Miscellaneous Appeal No. 273 of 2013 · The High Court · 2025

Judgment

HIGH COURT FOR THE STATE OF TELANGANA AT ITYDERABAD THE HON'BLE JUSTICE MOUSHUMI BTIATTACTIARYA AND THE HON'BLE JUSTICE GADI PRAVEEN KUMAR CTVIL MISCELLANEOUS APPEAL NO.273 OF 2013 8th December, 2025 Betwee[: Engineer-in-Chief (R&B), CRN and Managing Director, APRDC, Hyderabad- M/s.S.D.B. Infrastmcture Pvt. Ltd., (formerly known as M/s-Som Datt Builders Pvt. Ltd.,) and 3 others AND .Appeliant Respondents Mr. A- Raghuram, the learned Assistant Covernment Pleader for Andhra Pradesh appearing for the appellant. Mr. S. Ram Babu, learned counsel representing Mr. Rakesh K, learned counsel appearing for the respondent No. l. JUDGMENT: Qt e r H o n' ble, . ltt s tic e Mou s hu mi B hattachqry a)

1. The Civit Miscellaneous Appeal arises out of an order dated

19.1I.20L2 passcd by the Learned IX Additional Chief Judge (F.T.C),City Civil Court at Hyderabad (Trial CourtJ dismissing the Arb.O.P.No,1559 of 2OO9 hled by the appellant / pctitioner under section 34 (2) (iii) and (iv) of The Arbitration and Conciliation Act, 1996 ('the 1996 Act) for setting aside an Au,ard dated 3I.O3.2OO9 to the extent of Claim Nos.4 and 16 under Disputc No.2 passed by the Arbitral Tribuna-I. 2 MB,J & GPK,J .No.273 of 2O73 clL

2. The appellant/Engineer-in-Chief (Roads & Buildi I 1s), Government of Andhra Pradesh was the claimant in Dispute No. I r the arbi tration proceedings. The respondent No. l/Contractor was he claimalt in Dispute No.2. The claims arose out of an Agreement Io.E-in-C (R&B) Administrative and EAPs/113/99 dated Ol-O3.2OOO rvhi, h lvers executed by the parties for widening and strengthening of Thoka Road for a sum of Rs.1O9,87 ,St,7B9 /- (WorksJ. stipulated that the work was to be completed within 44 rr rall-y - Nandyal lhe Agreement ;nths.

3. By the impugned order, t1 e Trial Court uphetd r Le Award dated

31.03.2009 passed by the Arbitral Tribunal and dismis:;, cl the O.p. filed by the appellant while directing the appellanr ro pay Rs.! ),Ooo/-towards costs to the respondent No. 1.

4. The appellant has challenged the impugned ordcr ()n the ground that the Trial court failed to appreciate rhar the Arbir r.l I .r bu nal decided on issues which were beyond the scope of submission of r rc parties. The appellant contends that the Arbitral Tribunal gave:r der.i ron oontrary to the terms of the Agreement dated O 1.O3.2OO0. 3 MB,J&GPK,J CMA.No.273 oJ 2073

5. The events which are relevant to the present dispute a-re stated below: (i) The appellant and the respondent No.1 executed an Agreement on O I.O3.2O00 for a contract price of Rs. IO9,87,51,789/- pursuant to the respondent being declared as the lowest bidder in a bid floated by the appellant for the execution o[ Road Works. (ii) The scheduled date for completion o[ the Works was 3L.OA.2OO2 The respondent No- I completed the Wo rks within the extended period granted b1, the appellant i.e., on

03.11.2003. (iii) The respondent No. I submitted a Statement at Completion on 2tf.O2.2OO4 to the Engineer appointed by the appcllant viz. M/s. Louis Berger International (LBI) ('First Engineer') whereby additional claims amounting to Rs.30,54,97,63O/ - \\'e rc made bY the respondent No. 1 . ..,. + MB,J &. GPK,J CnL ,No.273 o.f 2073 (iv) On 16.06.2004, the First Engineer v as replaced by another Engineer i.e., Execut ve Engineer (R&B) (,Second Engineer,). (v) The Claims Specialist appointed by t re appellant submitted a Report i.e., Inter m Payment Certihcate No.42 on lO:O9.:2() 14 recommending the pa)rrnent :f Rs. 12,48,31,9O9.34 ps. to the respondenr Nc I in consultation with the appellant and I .e respondent No. 1 as per Clause 53.5 of I e Agreement. The appellant rejected I e determination of this amount. ("i) On 08.12.2OO4, the appellant informed rt c Second Engineer that the Employer can tal{(, l decision only if the Engineer certifies rt _- amounts considered due by the Contractor ir the Statement at Completion as per Clau s : 60.2 of the Agreement as the First Enginrr - had not certified the same du ring t lrc - incumbency as the Engineer. 5 frTB,J & GPK,J CMA.No.273 ol' 2073 (vii) On 2O.O4.2OO5, the Second Engineer certiFred the arnount found due to the respondent No 1 to be Rs.13,76,31,6681 - through the Interim Pa5rment Certificate No.a5 ('lPC') The appellant disputed the IPC and referred the matter to the Dispute Review Board ('DRB') on 29'O6'2O05 ('Dispute No. I '). The respondent also referred the matter in respect of the uncertified amount of Rs.13,22,62,685 /- in the Statement at Completion to the DRB on 18 10'2OO5 ('Dispute No.2'). (viii) On 25.10.2OO5, the DRB unanimously upheid the certification given by the Engineer in respect of Dispute No. I . (ix) On 07.11.2OO5, the appellant invokcd the Arbitration Clause No.67-3 o[ the Agreement' (*) On O4.O 1.2OO6, the responde nt No l referred Dispute No.2 to arbitration elnd nominaLed its Arbitrator as per Clause 67'3 of the Agreement' 6 ct, LNy;fs6",f:fi! (xi) On 01.02.20O6, the appellant appointeci its Arbitrator in respect of Dispute No. I utr ler Clause 67.3 of the Agreement. The appe lt. nt also confirmed the appointment of the st ne Arbitrator for Dispute No.2. (xii) On 1 1.03.2006, tJ.e Arbitral Tribunal ,, as constituted for adjudication of Dispute No . 1 and 2. The Arbitral Tribunal passed the Aue -d on 31.03.2009 awarding Rs.13,76,31,66t / with interest @ llo/o per annum to t re respondent No. 1 in respect of the Dispr ,e No. L (xiii) The Arbitral Tribunal also awar(t d Rs.31,99,693/- along with interest @ lto/o t .r annunl, inclusive of costs, to the respondrt Ll l.io. 1 in respect of Claim No.4 and Claim No I 1 of Dispute No.2. (xr v) ()n 19 . I | .2012, the appellart,s petition r r sctring aside the Award was dismissed bv rt . Triarl Court. 7 MB,J & GPK,J CIttA.No.273 oJ 2013 (rv) On 10.O4.2013, the appellant filed an Appeal against the judgment of the Trial Court before this Court, which stayed the Award subject to payment of one-third of the awarded amount' (x"i) On O3.O2.2014, payment of Rs. 10. 18 Crores was received from the apPellant.

