Mr. D. Bhattacharya, Adv v. STRATEGIC ENGINEERING PVT. LTD. ANR

29.09.2008 and the parties were referred to arbitration. 10. Facts as per SEPL (Petitioner in O.M.P. (COMM.) 128/2021)

10.1 TIFAC disbursed a sum of Rs. 2.80 crores for the said project to SEPL by UBI cheques dated 22.12.1999, 14.03.2000 and

29.11.2001.

10.2 The time for completion of the said project was 24 months which was extended by the AMC for a further period of 2 months for procurement of the 3 Axis Filament Winding Machine (“Machine”).

10.3 In the 5th AMC meeting SEPL was informed that Type II composite CNG Cylinders had been successfully developed using two axis filament winding system. However, the ultimate aim of the said project was successful commercial production of Type III cylinders and not Type II cylinders. The project was still incomplete merely at the design of Type II cylinder. The AMC in the same meeting recommended the release of Rs. 1.85 crore by TIFAC for procurement of the Machine.The project could have achieved commercial viability only upon successful commercial production of Type III cylinders for which the Machine was an essential requirement and hence the declaration that the project was a success by the AMC in the fifth meeting was wrong.

10.4 Pursuant to the AMC meeting, TIFAC paid the sum of Rs. 1.85 crore to SEPL for procurement of the Machine clearly showing that Digitally Signed By:MAYANK Signing Date:20.12.2025 13:47:06 O.M.P. (COMM) 548/2020& O.M.P. (COMM) 128/2021 the project was nowhere complete. Thereafter, SEPL placed an order for procurement of the Machine on M/s Entech USA on

19.10.2001. The whole amount of Rs. 1.85 crore was paid by SEPL to M/s Entech, USA towards sale consideration for the Machine. However, due to reasons beyond the control SEPL, the said machine was taken back by the US Custom Authorities after it had reached Singapore due to its dual Application possibility to cater to the requirement in the field of space and defence.

10.5 SEPL fought a legal battle in the courts of USA and consequently, the Machine was finally released in August, 2003. However, while releasing the Machine, the Axis of the Machine was removed by the Custom Authorities and only a 2 Axis Filament Winding Machine could be received. The entire project was based on the 3 Axis Filament Winding Machine and hence the ultimate objective of the project, that is, successful production and commercialization of Type III Cylinders was never achieved.

10.6 However, SEPL herein, in bonafide interest and utmost good faith with the intention of securing relationship for the successful completion of Phase-V of the project, issued 12 Post Dated cheques on the assurance of TIFAC that the same were only for the purpose of audit records and will not be presented for seeking payment at any time. TIFAC, with malafide intentions, presented the said cheques despite repeated requests made by SEPL not to present them. Therefore, the cheques were returned with an endorsement “insufficient funds”

10.7 SEPL, disbursed a sum of Rs. 4,00,000/- towards the payment, in the Digitally Signed By:MAYANK Signing Date:20.12.2025 13:47:06 O.M.P. (COMM) 548/2020& O.M.P. (COMM) 128/2021 hope that the Machine would be procured soon and thereafter when project succeeds, the repayment process can be started. Since, the required Machine was never procured, consequently, the project could not become a success and therefore, the question of repayment did not arise.

10.8 TIFAC preferred Complaints under Section 138 of the Negotiable Instruments Act, 1881 against SEPL and its Directors. In the Civil Suit filed by TIFAC, vide consent order dated 29.09.2008, the matter was referred to the Sole Arbitrator, who made and pronounced the Award dated 14.12.2019.

11. The Arbitrator adjudicated the dispute between the parties and held as under- “1. Since the project was not taken to a fruitful conclusion, SEPL need not contribute funds to TIFAC as per the TDA Agreement.

2. While SEPL need not contribute funds to TIFAC as per the TDA Agreement, it is logical that TIFAC recovers a part of its investments on the project by selling/auctioning plant and machineries acquired under the project and distributing the proceeds as per the TDA and Hypothecation Agreements. This action may be completed within three months of passing of this award.

3. In case SEPL wants to retain the set of plant and machineries acquired under the project, they may do so after paying Rs 28 lakhs minus Rs 4 lakhs already paid by SEPL that is Rs 24 lakhs to TIFAC within three months. Digitally Signed By:MAYANK Signing Date:20.12.2025 13:47:06 O.M.P. (COMM) 548/2020& O.M.P. (COMM) 128/2021

4. SEPL may immediately pay Rs 5 lakhs for wrongly securing TIFAC investment through a guarantor - company (PCACPL) whose management functionaries were same as that of SEPL, and for failing to bring these management functionaries to appear in the Arbitration proceedings in spite of repeated orders of the Arbitrator. This amount of Rs 5 lakhs may be paid as contribution to the Prime Minister's Relief Fund within three months and copies of the receipt may be sent to Arbitrator and TIFAC.

