B granted by the Arbitral Tribunal to file additional written submission has also been dealt with by the High Court with the finding that sufficient opportunity was given by the Arbitral Tribunal since there were at least two meetings/hearings before the learned Arbitrator where the Government of Goa did neither file nor seek leave to file written submissions in response to the claimant’s written clarifications/ C submissions. We are in agreement with these findings too. 14.3. In fact, the submissions of the aforesaid nature, attempting to find fault with the proceedings of arbitration on such hyper-technical but baseless grounds only show an attempt on the part of the State to somehow question the award and seek interference, irrespective of the D principles laid down by this Court. 14.4. In regard to the aforesaid procedural aspects of the matter, the High Court has cautiously taken note of the record of proceedings and has proceeded only within the confines of its jurisdiction to reject these contentions. E

15Copy pinpoint15. The question, however, is as to whether the High Court remained within those confines while dealing with the other points of challenge pertaining to the items of claim and consideration of the Arbitral Tribunal in that regard. We may examine the point-wise consideration of the High Court with reference to the applicable principles. F The award relating to variable charges on use of alternate fuel

16Copy pinpoint16. The claimant has assailed the judgment of the High Court by which it has set aside the award towards variable charges of Rs. 24.66 crore. It is the case of the claimant that the ground on which the High G Court has set aside the award was not at all an issue before the Arbitral Tribunal; that in any case, the State has referred to such clauses of the PPA which were not applicable to supply of electricity by using RLNG as alternate fuel; and that these clauses were applicable only for supply of electricity using ‘Naphtha’ as fuel. Per contra, it has been argued on H behalf of the State that the Arbitral Tribunal has approached the entire

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[DINESH MAHESHWARI, J.]

case from an altogether wrong angle; and when the Tribunal adverted to wrong questions, the result has been of wrong answers. This, according to the learned Attorney General, has been a gross illegality and perversity on the part of the Arbitral Tribunal. 16.1. We find it difficult to accept the submission of the learned Attorney General. In our view, on the issue of entitlement to raise invoices based on fluctuating price of fuel and rate of dollar, the Arbitral Tribunal has held in favour of the claimant after thorough examination of the documentary evidence before it and while focusing on core issue raised before it. 16.2. After taking note of relevant submissions and after having examined the entire documentary evidence, the Arbitral Tribunal returned a clear finding on facts in the following terms: - “41. The facts noticed above which are based entirely on the documentary record placed before the Tribunal clearly establish that the proposal made by the Claimant under its letter dated 21st D of March 2013 was an offer for supply of energy at a rate based on the formula contained in the aforesaid communication. It was clearly mentioned that the entire PPA and all other terms and conditions shall remain unchanged except for change in calculation of Variable charges in Monthly Tariff. The formula for working out the costs was also described as “Proposed Monthly Variable E Charge Formula” A Monthly Sample Calculation based on assumed values of landed cost of oil, and dollar rate, was appended to the proposal to show that the cost would be less than what was being paid by the Respondent. When the Respondent accepted the proposal and responded by its letter of 26th of April 2012 F which referred to the cost at the rate of Rs. 8.58 per unit, which was described as the “ revised fixed rate”, the Claimant clarified the position immediately by stating in its letter of 30th of April 2013 to the Respondent that the price mentioned in the proposal dated 21st of March 2013, was not for a fixed cost of power supplied, and that the same shall vary depending upon the fuel G price in the market and the exchange rate. They therefore requested the Respondent to confirm that the tariff was formula based and shall vary with changes in the fuel price in the market and dollar variation. Thereafter it appears that the parties were not able to resolve the differences that surfaced,, and ultimately H

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A the matter was placed before the Cabinet of the Government of Goa on May 22, 2013. After having considered the matter, the Cabinet took a very clear and categoric decision to purchase power from the Claimant at the rate given in the proposal of the Claimant, which would vary, based on the international price of gas and exchange rate fluctuations. The decision was communicated to all offices concerned with a request to report compliance. On the very next day, the Respondent by its letter dated 23rd of May 2013 confirmed that the Government had decided to continue to purchase power as per the formula proposed by the Claimant in their letter dated 21st of March 2013 considering the prevailing rates of fuel and dollar up to the expiry of the existing PPA. The same communication also directed that the power bills must be submitted with due documentation of prices of fuel and dollar.

42. These facts clearly establish that the price of power to be supplied by the Claimant was not based on fixed dollar rate or landing cost of fuel. The proposal clearly made these charges variable, and clarified the position further when the Respondent wrongly understood it to mean a fixed rate formula. Ultimately, the Cabinet of the Government of Goa took a decision clearly in favour of the stand of the Claimant. It was faintly argued that the Cabinet decision was not binding because, pursuant to it no order was drawn up by the State Government. Relying on the decision of the Hon’ble Supreme Court (AIR 1963 S.C 395) in Bachhittar Singh Vs State of Punjab, it was contended that unless the Cabinet decision is followed by a formal order drawn up by the State Government, it does not have any binding effect. The submission is wholly untenable. On facts, in the decision referred to the Court was concerned with the note of the Revenue Minister in the file,, and was not a decision taken by the Cabinet at its meeting. Secondly, in the instant case the decision of the Cabinet was communicated to all concerned officers directing them to act in accordance with the order and report compliance. Pursuant to the said decision, a letter was written by the Respondent to the Claimant accepting the proposal based on variable charge in accordance with the prevailing cost of fuel and dollar. This clearly shows that the Government acted upon the said decision of the Cabinet. H

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[DINESH MAHESHWARI, J.]