6. tearned counsel appearing for the appellant (petitioner before the Triat Court) submits that the Award is contrary to section 3a(2)(a)(iv) of the 1996 Act i.e., the Award deals with a dispute not contemplated by and falling outside the terms of the submission to arbitration and contains decisions on matters not submitted to arbitration lurtherance thereof, counsel submits that the appcllant's prayer in the statement of claims before the Arbitral Tribunal was to invalidale the action of the Engineer in issuing a Certificate under Clause 53 5 of the GeneralConditionsofContract.TheArbitralhou'everexceededits authority by awarding Rs. 13,76,3 1,6 68 / - lo thc respondent No' I without any corresponding claim from either party inctuding the respondent No.1. According to counsel, since the respondent No l did nol neither made any reference to the Arbitral Tribunal for dctermining the liability of the appellant with respect to the aforeszrid amount nor made any claim 8 MB,J & GPK,J Cn A.No.273 oJ 2Ot3 seeking payment of such amount, the Arbitral Triburr I could not have awarded the saicl amount to the respondent No. 1 wher the issue before the Arbitral Tribunal was regarding tJe validity o the premature issuance of the IpC b-y the Engineer wittrout follou,ir 3 the procedure contemplated under Clause 53 of the GCC. Counsel ubmits that the Award is hence arbitrary, perverse, capricious and withr:t application of mind to the issues raised by the appellant.

7. [t is also submitted that the Arbitra] Tribunal vio : ted Clausc S3.4 of the GCC u,hich rccluires the Tribuna-l assessing any cl, im made by the Contractor without follou,ing the procedure as laid dorv I in Clause 53 of the GCC, to verif-r. [he same from contemporary record,e whether or not such records u,erc trrought to the Engineer,s notice.

8. Counsel furthcr su bmits that the Arbitral Tribunz ] could not have awarded interest sincc there was no claim seeking inle .est in Dispute No. i where the appellant r.,,,as the claimant.

9. lrarned counscl appcaring for the respondent N( . r submits that thc present Appeal is not maintainable since it is contrzrrl r.o the la*. Iaicl dorvn by the Supreme c<>urt on the scope of interferen< r under section 37 o[ the 1996 Act. Counsel submits that the grounos raised bv the appellant lor challenging thc impugned order are beyond he scope o[ an 9 MB,J & GPK,J CMA-No-273 oJ 2O13 Appeat under section 37 of the 1996 Act and that none of the grounds raised herein point to any lacunae or errors in the reasoning given by the Trial Court for dismissing the section 34 petition liled by the appellant. Counsel further submits that the Arbitral Tribunal is empowered to interpret the clauses of the Arbitration Agreement and the appellate Court can only interfere with the findings of the section 34 Court on the ground of patent illegality and jurisdictional error.

10. We have considered the submissions made on behalf of the appeltant, the respondent No.1 as well as the material placed before us.

11. The dispute between the parties arises out of a Contract for widening and strengthening of a road which was execuled on 01.03-2OOO lor a sum of Rs. 109,87,51,789 I - . The Contract was based on the h-rternational Federation of Consulting Engineers (FIDIC) Conditions. Clause 2 of L|r.e Conditions provides for the appointment of an Engineer lor administering ttre Agreement. The completion date for the Project was scheduled to be on 31.08.2OO2. The respondent No. l/Contractor complcted the work on O3.11.2OO3 within the extended period of time granted by the appellant. The respondent No. I completed the work during the tenure of the First Engineer (LBI). Admittedlv, in the present case, two Engineers administered the Contract and certilLed the payments. The First Engineer (LBI) was appointed at the bcginning ol 10 MB,J & GPK,J Cll 1.No.273 of 2O73 the Contract i.e., from O 1.03.2OOO till 15.06.2004. The iecond Engineer was appointed on 16.o6.2oo4. The contract dated o1.cl .2oo0 coretained an Arbitration Clause No.67.3.