5. TIFAC may also pay Rs 5 lakhs penalty for casually accepting such a guarantor - company (PCACPL) whose management functionaries were same as that of SEPL, in order secure its investments. This amount of Rs 5 lakhs may be paid as contribution to the Prime Minister's Relief Fund within three months and copies of the receipt may be sent to Arbitrator and SEPL.

6. SEPL could have utilized plant and machineries acquired under the project to manufacture some products of their own business interest and thereby contributing to the national economy as well. They did not do so. SEPL is asked to pay back 10% of Rs 280 lakhs of tax-payers money (channelized through TIFAC) that is Rs 28 lakhs to TIFAC in two three-monthly instalments.

7. Further, TIFAC may pay another Rs 5 lakhs penalty for so casually formulating, and managing such a project of national interest. This amount of Rs 5 lakhs may be paid as Digitally Signed By:MAYANK Signing Date:20.12.2025 13:47:06 O.M.P. (COMM) 548/2020& O.M.P. (COMM) 128/2021 contribution to the Prime Minister's Relief Fund within three months and copies of the receipt may be sent to Arbitrator and SEPL.” SUBMISSIONS ON BEHALF OF TIFAC

12. Mr. D Bhattacharya, learned counsel appearing on behalf of TIFAC, vehemently challenges the Award.

13. Mr. Bhattacharya, learned counsel states that as per the Clauses V, VIII and IX the repayment of the amount was dependent upon the success in development of the technology and not on any commercial outcome. He challenges the said reasoning of the Arbitrator wherein he holds that the success of the project is dependent upon the commercial outcome of the said project. He places reliance on Union of India v. Selan Exploration Technology Ltd., 2010 SCC OnLine Del 3872, wherein it was held that “no clause of the contract can be given a go-bye and an interpretation which goes contrary to an express term of the contract can certainly not be adopted.”and states that the Arbitrator has all together ignored the material clauses of the contract.

14. He submits that the impugned Award itself records that no reliance has been placed on any document prepared with the assistance or guidance of the MIT, ostensibly to avoid any confusion. Therefore, it is clear that the Arbitrator has erroneously held that SEPL is not liable to repay the financial assistance on the grounds that there was no “commercial success”, or that there was no application or utilisation of the technology by SEPL, or that the project was not taken to its logical and fruitful conclusion. It is contended that such findings are wholly contrary to the clear and express terms of the contract and unsustainable Digitally Signed By:MAYANK Signing Date:20.12.2025 13:47:06 O.M.P. (COMM) 548/2020& O.M.P. (COMM) 128/2021 in law.

15. It is submitted by the learned counsel that the Arbitrator did not have the jurisdiction to decide whether the project was a failure or a success. The same came under the purview of the AMC.

16. He submits that the Award fails to take note of the fact that, pursuant to the AMC’s meetings dated 05.11.2002 and 06.11.2002, SEPL deposited cheques towards repayment of the financial assistance on

21.10.2002, under cover of a letter dated 21.10.2002. Even thereafter, SEPL continued to deposit additional cheques towards repayment, vide letters dated 19.02.2003, 25.02.2003, 25.02.2003, 23.04.2003 and

06.05.2003.

17. He draws my attention to the categorical findings of the Arbitrator that the AMC had declared the project as a “success” and that SEPL never raised any objection to such declaration at any point of time and, therefore, the said declaration should be relied upon and argues that Arbitrator erroneously declined to hold the project was “successful” by introducing extraneous considerations such as “commercialisation” and “market acceptance”. The Award further proceeds on an incorrect assumption that a declaration of “success” could only be made upon the so-called commercialisation of the project. These conclusions are directly contrary to the express terms of the contract, which was “successful development of the technology”. The development of technology was not dependent either on commercial exploitation or market acceptability. These two factors are extraneous to the terms of the contract and by relying upon commercialisation and market acceptability as being the parameters for Digitally Signed By:MAYANK Signing Date:20.12.2025 13:47:06 O.M.P. (COMM) 548/2020& O.M.P. (COMM) 128/2021 judging the project as successful, the Arbitrator has re-written the terms of the Contract and hence, the findings are perverse to the evidence on record. He places reliance on Dyna Technologies (P) Ltd. v. Crompton Greaves Ltd.1 SUBMISSIONS ON BEHALF OF SEPL

18. Mr. A.K. Thakur, learned counsel for SEPL, opposes the challenges posed by learned counsel of TIFAC and he further challenges the Award only to the extent of finding No. 6 on the ground of the same being perverse and contradictory to the findings of the Award itself.

19. He states that the AMC could not have been treated as the final authority, since its very decision constituted the subject matter of dispute which was referred to arbitration. Once the decision of the AMC was under challenge before the Arbitrator, the decision of the AMC could not have attained finality or bind the parties. The minutes of the 5th AMC meeting are contradictory in itself and hence TIFAC has wrongly placed reliance on the same.