43. For all these reasons, the Tribunal finds that the plea of the A Claimant that the Respondent was obliged to pay for the power purchased by it pursuant to the proposal accepted by it, on the basis of invoices prepared and submitted by the Claimant taking into account the variable cost of oil and dollar, must be accepted, and the plea of the Respondent to the contrary, must be rejected.” B 16.3. Insofar as the contention of State with regard to non- consideration of clauses 12.1.4 to 12.1.7 of PPA is concerned, in our view, the claimant is right in its submission that the main issue raised before the Arbitral Tribunal was only as to whether the agreement was to supply power on a fixed rate of fuel price and fixed rate of exchange in terms of US dollar to Indian rupee. C

16.4. It might appear that in the latter part of the pleadings, the Government of Goa referred to the aforesaid clauses 12.1.4 to 12.1.7 of PPA but, fact of the matter remains that they were not as such considered by the parties to be forming material propositions of law or facts so as to form the part of the issue before the Arbitral Tribunal. Even on the first principles pertaining to settlement of issues, like those in Order XIV Rule 1 of the Code of Civil Procedure, 190818, the Court, while dealing with regular civil suit, would be ascertaining as to upon what material proposition of fact or law the parties are at variance, and thereupon would frame and record the issues on which the right decision of the case appears to depend. The present case had been that of arbitration 18 Order XIV Rule 1 CPC reads as under: - “1. Framing of issues.—(1) Issues arise when a material proposition of fact or law is affirmed by the one party and denied by the other. (2) Material propositions are those propositions of law or fact which a plaintiff must allege in order to show a right to sue or a defendant must allege in order to constitute his defence. (3) Each material proposition affirmed by one party and denied by the other shall form the subject of a distinct issue. (4) Issues are of two kinds: (a) issues of fact, (b) issues of law. G (5) At the first hearing of the suit the Court shall, after reading the plaint and the written statements, if any, and after examination under rule 2 of Order X and after hearing the parties or their pleaders, ascertain upon what material propositions of fact or of law the parties are at variance, and shall thereupon proceed to frame and record the issues on which the right decision of the case appears to depend. (6) Nothing in this rule requires the Court to frame and record issues where the defendant at the first hearing of the suit makes no defence.” H

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A and, obviously, the Arbitral Tribunal was not obliged to frame issues on each and every fact pleaded or disputed. The Arbitral Tribunal was only expected to arbitrate on the dispute presented to it. Significantly, in the present case, the parties themselves succinctly formulated the issues on which the Arbitral Tribunal was required to give its ruling and therein, as regards this matter of variable charges, the question posed was with reference to assertion of the Government of Goa that the claimant had agreed to supply power based on fixed rate of fuel price and a fixed rate of exchange in terms of price of US dollar to INR for supply of power using RLNG as fuel from June, 2013 onwards (vide point in paragraph 34 of the award-reproduced hereinabove). The Tribunal, therefore, rightly indicated that the real issue was as to whether the invoices prepared by the claimant were in accordance with the terms and conditions of the proposal made by the claimant and accepted by the Government; and the core of dispute was as to whether price of energy to be supplied was based upon a fixed dollar rate and a fixed import price irrespective of actual fluctuations. The Tribunal indeed adverted to all the relevant facts and evidence in that regard and determined this issue in favour of the claimant. 16.5. In view of the real issue projected and agitated before the Arbitral Tribunal, reference to clauses 12.1.4 to 12.1.7 of PPA had obviously been unnecessary. This is coupled with the submissions of the claimant that the definition of “Fuel Supply Contract” in PPA was restricted to a contract entered into between the claimant and a fuel supplier for supply of “Naphtha”, and not pertaining to alternate fuel also. For ready reference, we may reproduce the definitions of “Fuel” as also “Fuel Supply Contract” in the PPA which read as under: - F “ ‘Fuel’ means Naphtha or any Alternate Fuel; *** *** *** ‘Fuel Supply Contract’ shall mean any contract entered into between RSPCL and any Fuel Supplier for the supply of Naphtha G pursuant to clause 12;” 16.5.1. If “Alternate Fuel” is also to be read alongwith “Naphtha” in the aforesaid definition, that would be either re-writing the contract or at least reading something into the contract by stretching the principles of construction of document. This would, in our view, be travelling into the area of such construction of the terms of contract which were not H

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forming the part of the material propositions of fact on which the parties were at variance. As noticed, the core of variance of the parties had only been as to whether the claimant was to supply energy on a fixed rate of fuel and fixed rate of foreign currency after the parties had agreed to the use of alternate fuel. 16.6. We have only broadly referred to the salient features of the dealings between the parties. In fact, not much dilation and dissection of the record is required because the Arbitral Tribunal has indeed examined all the relevant aspects of the matter in necessary details. 16.7. In any case, all documents which showed the cost at which alternate fuel was procured and the prevailing dollar rate were supported by price certificates forwarded to Government of Goa with each and every invoice, and such certificates had been from Public Sector Undertakings. There is nothing on record to show nor has Government of Goa demonstrated that it had either contemporaneously asked for any documents or had disputed or denied the correctness of such certificates. D

16.8. The Arbitral Tribunal has noticed that the decision of the cabinet was produced before it by Government of Goa itself. There is also a finding of fact in the award that the communication dated 23.05.2013 to purchase power at a fluctuating rate of fuel and exchange rate of dollar, conveyed to the claimant by Government of Goa, was pursuant to the cabinet decision taken on 22.05.2013. This has been a particular view taken by the Arbitral Tribunal of the evidence on record. We are unable to appreciate as to how such a view on evidence could have been substituted by another view on the same evidence by the High Court. In an overall view of the record, we are unable to agree that the Arbitral Tribunal had approached the case from an altogether wrong angle or it had asked wrong questions. In our view, the Arbitral Tribunal had squarely answered the issue, which was raised jointly by the parties before it.