12. Learned counsel appearing for the parties subnL: two disputes betrveen the parties urz. Dispute No.l a.t Both the disputes relate to the certihcation of tlL, Completion of the Works clated 28.02.20O4 submitted t1 , that there are i Dispute No.2. Statement at the respondent No. 1/Contractor under Clause 60. lO as certified by tbe two Engineers. The respondent No. 1 submitted its Statement at Complet to the First Enginecr (LBI). The Statement at Compl: amount of Rs.30,54,97,63o.00 ps. The First Enginee| on of the Works ion was for an ras replaced by the Second Engineer on 16.O6.2OO4. On 1O.09.2OO4, flt : First Engineer (LBI) certi[red a ner paymenr of Rs. 12,4g,31,909.34 ps. rr that price escalatior-r and accrued interest is also respondent No. 1/Ccntractor. Hou,ever, while certifying th the First Engineer/LBl rcjected certain claims of the : arrd left the issue of payment of certain amounts to be de time o[ preparzrtion of the Finat Bill which was to be ce expiration of the dcfect liabilitv period. The appellant th to consider thc payment due to the respondent No. I as recommendations o[ the First Engineer as the First Engirl rng with a note rayable to the : said payment, spondent No. 1 -ermined at the 'tified after the rreafter refused rrovided in the :er had already 11 I,B,J & GPK,J CMA.No.273 of 2013 been replaced by the Second Engineer when the recommendations had been made. Consequently, ttre appellarrt directed the Second Engineer to re-examine and certify the Statement at Completion of the Works submitled by the respondent No.1/Contractor.

13. On 2O.O4.2OO5, the second Engineer certilted the Statement at Completion submitted by the respondent No. 1 ald recommended the payment of Rs. 13,76,3l,66al- including the additional amount incurred on account of price escalation and accrued interest. The Second Engineer in its recommendations also did not certify the amounts which were either not certihed or left for determination by the First Engineer (LBI) and reserved them for determination at the time of preparation of the Final Bitl.

14. The appetlant failed to comply with the recommendalions of the Second Engineer and consequently, invoked the Dispute Resolutiort Clause in the Agreement and referred the dispute in relalion to certification ot the Statement at Completion submitted by the respondent No. 1 by the Second Engineer to the DRB which was termed as 'Dispute No. I'

15. Hence, to clarify, Dispute No. I was in relation to the vatidity of the certihcation of the Statement at Completion submitted by the respondent No. 1 under sub-Clause 6O.1O of the Agreement. Dispute No'2 rclated to 12 MB,J & GPK,,J Ctr r.No.273 of 2O73 the adjudication of the claims of the respondent \ r. 1 which were contained in the Statement at Completion but were nr) certified by the Engineer. Dispute No.2 was referred by the partie j to the Dispute Review Board ('DRB') under clause 67.3 of the Agreemerr

16. Clause 67.3(i) of the Agreement provides that a Indian Contractor (the respondent No. L in the presenl. : be settled by arbitration in accordance with The Conciliation Act, 1996 arrd that the Arbitral Tribunal ttrree Arbitrators. As per Clause 62.3(vi), arbitration lr Hyderabad, Andhra pradesh, India. Clause 67.1 conter:.r of a dispute under the Contract to mean .any dispu Employer (the appe ant,) and the Contractor (the reslr connection with or arising out of the Contract or tho ( Works whether during the execution or after the compleri or whether before or after the rcpudiation or other te - Contract. lispute with arr rse) shall frnally \rbitration and sha-ll consist of ,s to be held at )lates the scope e' between the ,ndent No. 1) in recution of the rn of the Works nination of the

17. Clause 67.1 also provides that a dispute worr 1 disagreement by either of the parties rvith respect tl inaction/instruction/determination/opinion/certihcate valuation of the Engineer' ciause 67.1 further stipulates that the rl r pute shar first be referred to the Dispute Revieu, Board (,DRBJ anr if either the : include any any action/ 13 MB,J &GPK,J CMA.No.273 o.f 2013 Employer or the Contractor is dissatisfied with any Recommendation of the DRB or if the DRB fails to issue its Recommendations within 56 days after the receipt of the written request for Recommendation by the Chairman o[ the DRB then either the Employer or the Contractor may within 14 days after the expiry of the said 56 day period, give Notice to the other party of its intention to commence Arbitration with a copy to the Engineer for information.

18. The Notice shall lurther establish the entitlement of the party giving Notice, for commencement of arbitration as to the dispute and subject to Clause 67.4 of the Agreement, no arbitration in respect thereof may be commenced until such Notice is given. Clause 67. 1 stipulates that if the DRB issues a Recommendation to the Employer and the Contractor within the 56-dav limit and no notice of intention lor commencement o[ arbitration as to the said dispute is given, either by the trmployer or the Contractor within 14 days from the receipt of the Recommendation from the DRB, the Recommendation shall become final and binding upon the trmployer and the Contractor.

19. [n the facts of this case, both the Disputes were referred to Lhe DRB under Clause 67. I of the Agreement. The DRB issued its recommendation rvith regard to Dispute No. 1 on 25.1O.2O05 b1' upholding the validity of the certification given by the Second Engineer in 14 MB,J & GPK,J ClY,2 .No.273 of 2073 relation to the Statement at Completion. The DRB horvc rer failed to give its recommendations in relation to the Dispute No.2 rele .red to it by the respondent No.l within 56 days, as stipulated under C[, use 67.1 of the Agreement.

20. The appellant, being aggrieved by the Recomm: rdations of the DRB with respect to the Dispute No. 1, invoked the A. ,itration Clause No.67.3 of the Agreement. The respondent No. I a I ;o invoked the Arbitration Clause with regard to the Dispute No.2 sinc< the DRB failed to give its recommendations with respect to the said dts :ute within the 56-day limit.