20. He points out that the issue of repayment would only arise after the project was declared as successful, which was wrongly done by the AMC. Therefore, the subject matter of the dispute was the said report. Moreover, the Arbitrator, himself was a senior scientist and technocrat, has independently examined the decision taken by the AMC and rendered his findings thereon. The submission of TIFAC that the AMC is the final authority cannot be accepted as then there would be no disputes between the parties to be referred to Arbitration.

21. He further states that the decision in the 5th AMC meeting dated 1(2019) 20 SCC 1. Digitally Signed By:MAYANK Signing Date:20.12.2025 13:47:06 O.M.P. (COMM) 548/2020& O.M.P. (COMM) 128/2021

24.08.2001 cannot be relied upon as it is in itself contradictory. It is apparent upon the bare reading of the minutes of the meeting. On one hand AMC declared the project as successful and on the other hand it was directed to TIFAC to release the money to SEPL for procurement of the Machine.

22. It is emphasised that the contention of TIFAC that the cheques were given in the form of repayment is absolutely erroneous. The cheques were provided by SEPL in good faith and only upon the procurement of the Machine and aluminium linear, the project would become a success. As per the terms envisaged under the TDA the repayment would only begin at the successful completion of the said Project and its commercial utilisation. Since, the project was neither successful nor attained commercial viability therefore the question of repayment did not arise.

23. He points out that the cheques were issued on October, 2002 which is a year prior to the arrival of the Machine. TIFAC illegally and arbitrarily encashed the said cheques more than six months prior to the arrival of the Machine. The Machine arrived on 05.09.2003, which is evident from the bill of entry as stamped by the Chennai Custom Authorities whereas the cheque was presented for repayment by TIFAC in January,

24. He submits that the cheques were submitted by SEPL to TIFAC as SEPL wanted to continue the work. The same is evident from the fact that an amount of Rs. 4,00,000 was also paid by SEPL. This amount was not in pursuance of repayment obligation, as the same would have only arisen after the successful completion of the Project. It is also Digitally Signed By:MAYANK Signing Date:20.12.2025 13:47:06 O.M.P. (COMM) 548/2020& O.M.P. (COMM) 128/2021 evident from the findings of the Arbitrator that the project was not successfully completed.

25. Challenging the finding No. 6 of the Award, Mr. Thakur submits that Arbitrator himself has observed that the declaration of the project as “successful” after the 5th AMC meeting was erroneous, particularly in view of the fact that the funds for procurement of the Machine were released only after the said meeting. In such circumstances, the project could not, in any manner, have been declared successful. Therefore, the finding of the Arbitrator directing SEPL to pay a sum of Rs. 28,00,000/- to TIFAC as SEPL could have utilized plant and machineries acquired under the project to manufacture some products of their own business interest and thereby contributing to the national economy as well and they did not do so, is contrary to the evidence and material placed on record. He places reliance on SBP and Co. vs Patel Engineering and Anr.2 ANALYSIS AND FINDINGS

26. I have heard the learned counsels for the parties and perused the material on record.

27. Before proceedings with the objections raised by the parties, it is pertinent to reiterate the scope of interference under Section 34 of the 1996 Act. The scope under section 34 of the 1996 Act is very limited and narrow as the Court does not sit in appeal over the Award or reviews the Award passed by the Arbitral Tribunal or re-appreciates the evidence. Further, it is the prerogative of the Arbitral Tribunal to interpret the term of the Contract and if the Arbitral Tribunal has 2(2005) 8 SCC 618. Digitally Signed By:MAYANK Signing Date:20.12.2025 13:47:06 O.M.P. (COMM) 548/2020& O.M.P. (COMM) 128/2021 adopted a view which is plausible, the Court is not required to interfere even if an alternate view is possible. To set aside the Award, the Award must fall under any of the grounds as mentioned in section 34 of the 1996 Act. One of the grounds, amongst other, pertains to patent illegality. Section 34 (2A) of the 1996 Act provides that if the Award is patently illegal then it is liable to be set aside. The Award is said to be patently illegal if it is contrary to substantive provisions of law of India, or provisions of the 1996 Act or the terms of the contract.3 Reliance is placed on OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions (India) (P) Ltd.4.

28. With these principles, I shall now consider the rival contentions of the parties. TIFAC’s Challenge to the Award (O.M.P (COMM) 548/2020) 29. TIFAC’s primary challenge to the Award is based on the finding of the AMC that the Project was successful and the same was declared by the 5th AMC meeting. Therefore, in terms of Clause No. IX of the TDA, SEPL is liable to pay Rs. 3.36 crores.

30. It is the contention of TIFAC that the repayment is dependent upon success in development of the technology and not its commercial outcome. The finding of the Arbitrator that the project needs to attain commercial viability for repayments to begin, is misplaced. Further, the SEPL never objected to the said certification of AMC in the 5th and 6th meeting, that the technology has been developed successfully. The Arbitrator also supported the said contention and gave a finding that