17Copy pinpoint17. True it is that consideration of any adjudicatory forum would be vitiated by asking wrong questions but then, in our view, this flaw operates against the consideration of the High Court rather than against the consideration of the Arbitral Tribunal. 17.1. As noticed, the High Court has reproduced all the said clauses of the contract under the heading “Fuel Supply” and then, H

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A elaborately discussed the features related with their operation, particularly clauses 12.1.4 to 12.1.7. The High Court has found this aspect to be a vital issue and non-consideration thereof has been taken to be a patent illegality. It was observed and held, inter alia, as under: “88. According to us, the issue about the applicability and the non-compliance of contractual clauses 12.1.4 to 12.1.7 was one of the most relevant and vital issues which arose before the learned Arbitrator. A substantial claim was made by the Respondent towards variable charges, of which, the fuel component was the most dominant. Ultimately, the learned Arbitrator has made an Award in an amount of Rs. 24.66 crores (approximately) towards variable charges post the switch of the fuel from Naphtha to RLNG. Such a substantial award has been made without even adverting to, much less considering or evaluating the issue raised by the Appellant about applicability and non-compliance with the contractual clauses 12.1.4 to 12.1.7. This amounts to patent illegality because the Award to that extent can be said to have been made ignoring or even disregarding contractual provisions to be found in clauses 12.1.4 to 12.1.7 of the PPA. The Award to this extent will have to be held as vitiated by patent illegality because Award ignores vital evidence on the issue of applicability and non-compliance with the contractual provisions in clauses E 12.1.4 to 12.1.7.” 17.2. The High Court has also proceeded to observe and reiterate that interference was being made not because of the Court disagreeing with any interpretation of the contractual clauses by the Arbitrator but because the Arbitrator failed to look into the relevant contractual provisions. The High Court justified its interference while observing as under: - “98. According to us, all these predicates are attracted when it comes to impugned Award concerning the variable charges. The interference is by no means, merit-based. Interference is because the Arbitrator in the present case has failed to even advert to much less go into the merits of one of the most vital and relevant issues concerning the applicability and non-compliance with the contractual provisions. The interference is not because the interpretation of the contractual clauses by the learned Arbitrator H is wrong or because we disagree with such interpretation. The

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interference is because the learned Arbitrator failed to even look A into the contractual provisions to find out if the same were given a go by post the switch of fuel from Naphtha to RLNG. The interference is because the learned Arbitrator failed to take note of and interpret the contractual clauses to find out whether they were breached as alleged by the Appellant though denied by the B Respondent. Without even adverting to much less taking into consideration the contractual provisions which governed the relationship between the parties, the learned Arbitrator was not justified in making an Award of Rs. 24.66 crores in favour of the Respondent. Accordingly, we set aside the impugned Award to the extent it awards Rs. 24.66 crores to the Respondent towards the variable charges.”

18Copy pinpoint18. As noticed, arbitral award is not an ordinary adjudicatory order so as to be lightly interfered with by the Courts under Sections 34 or 37 of the Act of 1996 as if dealing with an appeal or revision against a decision of any subordinate Court. The expression “patent illegality” has been exposited by this Court in the cases referred hereinbefore. The significant aspect to be reiterated is that it is not a mere illegality which would call for interference, but it has to be “a patent illegality”, which obviously signifies that it ought to be apparent on the face of the award and not the one which is culled out by way of a long-drawn analysis of the pleadings and evidence. Of course, when the terms and conditions of the agreement governing the parties are completely ignored, the matter would be different and an award carrying such a shortcoming shall be directly hit by Section 28(3) of the Act, which enjoins upon an Arbitral Tribunal to decide in accordance with the terms of contract while taking into account the usage of trade applicable to the transaction. As said by this Court in Associate Builders (supra), if an Arbitrator construes the term of contract in a reasonable manner, the award cannot be set aside with reference to the deduction drawn from construction. The possibility of interference would arise only if the construction of the Arbitrator is such which could not be made by any fairminded and reasonable person. G

19Copy pinpoint19. The case of SAL Udyog Private Limited (supra) cited by learned Attorney General is an apposite example as to when the principles governing “patent illegality” come into operation. In that case, in the contract concerning supply of Sal seeds, the respondent-contractor had continued to operate until 21.12.1998, when the contract was terminated H

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A in accordance with the change in legislation. The respondent thereafter levied a claim for refund of a sum of about 1.72 crore, allegedly paid in excess to the State. The dispute ultimately led to arbitration and an arbitral award was made in favour of the respondent which was not interfered with under Sections 34 and 37 of the Act. B 19.1. Therein, the specific ground of challenge by the appellant- State had been that the Arbitrator ignored the binding term of contract governing the parties relating to recovery of “supervision charges”. Such a binding term was brushed aside by the Arbitrator while observing that there was no basis to admit any such “indirect expenses”. This Court found that the supervision charges were levied by the State and paid by C the respondent without any demur right from the date parties entered into agreement and it was only after termination of the contract that the respondent raised a dispute towards supervision charges. It had been a classic case of the Arbitrator ignoring and rather overriding the terms of contract, as would appear from the following observations of this Court D with reference to the facts of the case: “23. On a conspectus of the facts of the case, it remains undisputed that though the appellant State did raise an objection before the Arbitral Tribunal on the claim of the respondent Company seeking deduction of supervision charges, for which it relied on Clause E 6(b) of the agreement and the Circular dated 27-7-1987 to assert that recovery of supervision charges along with expenses was a part and parcel of the contract executed with the respondent Company, the said objection was turned down by the learned sole arbitrator by giving a complete go-by to the terms and conditions of the agreement governing the parties and observing that there is F no basis to admit any such “indirect expenses”. The Circular dated 27-7-1987 issued by the Government of Madhya Pradesh that provides for imposition of 10% supervision charges on the amounts calculated towards the cost of the Sal seeds in the expenditure incurred, was also ignored. Pertinently, the respondent Company G has not denied the fact that supervision charges were being levied by the appellant State and being paid by it without any demur as a part of the advance payment made on an annual basis, right from the date the parties had entered into the first agreement i.e. from 30-8-1979. This fact is also borne out from the specimen copies of the orders filed by the appellant State with the appeal that H