21. Therefore in essence; Dispute No. I rvas referrt:c to the Arbitral Tribunal by the appetlant aggrieved by the validation o1 he certification of the Statement at Completion ol Rs. 13,76,31,668.OOp; by the Second Engineer. The appellant's contentions are as follows: (i) The First Engineer's tenurc had expired and rence the certification given by it was null and void_ (ii) The Second Engineer's certification u.as also ,a id as the certihcation was given under Clause 53 f the Agreement and was unsubstantiated. 15 MB,J &GPK,J CilIA.No.273 of 2013 Dispute No.2 was relerred to arbitration by the respondent No. l/Contractor for adjudication of its Claims of Rs. 13,68,63,3961- made in the Statement at Completion which had been kept pending till creation of the Final Bill.

22. By the Arbitral Award dated 3 t.03.2O09, the Arbitral Tribunal awarded Rs.31,99,693/- against the respondent No.1's claimed amount of Rs. 13,68,63,396 /- including costs towards payment of arbitrator's fees paid by the respondent No. I tou,ards the unpaid share of the appellant.

23. During the course of the submissions before this Court, learned counsel appearing for the appellant submitted that tlle appellant does not intend to pursue the Appeal under section 34 of the 1996 Act with r€gard to Dispute No.2. Hence, the appellant's case is restricted to Dispute No. 1 in the present Appeal.

24. The Supreme Court has reitcrated in several decisions that under section 34 of the 1996 Act. Court shall not interfere with the Award and the reasons given thercin unless the reasons are implausible to such an extent that no reasonablc man would arrive at such conclusions. The decisions reinforce that the Court will only interfere where the Arbitral Tribunal has committed a manifest error in interpreting the contractual provisions, such that the interpretation also violates the public policy 16 embargo under explanation 1 to section 3a(2)(b)(ii) oi t - settled that interpretation of the terms of the cor] MB,J 6L GPK,J '.No.273 o.f 2073 r 1996 Act. It is ract/ arbitration agreement is completely within the domain o[ the Arbirr rl Tribunal, and the Court will adopt a hands-off approach if the interprr ation given is a plausible view and a_ligns with the intention of the pzut es. It is equally well settled that in section 34 proceedings, the Cour does not sit in Appeal over the Arbitral Award and may interfere o: merits on the limited ground provided under secrion 3a(2)(b)(ii), i.e . ii the Award is against the 'public policy of India,. Even then, the interf r 'ence wouid not entail a review on the merits of the dispute but would br -estricted to the findings of ttre Arbitrator where the Court finds thern o be arbitrary, capricious or perverse or where the conscience o[ the Co- -r is shocked or the illegality goes to the root of the matter: MMTC Ltd. t, I M/s. Hindustan Construction Compang Ltd. u. M/s. NH; edanla Ltdrand t.:. The limited scope of interference by the Court in an application unrlt i section 34 and the concomitant embargo on such Court from re appr( ( rating evidence was emphasized in PSA Sical Terminals priuate Ltd. u. E,t trd of Trustees of V.O. Chidombranar, Port Trust Tuticorin3. 25 Public Policy under Explanation I to section 34 (21 r tl (ii) of the Act has been held to be the ,fundamental poticy of Indizur lat, including ' pool + scc 163 ' lzozcl z scc 6 13 3 (2023) rs scc 781 t7 MB,J&GPK,J CkIA.No.273 of 2073 violation of Indian statutes linked to public policy or public interest and disregarding orders of superior Courts in India: Ssanggong Engineeing and Constntction Compang Ltd., u. NHAI4, and Somd.att Builders-NCC- NEC (JV) u. Nattonal Highuags Authoity of Indias.

26. It hence follows that the scope of interlerence in an Appeal under section 37 of the 1996 Act would be even more curtailed since the Appellate Court would only test whether the order passed by the Trial Court under section 34 falls within the limited statutory corners of section 34 of the Act. The Appellate Court cannot treat the Appeal as an invitation to reopen the merits of the dispute which was before the Arbitral Tribunal: Reliance Infrasttucture Ltd. u. State of Goaa ; M/ s. Larsen Air Conditioning and Refrigeration. Compang u. Union of IndiaT-

27. The bar on the Courts to render their independent hndings on the interpretation of the contractual terms, over and above the interpretation given to the terms by the Arbitral Tribunal unless such interpretation is unfair or unreasonable, '*'as also noted in National Highuags Authorttg of India u. ITD Cementotion India Limitedd. We find that the Courts have also construed the clauses in the General Conditions of the o 1zo rs; rs scc 131 ' 1zozs1 a scc 757 6 (2c241 1 6CC 479 7 l2o23l 1d QCC 472 8 (2015) 14 sCC 2 1 18 MB,J & GPI<,J CtL rNo.273 o.f 2073 contract/ arbitration agreement therein in the sar le manner as interpreted by the Arbitral Tribunal in the present case

28. The comparative interpretation of the relevant O auses is put in context from the following: (a) The Arbitral Tribunal interpreted Clause 53. . deating with the requirement of the Contractor to gir r notice of his intention to claim any additional payment l) rsuant to any Clause of these conditions or other\,\,is t. to the Engineer, with a copy to the Ernployer, r,irh r 2g days afler the event giving rise to the Claim has first r risen. (b) Clause 53.4 provides that where the Contract,r farils to comply with aly of the provisions of Clause 53 n rcspecr of any Claim which he seeks to make, the enti lement ol the Contractor to payment in respect thereof, shalt not exceed such amount as the Engineer or a -bitrators appointed under Clause 67.3, assessing tL : Claim. considers to be verified by contemporary recorrl ; u,hether or not such records were brought to the enginrrr r,s noticc as required under Clause 53.2 and 53.3. t9 MB,J &GPK,J CMA.No.273 o.f 2013