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amply demonstrate that the cost of the Sal seeds required to be paid by the respondent Company included “supervision charges” described as “Paryavekshan vyay” in vernacular language. It was only after the appellant State had terminated the second contract on 21-12-1998, that the respondent Company raised a dispute and for the first time, claimed refund of the excess amount purportedly paid by it to the appellant State towards supervision charges incurred for supply of Sal seeds. In our opinion, this is the patent illegality that is manifest on the face of the arbitral award inasmuch as the express terms and conditions of the agreement governing the parties as also the Circular dated 27-7-1987 issued by the Government of Madhya Pradesh have been completely ignored.” 19.2. In view of such an error apparent on the face of the record, this Court found the matter to be of patent illegality which was going to the root of the matter and the impugned award, insofar permitting deduction of the supervision charges recovered from the respondent, was quashed and set aside being in direct conflict with the terms of the contract and the relevant circular. This Court held thus: “26. To sum up, existence of Clause 6(b) in the agreement governing the parties, has not been disputed, nor has the application of the Circular dated 27-7-1987 issued by the Government of E Madhya Pradesh regarding imposition of 10% supervision charges and adding the same to cost of the Sal seeds, after deducting the actual expenditure been questioned by the respondent Company. We are, therefore, of the view that failure on the part of the learned sole arbitrator to decide in accordance with the terms of the contract governing the parties, would certainly attract the “patent illegality ground”, as the said oversight amounts to gross contravention of Section 28(3) of the 1996 Act, that enjoins the Arbitral Tribunal to take into account the terms of the contract while making an award. The said “patent illegality” is not only apparent on the face of the award, it goes to the very root of the matter and deserves interference. Accordingly, the present appeal is partly allowed and the impugned award, insofar as it has permitted deduction of “supervision charges” recovered from the respondent Company by the appellant State as a part of the expenditure incurred by it while calculating the price of the Sal H

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A seeds, is quashed and set aside, being in direct conflict with the terms of the contract governing the parties and the relevant circular. The impugned judgment dated 21-10-2009 is modified to the aforesaid extent.” 19.3. The aforesaid had not been a case of the fundamental alteration of the terms of contract during the currency of contract and for that matter, the parties having definitely exchanged communication and having brought into existence an agreement which, even if construed as supplemental to original one, had been of material difference in regard to the use of particular fuel and then raising of invoices on that basis with reference to fluctuating price of fuel as also the exchange rate of foreign currency (US dollar).

20Copy pinpoint20. The matter can be examined from yet another angle. If the terms agreed to by the parties with exchange of communications commencing from 20.03.2013 were to be ignored, the result would be of ignoring such terms of contract of the parties which had come into existence and which were binding on both. Viewed thus, coupled with the fact that only the limited dispute was presented for arbitration (i.e., as to whether power was to be supplied on the basis of fixed rate of fuel and fixed rate of currency or on variable charges), the Arbitral Tribunal, in our view, has been justified in focusing on the core issue raised, rather than going astray and entering into such an analysis which was not germane to the issue at hand.

21Copy pinpoint21. For the reasons aforesaid, in our view, no ground for challenge under Sections 34 or 37 of the Act was made out in relation to the award pertaining to variable charges. Hence, the High Court has not been right in setting aside the award relating to variable charges on the ground of so-called non-consideration of clauses 12.1.4 to 12.1.7 of PPA. 21.1. Putting it in other words, the High Court, even while reminding itself of the limitation of jurisdiction, has committed the same error by extensively dissecting the evidence while assuming that clauses G 12.1.4 to 12.1.7 were decisive of the matter without taking a close look at the material propositions which formed the dispute and which were presented by the parties before the Arbitral Tribunal. As regards variable charges, the core question before the Tribunal had been as to whether the claimant agreed to supply electricity on fixed charges with fixed rate of foreign currency while using the alternate fuel. This question was H essentially to be determined with reference to the new contract that

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came into existence with exchange of communications between the parties. The Arbitrator precisely decided the matter with reference to, and after analysis of, that evidence. It had neither been a case of the Arbitrator not taking into consideration the terms of contract applicable to the issue at hand nor of any such finding which no fair-minded or reasonable person could have possibly rendered ever. Viewed in the light of core dispute presented to the Arbitral Tribunal by the parties, the submissions of the learned Attorney General, that the Arbitral Tribunal has not examined the question as to whether the correspondence in question resulted in change of fundamentals of contract, do not make out a case for interference because novation of the terms of contract as regards fuel had not been a matter of dispute at all. The core question was as to how the new terms were to operate. The Arbitral Tribunal has precisely dealt with the same in accordance with law.

22Copy pinpoint22. What has been observed hereinabove and held in disapproval of interference by the High Court in the item of award pertaining to variable charges more or less apply to the other items too, where the D High Court has interfered and has upturned the award. In view of the detailed discussion foregoing, we need not elaborate on all other items. Suffice it would be to deal briefly with the same as we find that on every such score, the High Court has rather entered into merits of the matter as if dealing with a regular appeal. It has been a clear case of the High E Court travelling beyond the periphery of Section 34 as also Section 37 of the Act of 1996. The award relating to downrating of the plant

23Copy pinpoint23. As regards downrating, the issue before the Arbitral Tribunal was as to whether the plant was required to be downrated till the expiry of PPA as contended by Government of Goa relying on a draft notification issued by Ministry of Power, Government of India. 23.1. The Arbitral Tribunal considered the contractual terms of the parties and came to a specific finding on interpretation of such terms and conditions that various Supplementary PPAs executed between the parties show that the Rated Capacity of the plant was reduced to 19.8 MW and the obligation of the claimant was restricted to assuring supply upto 19.8 MW without any reference to degradation of such capacity. On considering the material on record, the Arbitral Tribunal held that Government of Goa was not justified in contending that there was any H

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A downrating annually of Rated Capacity. In regard to this issue, it is more than apparent that the Arbitral Tribunal had considered the provisions of the contract and had taken a particular view thereupon. The Tribunal said, inter alia, as under:- “48. An issue was raised at the stage of arguments relating to the down rating the generating capacity of the plant annually commencing from the first year after Commercial Operation of the plant. Such a plea does not appear to have been raised in the Statement of Defence by the Respondent even though it is contended that down rating a small fraction of generating capacity will have a huge impact on the monthly invoices. Learned counsel for the Claimant brought to the notice of the Tribunal that it was in paragraph 12 of the sur rejoinder that the Respondent sought documents relating to Original Equipment Manufacturer’s (OEM) recommendations towards down rating of generating capacity as envisaged in the definition of “Contracted Capacity” which was required to ascertain the implementation of the down rating of the generating capacity in accordance with the recommendations of the Original Equipment Manufacturer.

49. According to the Respondent in terms of the PPA, the contracted capacity was defined to be 39.402 KW in the first year of commercial operation and down rated annually as per original equipment manufacturer’s recommendation in successive years. However, the Claimant did not take into account the down rating factor in any of the bills which it submitted to the Respondent. After the dispute arose, the Respondent observed that the down rating factor ought to have been applied from the year 2000 F onwards, which was the second year of commercial operation, in terms of OEM recommendations. It was therefore that the Respondent sought necessary documents from the Claimant as regards the recommendations of the OEM, but the same were not provided, contending that the said documents were not available G with the Claimant. In the circumstances, the Respondent had to go by other material to calculate the down rating factor. The Respondent has relied upon a draft notification issued by the Government to calculate the down rating. The said notification provides that the down rating would start from the second year of operation and would proceed till the fifth year, after which the H

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plant had to be overhauled as a result of which in the sixth year, the down rating would be negligible. Based upon the draft notification issued by the Ministry for Power, the Respondent has made calculations taking into account the down rating right from the year 2000.

50. The Claimant responded by contending that a draft notification issued by the Ministry for Power has no value unless the same is duly notified in the Gazette. The Respondent has not relied upon any final notification duly notified. The Government may have thought of not issuing the notification for good reasons. Being only a draft notification which was never finally issued, it has no value in law and the Respondent cannot derive any benefit from such a draft notification.

51. It is the case of the Claimant that the contracted capacity under the PPA dated 10th of January 1997 was equal to 39,402 kilowatts in the first year of commercial operation and down rated annually thereafter as per original equipment manufacturer’s recommendation in the subsequent years. Later, the parties agreed to convert the generating station from Open Cycle into a Combined Cycle generating station of 48 MW capacity. On 10th September 1997, a supplementary PPA was entered into which permitted the Claimant to sell power directly in excess of 39.8 MW to consumers in Goa. After the Claimant commenced commercial operation of the power station on 14th of August 1999, on completion of one year thereafter, a second supplementary agreement was entered into on 20 September 2000 whereunder the Respondent agreed to consent to sale of electricity in full or in part, to the extent of F 2000 KW generated at the power station directly to any consumer in Goa. Referring to such other supplementary agreements it was submitted that the earlier definition of the contracted capacity was given a go by, and completely changed. The issue with regard to down rating thus became irrelevant, and in any event by subsequent written agreement, inter alia, amending the earlier G agreement, there was no question of any further down rating as alleged. The parties are bound by the contractual provisions. The various supplementary PPAs executed between the parties clearly show that the rated capacity was subsequently reduced to 19.8 MW and the obligation of the Claimant was restricted to assuring H

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A supply up to 19.8 MW without any reference to degradation of such capacity. The Respondent is therefore not justified in contending that there was an alleged down rating annually of the rated capacity.” 23.2. The Arbitral Tribunal then considered the documentary B evidence produced before it, including a certificate issued by OEM dated 08.11.2005 and Minutes of Meeting dated 05.04.2007, where the issue was settled and all bills till that date were reconciled and future bills were raised on the basis that there was no downrating. This is clear from the following findings in the award in question: - C “52. What is even more significant is the reliance placed upon the certificate issued by the OEM namely BHEL-GE Gas Turbine Services, Private Limited dated November 8, 2005. It is certified by the OEM that subsequent to the commissioning of the Goa plant of the Claimant recommended inspections of Gas Turbine were carried out and Turbine was found to be generating the D Rated Output without any degradation. Similarly, BGGTS had carried out the Hot Gas Path Inspection of GT during Annual Inspection in September 2005. All operating parameters were checked and the Turbine was found to be generating its Rated Output without any degradation.

E 53. The Respondent submitted that the certificate refers to there being no degradation of the plant. The degradation and down rating are two different and distinct concepts which cannot be confused with one another. It is not possible to accept this contention because down rating becomes necessary only if there is degradation of the plant.

54. The Claimant has also referred to the meetings held between the parties, on 5th April 2007, when the Respondent was duly satisfied on the issue relating to down rating of contracted capacity as per OEM’s recommendation which were discussed in the said committee. The Claimant explained that the plant was maintained as per OEM’s recommendation and there had been no down rating of contracted capacity. The Claimant had already submitted OEMs letter in this regard, which is dated 8th November 2005. The parties agreed at the said meeting that the invoices were to be reconciled as per what was stated in the said meeting and all future invoices were to be calculated in the same manner. The minutes of the

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said meeting dated 5th April 2007 have been placed on record. A Thus, the question of down rating of contracted capacity is completely irrelevant. It is not disputed that, based on the minutes of the said meeting and the agreement arrived there at, the invoices for the period April 2004 to April 2007 were reconciled and the reconsideration was duly approved by the Respondent and the payment was made on the basis thereof by the Respondent to the Claimant. All future invoices were raised on the basis of the said agreement arrived at the meeting and the invoices were duly approved by the Respondent and have been paid by the Respondent for the period up to March 2013 and a part of April 2013. In the circumstances, therefore, the issue relating to the down rating of capacity of the plant appears to have been settled between the parties, and should not be allowed to be re-agitated in this proceeding. This claim is accordingly, rejected.” 23.3. The Arbitral Tribunal thus held that the issue relating to downrating of capacity was settled between the parties and the parties should not be allowed to reagitate the same.

24Copy pinpoint24. As regards this issue of downrating, again, we find that the High Court has found shortcomings in the discussions of the Arbitral Tribunal as regards the meaning and effect of the certificate dated 08.11.2005 and as to whether the claimant could have made any claim on that basis or not. The High Court even proceeded to analyse the minutes of the meeting. It has clearly been a case of value and worth attached to a particular evidence by Arbitral Tribunal, which was considered not satisfactory by the High Court; and rejection of the contention of the Government by the Arbitral Tribunal was found to be erroneous. However, thereafter, the High Court again observed that it was not a case of re-appreciation of evidence but being a case of no evidence, there had been patent illegality. The High Court observed as under: - “124. The impugned Award has recorded a finding based on the bald statement in the certificate dated 8th November 2005 and there was no degradation of the plant and further, in the absence of degradation of the plant, the concept of downrating will not apply, Again, this is, with respect, patent illegality. The certificate could hardly have been regarded as a recommendation of OEM. In any case, the certificate referred to the absence of degradation H

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A in the year 2005, and based on such a certificate, there was no question of inferring that there was no degradation of the plant even thereafter. Therefore, the contractual stipulation regards downrating, which was never amended or deleted by any subsequent agreements, could not have been ignored or bypassed based on the certificate dated 8th November 2005 or the minutes B of the meeting dated 5th April 2007.