29. The Arbitral Tribunal interpreted Clause 53.1 and Clause 53.4 to mean that even if the Contractor fails to give notice to the Engineer under Clause 53.1 for aly additional payment (claim etc.), his entitlement for the same cannot be denied under Clause 53.4. The Contractor's claim however cannot exceed the amount verifred by the Engineer based on contemporary records. The Arbitral Tribunal accordingly held that on 17 .O2.2OO5, the incumbent Engineer recommended to the Employer the views/ recommendations of the former Engineer and Claims Speciatist for payment to the Contractor under Clause 60.2. The trmployer horvever did not accept the recommendations of the Engineer and instruc[ed him to once again certify the Statement at Completion after applying his mind, and not to certify the recommendations of the former Engineer (LBI). The incumbent Engineer subsequenfly certihed and recommended to the appellant for payment to the respondent No. I uide a letter dated 2O.O4.2OO5. However, the Employer once again returned the recommendat:ion to the Engineer on 11.O5.2OO5 and referred the disputc to the DRT on 29.06 -2OO5.

30. The Arbitral Tribunal accordingly hetd that thc Employer failed to apply its mind to the recommendations dated 10.O9-2OO4 (given by the First Engineer/Claims Specialist) on the claims ol the Contractor included in Part B of its Statemen[ at Completion and kept returning the \/ 20 MB,J An GPI<,J .No.273 of 2O13 cl,.\ recommendations to the Engineer. The Arbitral Tribun 11 held that the certification given by the Engineer on 20.O4.20O5 was ir rccordance with the Conditions of the Contract. Hence, the Arbitral Tril; rnal declined to accept the prayer of the Appellant/Employer for pz.r sing an au,ard invalidating the action of the Engineer in certifying li e Statement at Comple[ion furnished by the respondent No. I a].r I rejected the appellant's Claim. The Arbitral Tribunal further directec -he appella-nt to pay the respondent No. 1/Contractor an anount of Rs. 1 I 76,3 i,668/- as certified by the Engineer and recommended for payment ride letter dated 2O.O4.2OO5, inclusive of interest at llo/o per annum for- the delay up to t7.o2.2005.

31. The vieu, taken by the Arbitrator i.e., the claim ol the Contractor cannot be rejected even in the absence of a forrnal notic,: to the Enginecr undcr Clause 53.1, in view of Clause S3.4 which provictr s an overriding mcchanism permitting the Engineer or any arbitrators Io assess such claims, aligns with the view taken by the Courts in sevt: al decisions. [n Slnle o/ Onssa u. Larsen &Toubro Limitede, a learned Sin ,le Jucige of the Orissa High Court held that Clau.se 53.4 provides for tl- l Settlement of Claims raised by the Contractor, in the absence of 2g c rys'notice and onl_v rcslricts the payment in respect of such claint o the arnount determined by the Engineer or any of the Arbitrators i rpointed under 9 AIR 2006 Ori 15 2l MB,J & GPK,J CMA.No.273 of 2O13 the Arbitration Clause, assessing the claim, considers to be verified by contempora,ry records.

32. ln National Higfutags Autlnritg of India u. ITD-SDB (JV7to, ,n. O.tn' High Court interpreted Clause 53.4 to hold that Clause 53.1, 53.2 and

53.3 of the GCC are procedural in nature and would not take away the contractor's right to lodge a claim for additional payment rvith the only caveat being that the Contractor's claim would be restricted to the anount, as quantifled either by the Engineer or the Arbitral Tribunal appointed under Clause 67.3.

33. The decisions cited by the appellant do not assist its case for interference with the Award.

34. In National Higfumy Autlnritg of India u. Ssangyong Engineering and Construction Co. Limitedl l, a Single Bench of the Delhi High Court clariired the ambit of lublic policy' for challenging an Alr'ard arising out of international commercial arbitration. In any event, the Delhi High Court reiterated that an Arbitral Award rnay be set aside where the Award contravenes public policy, exhibits patent illegality, or when the Arbitrator fails to adhere to the fundamental principles of natural justice. It was further held that the scope of interference in an Au'ard arising out 1 I 0 20 18 SCC OrlLirLe DEL 12296 I' 2024 scc online Del 2767 22 MB,J & GPK,J Cll1 .No.273 of 2073 of international commercial arbitration was even moi-r restricted a-nd such an Award could only be interfered with in case ol :ontravention to the public policy of the Country. In any event, the said c a contention that the Arbitral Tribunal had igrL, ecision involved red numerous documents filed by the petitioner therein highlighting rl e discrepancies in the payment certihcate dated 3l.OB.2Ol4, which for.r ed pa-rt of their defense.