125. The impugned award to the extent it rejects the Appellant’s contention based on the downrating, will, therefore, have to be set aside on the ground that the same is vitiated by patent illegality on the face of the record. The findings recorded in the impugned C Award are based only on the certificate dated 8th November 2005 and the minutes of the meeting dated 5th April 2007. None of the documents suggests that the contractual term of the downrating was either done away with or complied with. This is not a case of either reappreciation of the evidence on record or a case of insufficiency of evidence. This is a case of no evidence. This is a case of ignoring the contractual provision by incorrectly assuming that such provision was amended or deleted. The tentative findings to the contrary are, therefore, ex facie perverse and suffer from patent illegality on the face of the record. The impugned Award, to the extent it rejects the defence of the Appellant on the issue of downrating and proceeds to make an award of Rs. 18.53 crores in favour of the Respondent is liable to be set aside on the ground of perversity and patent illegality.” 24.1. In regard to this issue, in our view, the High Court has again travelled beyond its jurisdiction under Section 37 and rather than remaining within the confines of consideration under Section 34 of the Act, has entered into the arena which is exclusively within the Arbitrator’s domain. What the Arbitral Tribunal has held in regard to this item had exclusively been its view on the evidence on record and the relevant surrounding facts/factors. The view so taken by the Arbitral Tribunal cannot be said to be wholly perverse or suffering from patent illegality so as to be interfered with. Needless to observe that even if two views are possible, the Court cannot substitute its own view with that of the Arbitral Tribunal.

25Copy pinpoint25. The questions raised by the learned Attorney General, in relation to the issue concerning downrating, that adverse inference ought to be drawn against the claimant for failure to produce OEM

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recommendations, are only pertaining to the principles of appreciation of evidence. Of course, in the regular adjudicatory process, the Court may presume existence of certain facts under Section 114 of the Indian Evidence Act, 1872; and in terms of Illustration (g) thereof, the Court is entitled to draw an inference that the evidence which could be but not produced would, if produced, be unfavourable to the person who withholds it. However, in a given case, while determining the dispute by way of arbitration, whether the Arbitrator draws such adverse inference or not, is essentially a matter of appreciation of evidence; and if not drawing of adverse inference is also permitted to be raised as a ground of challenge under Section 34, it would open the confines of limited interference in an award; and would carry the propensity of converting the proceedings under Section 34 and under Section 37 into the proceedings of regular appeal/revision against the award and thereby, again violating the principles that re-appreciation of evidence is not envisaged in the proceedings under Section 34 of the Act of 1996. It gets per force reiterated that an award could be said to be suffering from “patent illegality” only if it is an illegality apparent on the face of the award and not to be searched out by way of re-appreciation of evidence. The submissions as regards drawing of adverse inference are themselves adverse to the ethos of Sections 34 and 37 of the Act of 1996 and are required to be rejected. 25.1. In other words, as regards the question of downrating, the questions relating to the value of certificate dated 08.11.2005 and the effect of the claimant not taking up this issue earlier would again fall directly within the arena of appreciation of evidence and reach to the extent of rendering the finding on preponderance of probabilities. The Arbitral Tribunal has taken a particular view of the evidence before it. If F it were an appeal against the award, the approach of the Court could have been different but, not so while examining the award within the confines of Section 34 of the Act. We would hasten to observe in this regard too that even in a regular appeal against a decree of the Trial Court, the Appellate Court would not substitute its own views without specifically recording a finding as to the error in the decision under G challenge. In any case, if the approach of the High Court in the present case is countenanced, the result would only be of making every award susceptible to challenge before the Court on those very grounds which are, otherwise, of appeal or revision and which are not permitted by the legislature to be taken under Section 34 of the Act of 1996. H

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26Copy pinpoint26. Having found the two major issues dealt with by the High Court not standing within the confines of limited jurisdiction under Section 34 of the Act of 1996, we may again observe that the approach of the High Court in relation to the other two comparatively minor issues relating to variable charges on 4MW power and netting-out principles is also suffering from the same error, where the High Court has deeply analysed the evidence on record to hold that the Arbitral Tribunal has not been correct in its propositions or inferences. The award relating to variable charges on 4 MW power

27Copy pinpoint27. The Arbitral Tribunal examined the documentary evidence, viz. letters exchanged between the parties dated 02.01.2009 and 19.01.2009 and came to a finding that State was not justified in its submission that the available capacity of the plant stood reduced.

28Copy pinpoint28. In this item too, the High Court has reinterpreted the said communications dated 02.01.2009 and 19.01.2009 by which parties agreed to the manner of billing for supply of 15.8 MW power out of 19.8 MW capacity of the power station reserved for Government of Goa by permitting the balance 4 MW to be sold to third parties; and the High Court arrived at a different finding of fact on the evidence on record. We may usefully reproduce the summation of the findings by the High Court as regards variable charges on 4 MW power as follows:- E “137. The circumstance that there was a specific clause excluding the payment of fixed costs, could not lead to the inference that the Appellant had agreed to bear the variable costs in respect of this 4 MW power, which variable costs were even otherwise not payable by the Appellant to the Respondent in terms of the original F PPA or PSA and the supplementary PPAs. If there was any proposal for encumbering the Appellant with any charges over and above the charges undertaken by it under the contract, then surely this ought to have been specified. Such an additional burden cannot be imposed by implication. Therefore, the reasoning that because there was no reference to variable charges in the communication dated 19.1.2009, the same was agreed to be paid by the Appellant is quite perverse and constitutes patent illegality on the face of the record. According to us, the impugned Award to the extent it so unjustly enriches the Respondent to the extent of Rs. 3.94 crores conflicts with the most basic notions of morality and justice. The impugned Award, to this extent, is also vitiated by

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unreasonableness, perversity, and patent illegality apparent on the face of the record.”

29Copy pinpoint29. The High Court has once again stepped into the arena which is reserved for the Arbitral Tribunal. It is noticed that the parties had agreed to a particular methodology of billing for supply of 15.8 MW power but, at the same time, retained with them the right to revert back to 19.8 MW supply at any future point of time. With reference to the dealings of the parties, the Arbitral Tribunal has taken a particular view of the matter. It cannot be said that the view as taken by the Arbitral Tribunal was entirely impermissible or implausible. There was no scope for interference by the Court. C The award relating to netting-out principle

30Copy pinpoint30. The aspect of netting-out, again, depended on the terms of contract of the parties and the deductions to be drawn from the evidence on record. The Arbitral Tribunal had drawn the particular conclusion on the basis of notes dated 13.09.2014 and 18.09.2014. The Arbitral Tribunal D considered the documentary evidence before it, as well as the provisions of the contract relating to supply of backup power by Government of Goa to the claimant when the power station was under shutdown for the period May 2014 to August 2014. The Arbitral Tribunal further referred to the communications which also include the decision of the Government of Goa as to the rate at which power during the shut down period was to E be supplied to the claimant and on this basis, came to the finding that a fixed rate which was not to be multiplied as per the provisions of the PPA was agreed between the parties. The award also gave reasons for such finding. Even if it be assumed that another view is possible, it cannot be said that the Arbitral Tribunal has taken such a view which no fair- F minded and reasonable person could have ever taken.

31Copy pinpoint31. The High Court has again justified its interference in this item in the following terms: - “148. According to us, the impugned Award on the aspect of netting out is again vitiated by perversity and patent illegality. The G note dated 13/8/2014, as well as the communication dated 18/9/ 2014 on its plain terms, refers only to the determination of a rate of Rs. 3.78 P. KWh. for applying the contractual provisions concerning netting. This note or this communication was necessitated because for the relevant proximate billing period there H

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A were no supplies made by the Respondent to the Appellant and therefore there was no ready rate available based on which the contractual provisions could be worked for netting out. Therefore, the Appellant determined the rate of Rs. 3.78 P. KWh. as the base rate for purposes of netting out. There is nothing either in the noting or in the communication dated 18/9/2014 to even remotely suggest that by determining such base rate, the parties intended to give a complete go-by to the clear and specific contractual provisions for the multiplication of this base rate into 1.25 for purposes of netting out in the eventuality of an unscheduled shut down of the power plant by the Respondent. Therefore, based on the noting and the communication dated 18/9/2014, the finding or the conclusion that the parties had agreed to do away with the clear and specific contractual provisions, is not even a plausible finding or conclusion. Such a finding or a conclusion is vitiated by perversity and patent illegality on the face of the record. The Award of an amount of Rs. 2.36 crores (approximately) to the D Respondent on this score is, therefore, liable to be set aside on the grounds of perversity and patent illegality on the face of the record.” 31.1. On this item too, the High Court has substituted its own view and has reinterpreted the documentary evidence before it for setting E aside the award. Such a substitution of view is not permissible for the Court under Section 34 of Act. There arise no question of it being permissible under Section 37 of the Act. Interest in award

32Copy pinpoint32. It has been argued on behalf of the State that the High Court ought not to have rejected its contention with regard to the interest for pre-reference period since the liability to pay interest would arise only once the amount to be paid has been determined. 32.1. In regard to the question of interest, the High Court has G rightly held that the Arbitral Tribunal was justified in following the contractual provisions and the provisions of Section 31(7) of the Act; and has rightly not interfered with the award of interest for the pre- reference period and the period during which the proceedings were pending before the Arbitral Tribunal. In our view, the State is not right in contending that the interest could not have been awarded during the H

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period of reference to the Arbitrator. In regard to this aspect, the A submissions to the effect that pre-reference period interest was not based on any compelling reasons and contractual provisions for interest were in terrorem are liable to be discarded, could only be rejected for being not even standing within the periphery of Section 34 of the Act of 1996.

33Copy pinpoint33. However, insofar as post-award period is concerned, the High B Court has reduced the rate of interest from 15% to 10% by following the decision of this Court in the case of Vedanta Ltd. (supra). The High Court has relied on the principles of proportionality and has scaled down the rate of interest to 10% p.a. while observing as under:- “175. Mr. Bhat handed in a statement indicating the interest rates C (Benchmark Prime Lending Rates) of the State Bank of India. For the period 2017-18, the rates indicated range around 13 to 14% per annum. This is no doubt one of the factors to be taken into consideration for determining the prevailing economic conditions when the impugned Award was made. Again, reference is also necessary to the principle of proportionality of the amount awarded as an interest to the principal sums awarded. Having cumulative regard to all the factors referred to above, we feel that in the facts and circumstances of the present case, the award of interest at the rate of 15% per annum is excessive and contrary to the principle of proportionality and reasonableness and the same will have to be scaled down to 10% per annum. In Vedanta Ltd. (supra), the Award was dated 9/11/2017 and the Court awarded interest at the rate of 9% per annum for the INR component. The impugned Award, in our case, was made on 16/ 2/2018.” F

34Copy pinpoint34. We are of the view that the aforesaid reduction of rate of interest by the High Court is also unjustified. We have noticed the provisions of Section 31(7)(b) that unless the award otherwise directs, the sum payable under the arbitral award shall carry interest at the rate of 2% higher than the current rate of interest prevalent on the date of the award, from the date of the award to the date of payment. The G expression “current rate of interest” has been explained in the Explanation to the said Section to have the same meaning as assigned under Section 2(b) of the Interest Act, 1978. The High Court has referred to the decision in Vedanta Ltd. (supra) to hold that a Court may reduce interest awarded by the Arbitrator when such interest does not reflect H