35. [n Assocrare Builders u. Delhi DeuelopmEnt t\ 'tlnritg t2 , the Supreme Court laid down the juristic principle of a ,i11 licial approach' demands that a decision be fair, reasonable, and ob. t arbitran and rvhimsical would not amount to a rez I ctive. Anything onable, fair or objectivc dctermination. The Supreme Court firrther t:; plained that a perverse decision is one that is so irrational that no rez sonable person w.ould h:rve arrived at the same conclusion and would i: volve a finding based on no cvidr:nce, or a situation where tlle Arbitre I Tribunal takes irrelevant letctors into account, or ignores vital evidenc: to arrive at its decision. [n thc prescnt case, there is no ground ra r ed regarding a breach of the principles of natural justice by tl.e Arbitr I the Au'ard being perverse on the touchstone of .Ass Tribunal or of rciate Builders (Su p ra) . " (zois) : scc qg 23 MB,J 6r,GPK,,I CltIA.No.273 of 2073

36. International Constntction Comtrtany u. State of APt3 was a decision under The Arbitration Act, 1940, and involved a condition in the Agreement between the parties therein where claims/disputes arising out of the contract were to be submitted in writing to the Superintending Engineer within 15 days from the date of the cause of action, so that the facts could be ascertained and a prompt decision be given. This decision in fact helps the respondent No. l/Contractor, since there was an admitted failure on the part of the First Engineer (LBI) to give its recommendation within 55 days in relation to the Dispute No.2 as referred by the respondent No. 1. The Findings of the Arbitral Tribuqal:

37. After considering the pleadings and documents of the parties, the Arbitral Tribunal gave the following ftndings: (i) The appellant/employer failed to resolve the issue of payment to the respondent No.l/contractor based on [he recommendations of the. two Engineers. The respondent No. l-contractor submitted its Statement at Completion to the First Engineer (LBI) as per the terms o[ the Agreement between the parties. The claims of the respondent No. I as "arR 2oot sc 833 24 MB,J & GPK,J CIL r.No.273 of 2013 submitted in Part B of the Statement at ComJr :tion were examined by the authorized Ciaims Specialist < ! the First Engineer (LBI) and were accordingly recommen led to the appellan t/ trmployer on IO.O9.2OO4. (ii) The Second Engineer also recommended thesrr claims by his letter rlated 2O.O4.2OO5. The claims of the r :spondent No. 1, as recommended by the Engineer, w: e neither examined nor approved/rejected L I trmployer/ appellal t. (iii) The appellar..: t / Employer appointed the Secon<l (R&B) in place ol the First Engineer (Lll appcllan t / Emplovcr instructed the Second Engi :r on 08 12.200.1 to cxamine the Statement at () furnishecl by the re spondent No.l and certi$r tJt as being .1u sriliccl lor taking further actio r Empio,t,er's end. The incumbent/Second Er I 17.O2.2OOS reiter:rted the recommendations of 1l Engineer ). The :er (R&B) rmpletion : amount at the ineer on e Claims Specialist of the First Engineer (LBI) but the errl not acccpt rhc samc and instructed him to r:, Statcmcnt .rt Clomplction once again after ap. mind and not to cerlify the recommendations ol loyer did rtify the ying his lhe F irst 25 MB,J & GPI<,J CIt/1A.No.273 of 2O73 Engineer. In response to these instructions, the Second Engineer (R&B) once again certifred and recommended payment of a gross amount of Rs. 14,47,09,405/- to the respondent No. 1 by his letter dated 20.04.2005. (iv) However, instead of resoMng the issue of payment, the Employer/appellant once again returned the issue of payment to the Engineer on 11.05.2OO5 ard then referred the matter to the Dispute Review Board (DRB)

29.06.2005

38. The Arbitral Tribunal accordingly found that the Employer/ appellant had never applied its mind to the recommendations dated 1O.O9.20O4 of the Claims Specialist of the First Engineer (LBI) with respect to Part B of the Statement at Completion and continued to return the IPCs to lhe Second Engineer (R&B). The Arbitral Tribunal lound that the certihcation made by the Second Engineer (R&B) on 2O.O4-2005 was as pcr the Conditions of the Contract and the prayer of the appetlan t/ trmplo-yer to pass an awa-rd invalidating the action of the Enginecr in certifying the Statement at Completion should be rejected as being ',vithout basis. 26 MB,J & GPK,J CMi .No.273 of 2073

39. The Arbitral Tribunal accordingly passed thr Award dated

31.O3.2OO9 by rejecting the prayer of the appellant to nake an Award inva-lidating the action of the Engineer in determining z,r d certifying the Statement at Completion furnished by the respondent I The Arbitral Tribunal further directed thc ap]) o. 1/contractor. llartt to pay Rs. 13,76,31,66a/- b the respondent No. I as certificrl in IPC-45 and recommended by the Second Engineer for payment uidru his letter dated 2O.O4.2OOS inclusive of irrterest at 119tr per arnum for .he delay up to

17.O2.2OO5. The Ar,rrard of Rs.13,76,31,669 - was mac[ with reference to the Statement at Completion submitted by the resl) rndent No. 1 as against Rs.30,54,97,63O i as claimecl by the respondent i 'o.

40. With regard to Dispute No,2, the Arbitral Tri runal alvarded Rs.31,99,693/- along u,irh interest at llTo per annurr as against the respondent's claim of Rs_ 13,6U,fi3,39O/ . The amount a,n.i rded under the Dispute No.2 in lavour of rhc respondent No. 1 incluc t d allowing the respondent No.l's Clainr Nos.4, l6 and costs towa:.r s payment of Arbitrators lees which u,ere paid by the respondent No. [ ,contractor for the unpaid share o[ the appeltant.