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A the prevailing economic condition or where it is not found reasonable or where it promotes interest of justice. We do not find any basis in the impugned judgment of the High Court for reducing the rate of interest, as in the case of Vedanta Ltd., wherein this Court was dealing with an International Commercial Arbitration involving rupee as well as euro components. Moreover, in the case of Vedanta Ltd., the rate of interest B was reduced in respect of the foreign currency component to bring the interest rate in line with the international rate on the ground that the rate of interest prevailing on the rupee debt in India and on international currency abroad were different and the international rates were lower. Such a situation is not obtaining in the present case. C 34.1. The High Court seems to have not considered the relevant factual aspects. On the contrary, as has been submitted before us as well as the High Court, the prevailing interest rate being the prime lending rate of State Bank of India was in the range of 13% to 14% per annum. Thus, the Arbitral Tribunal was justified in granting interest at the rate of D 15% per annum post-award. In our view, the Arbitral Tribunal was well within its jurisdiction under Section 31 of the Act to award interest at the rate of 15% p.a. and there was no justification to reduce the same to 10% p.a. We may observe with respect that the High Court was not exercising any equity jurisdiction so as to resettle the rate of interest as E deemed fit by it. It had been a matter relating to an award made by the Arbitral Tribunal in a commercial dispute. Final comments, observations, and conclusion

35Copy pinpoint35. In the foregoing discussion, we have not elaborated on the discussions and findings of the Commercial Court in its order dated F 12.09.2019. Instead, we have directly dealt with the consideration of the High Court vis-à-vis the award in question. As noticed, the High Court could only be said to have misdirected itself on the major issues concerning merits of the award. However, before concluding, we may observe that it had not been as if the Commercial Court did not examine the material G issues arising for determination while dealing with the case in terms of Section 34 of the Act of 1996. 35.1. It is noticed that after taking note of the submissions of parties, the Commercial Court precisely framed the points for determination and then, dealt with every point on the anvil of Section 34 H of the Act of 1996. With respect, we do not find the High Court justified

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in making a comment about framing of points for determination by A Commercial Court and then observing that the Commercial Court merely reproduced the findings of the award. The Commercial Court dealing with Section 34 application was not acting as a Court of Appeal. Yet, looking to the long-drawn arguments, the Commercial Court enumerated the issues raised and then returned the findings after examining the record and while rejecting the submissions made on behalf of the State. There had been no such flaw in the judgment and order passed by the Commercial Court which called for interference by the High Court on the parameters and within the periphery of Sections 34/37 of the Act of

1996. We may, for illustration, reproduce paragraph 49 of the order of the Commercial Court where, in relation to the issue of variable charges, after taking note of all the factual aspects and contentions of the parties, the Commercial Court held as under: - “49. Above facts clearly show that GOG clearly accepted and understood that the price of electricity was to be calculated on the basis of price of fuel and dollar conversion rate and that letter dated 30.08.2013 and cabinet note were on a guiding factor to know the understanding between parties. The Ld. Arbitrator rightly appreciated that the cabinet of GOG took a decision clearly in favour of the stand of the claimant. Ld. Advocate General has argued that the cabinet decision was not binding because pursuant to it no any decision was taken by the State Government nor any decision was conveyed to the claimant. Reference was made to Judgment in the case of Bachhittar Singh (supra) wherein it is held that unless the cabinet decision is followed by a formal order drawn up by The State Government, it does not have binding effect. Ld. Advocate General also made reference to judgment in the case of Bombay Chemicals Ltd. v/s. Union of India – 2006(201) ELT 167 Bombay wherein cabinet note was considered on merits but it was held that the cabinet note was only to make budgetary provision. Without prejudice Ld. Advocate General also submitted that even if the cabinet note was to be considered it could at the most be for an amount of Rs. 0.76 paise increase and nothing more than that. In the present case subsequent conduct of GOG in making payments based on variable fuel price shows that they implemented the said cabinet decision. In the present case even if the said cabinet note is considered to be internal note, it will have to be considered because GOG accepted variable fuel price and H

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A also made payments. Making of payments thereafter are variable factors which distinguish the above two judgments. For the reasons mentioned above, Point No.1 is answered in the Affirmative.”

36Copy pinpoint36. The narrow scope of “patent illegality” cannot be breached by mere use of different expressions which nevertheless refer only to “error” and not to “patent illegality”. We are impelled to reiterate what has been stated and underscored by this Court in Delhi Airport Metro Express (supra) that restraint is required to be shown while examining the validity of arbitral award by the Courts, else interference with the award after reassessing the factual aspects would be defeating the object of the Act of 1996. This is apart from the fact that such an approach would render several judicial pronouncements of this Court redundant if the arbitral awards are set aside by categorizing them as “perverse” or “patently illegal” without appreciating the contours of these expressions.

37Copy pinpoint37. In the passing, we cannot help noticing that in the impugned judgment, the High Court though referred to the principles laid down by this Court in Ssangyong Engineering (supra) but then, reproduced an analysis by a learned Single Judge of the High Court and proceeded to decide the matter with reference to the passages so extracted. With respect, we are of the view that enunciation of this Court ought to have been examined by the Division Bench of the High Court while dealing with the matter at hand, rather than relying on the analysis by a learned Single Judge of the High Court. We say no more in this regard, essentially because the latter decisions of this Court like those in Delhi Airport Metro Express and Haryana Tourism Limited were not available before the High Court at the time of passing of the impugned judgment and order dated 08.03.2021. Nevertheless, the principles expounded by this Court in Associate Builders and Ssangyong Engineering (supra) were available and the matter was required to be dealt with in reference to those principles. Leaving this aspect at that, suffice it would be to observe for the present purpose that the impugned judgment and order dated 08.03.2021, insofar it interferes with the findings and the conclusions of the award in question, cannot be sustained and is required to be set aside.

38Copy pinpoint38. For what has been discussed hereinabove, a few other submissions made by the learned Attorney General in regard to the calculation of the awarded amount and ancillary aspects do not require

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elaborate discussion. Fact of the matter remains that nothing of a patent A illegality apparent on the face of the award has been pointed out. The submissions essentially are of indicating some alleged errors on the merits of the case which, as noticed, do not fall within the parameters of Section 34 of the Act of 1996.

39Copy pinpoint39. Hence, that part of the impugned judgment and order dated B 08.03.2021 as passed by the High Court, which modifies the award dated 16.02.2018 and the order of the Commercial Court dated 12.09.2019, is set aside and consequently, the award in question is restored in its entirety.

40Copy pinpoint40. The appeal filed by the claimant is allowed accordingly and that filed by the State is dismissed. No costs. C

Nidhi Jain Appeals disposed of. (Assisted by : Shevali Monga and Shashwat Jain, LCRAs)