41. Claim No.4 rvas lor Rs.29.74,615/- ) se\gniorage charges rccovcred lrom the tpC,s [owards rr'1 rnd of excess ,7 MB,J & GPK,J CMA.No.273 oJ 2013

42.TheArbitralTribunalwasoftheviewthattheclariltcationissued in regard to measurement of quantities for working out the seigniorage charges by the Government of Andhra Pradesh uide Memo dated O4.O2 .2OO4 should be followed in the present case and hence' the respondent No.l is entitted to refund of excess seigniorage charges amounting to Rs.23,16,283/- which were deducted by the appellant'

43. Claim No. 16 was for an amount of Rs'5,O0,00'OOO/- towards release of bank guarantee and compensation of loss of future income due to non-release of retention money in tl.e form of bank guarantee including bank guarantee charges and loss of interest on margin money' The Arbitral Tribunal held that 5oo/o of the retention money was to be released by the Employer under Clause 6O'6 of the Contract u pon substantial completion of the Work and issuance of the Taking-Over Certificatc by the Engineer arld the balance 50%o was to be released upon expiry of the Defects Liability Period' Since' the respondent No. l/Contractor had incurred bank guarantee charges and loss of interest on margin money, it was held that the respondent No' 1 rvas entitled to an Au'ard of Rs.2,59,O1O/-' The Arbitral Tribunal atso held that the claim of Rs.5 crores towards loss of future profits is too remote and does not dcserve consideration' The Arbitral Tribunai directed the appellant to release the bank grl arantee for Rs'27'OO'OOO/- forthwith' 28 MB,J & GPK"J C.r A.No.273 of 2OtJ

44. The Arbitral Tribunal awarded interest at I lo/a t No. 1 on the amount awarded from the date on whict arose till date of the award. Thc Arbitral Tribunal alsr, at 7lo/o on all the individual amounts au,arded in respr claims and the interest up to the date of award awzur each claim. The Arbitral Trilrunal also r ( appellant/Employer had laited to deposit the balar r Arbitrators' fees which had been cleposired by the rc:; order to enable the Arbitral Tribunal to make the Au i appellant was direr;ted to pay an amount of Rs.(r l respondent No. 1 to\r,ards costs. r the respondent cau se of action rwarded interest :t of each of the ed in respect of ted that the e share of the rondent No. 1 in rd. Hence, the 1,40Ol- to the

45. As stated above, during thc course of arguments. appearing for the appellant had clarified rhat rhe aJ,l challenging the Disputc No.2 i.e.. the respondent N( reference to Arbitration for adjuclication of its claim of ll; made in the Statement at Conrpleiion. inc:identally, thr, I awarded Rs.31,99,693/- agzrinst rhe claimerl Rs. 13,68,63,396/-. The issue rvhich lalls lor consider:t Court is whether the appellant's chailengc to the impugr r by the learned Trial Court on I c). 1 1.2012 can be allo. r:arned counsel ellant was not . 1/Contractor's 13,68,63,396/_ 'bitra.l Tribunal amount of ion before this d order passed ,ed within the stqtutory frameu,ork of sectlons 37 ancl 34 of the 1996 Ar I tI ,l 29 MB,J & GPK,J C IA.No.273 of 2073

46. Notably, the appellant failed to point out any discrepancy in the quantification ald determination of the bill submitted by the respondent No. 1. None of the grounds advert to the statutory position under section 34 of the 1996 Act including breach o[ principles of naturat justice by the Arbitrators or [he Arvard being patently illegal, perverse or in conflict with the public policy of India' The appetlant has also not questioned the impugned order on the unreasonableness of the Arbitrators' interpretation o[ the contractua[ Clauses' It would be clear from the above grounds that the appellant has treated the present Appeal as a re- appreciation of the merits of the disputes between the parties' The statutory bar against review on the merits of the dispute and the setting aside of an Award solcl-"-' on the ground of an erroneous application of the law or by re-appreciation of evidence can be found in Explanation 2 to section 34(2\ and' the proviso to section 34{2A) under 1996 Act itself' It is clear that the Legtslature envisaged a hands-olT approach by the Court in respect of the tacts even at the first stage of challenge under section 34. The second sLage of challcnge under section 37 would hence be even more circumscribed and the scope of interference more curtailed'

47. The A$,ard passed by the Arbitral Tribunal runs into factual details after taking note o[ the submissions o[ the appellant as well as the respondent No. I 30 MB,J & GPK,J ( MA.No.273 oJ 2013

48. The findings of the Arbitral Tribunal are sr. reference to the relevant facts with due regard to the . the Agreement between the parties. There is nothinpl that the Arbitral Tribunal misapplied itself or scope/ terms of the reference or that the Award corL matters beyond the scope of the submissions to Arbi the interpretation of the contractual clauses as grv€ Tribunal is reasonable and strictly lvithin the intcntror is settled law that interpretation of the contracruat r( domain of the Arbitral Tribunal and I he referral Cour if the interpretation is found to be unreasonable ot logic. We do not find the Arbitral Tribunal eithcr misrr.; or giving an arbitrary or unreasonablc intcrpretation,/,l relevant contractual terms. It consequentl,r. lollori,s rlr reasoned award and one which cannot be unsettle(l perversity. It has not been contended that the Arbitra consider material facts/records or consiriered ext: arriving at its findings or even that the fi nclings wcrr_, r evidence. The public policy ground is also not availab r since it also has not been submitted that the making ( lnduced or affected by fraud or corruption or r.r,a s in r i,r rilarly given with elevant Clauses of rn record to show /ent beyond the rins decisions on ration. Similarly, -t by the Arbitra_l o[ the parties. it -ms is within the ;an only interfere :ne which delies ding the contract nstruction of the 1 the Award is a n the ground of lribunal lailed to .neous facts in ot based on any to the appellant I thc Awnrd was ation of scctions 31 IAE.,J & GPK,J CMA.No.273 oJ 2O73 75 or 81 of the 1996 Act or that the Award is in contravention with the fundamental policy of Indian law or is in conflict with the most basic notions of moralitY or justice. Findin s of the [.earned Trial Co rt in the I 19.tr.20r2l u ed Order dated On Dis ute No. 1

49. The Trial Court found that the appellant's case did not pertain to a breach of the principles of natural justice in the absence of contentions like the appellant not having been given proper notice of the aPpointment of the Arbitrator, or of the arbitral proceedings; the appellant's inability to present his case; or even that the arbitral award dealt with a dispute note contemplated by or not falling within the terms of the reference to arbitrator or contained a decision on matters beyond the scope of the submission to Arbitration 50. On merits, the Trial Cou rt found that the appellant/Employer appointed the Second Enginccr (R&B) in ptace of the First Engineer (LBI) because the appellant declined to accept the certification of the latter dated 10.O9.20O4 whereby the cl:rims inctuded by the respondent No'1 in Statement at ComPletion were recommended to the Part B of the 17 .O2.2OO5. the incu mknt/ Second Engineer reiterated to the appellant. On the recommendations oi t he First En gineer/Claims SPecialist 32 MB,J & GPK,J ( r4A.No.273 of 2O13 appellant for appropriate payment to the respondent ,,,1 ).1. The appellant did not accept this recommendation and again ins Llctod the Second Engineer to certify the Statement at completion after t pplicatio. of mind arld not to certify the recommendations of the Fi;-, t Engineer. The incumbent Enginecr once again certified and recomnt,: r<1ed payrnent of a total amount of Rs. 14,47,09,4O5/- utde letter datecl . 0.0.1.2OO5 by the appellant to the respondent No. 1 but the said clainL: rf rlrc respondent No. I as recommended by the Engineer were nej t - .r r:xamined nor rejected/approved by the appelant. Hence, ir u r s hcrd that the difference ol Rs. 1,27,,99/59/- in the deternrinatioir ),\. rhe Engineers cannot be contested and the Award of the Arbitral l.- trunal conhrming the certificatron by the Second Engineer is justilied.

51. The appellant, instead of resolving the issue p.r\. rncnl ro the respondent No. l, once again referred the matter to tht, F)ngineer on 11.05.2005 and to the Dispute Review Board (DRB) <.,r. ,_.9.0(r.20O5. The Trial court hence found that the appellant could nor (, rir('r)(r th.r there was no dispute between the appellant and thc r.sponclenI No. 1 n'arranting the invocation of clause 67.1 of rhe ,\ r (,cnrcnt i_e., for rcference of dispute to the DRB. Also, the apperi r r r,s [e tte r dated 29.06.2OO5 addressed to the Chairman, DRB, reflccrs rrr r hc appellant had furnishecl a statement specifying the disputc a.d I rr;rilc<l histor\,. of IITB,J & GPK,J CMA.No.273 oJ 2073 the case together with relevant copies of documents with a request to give their recommendations to resolve the issue of validity or otherwise of the certihcation of the Statement at Completion under Clause 6O' 1O' Consequently, the appellant's contention that the Arbitral Tribunal had no jurisdiction since the reference to the DRB was not a dispute as per Clause 67. I was not at all tenable'

52. The Trial Court further agreed with the view taken by the Arbitral Tribunal that even if the Contractor/ respondent No 1 had not given notice to the Engineer under clause 53.1 for al1y additional payment (claims etc.), the contractor's entitlement for the same could not be denied under Clause 53.4. The Trial Court construed Clauses 53'1 and 53.4 to hold that the latter clause specifically provides that, in the event of failure of the contractor to give 28 days' notice' his entitlement to payment shall not exceed the amount as detcrmined by the Engineer or the Arbitral Tribunal appointed under the Arbitration Clause' based on contemporary records. On Dispute No. 2:

53. The Trial Court found tha[ the appetlant did not contest the rnerits of the claims referred to by the respondent No l since the appellalt's contention before the Arbitral Tribunal $'as that the subject matter of -/ -/ 34 MB,J 6b QPK,J ( MA.No.273 of 2013 arbitration is the obligation of the employer either trr demanded payment in specific circumstances and th present statement of claim is asserting some things or Trial Court specihcally dealt with Claim Nos.4 and excess seigniorage charges of Rs.29,24,615/- and tl Guarantee and compensation for loss of future inc release of retention money in the form of bank guara_rr guarantee charges and loss of interest on margin nr, The Trial Courr agreed with the findings of the Arbitr both these heads by holding that there is no error c Arbitrators in parrl-y allowing Claim No.4 to the exterll along u'ith interest ar the rate of llok per annum frr O4.O1.2006 and bl,.directing the appellant/Employer rc Guarantee for Rs.27 lakhs to the respondent No artarcling a surn of Rs.2,59,O1O/- towards Bank Guare loss of interest on margin money to the respondent Ii the appellant. admit or deny the contractor in the rer than Lhat. The 16, i. e-, refund of -' release of Bank rme dtte to non- ::e including bank rrey, respectively. Ll Tribunal under r the p€rrt of the rf Rs.23, 16,283/ m 01 .03.20O4 ro relcasc the Bank /contractor and rtee charges and ,. I tr.r bc paicl by

54. On the issue of Interest, the Trial Court held : rat lhe :r*,ard of inte rest aL 11,% to the respondent No. l/contractor rtm [hc clate on which the cause of action arose till the date of the Ar,,,ir C, as rt,ell as thc arvard o[ interest ol I lo/o on all amounts in respect o[ i:r ch o[ rhc claims 35 ilIB,J & GPK,J CMA.No.273 oJ 2O73 and interest up to the date of Award in respect of each claim' was correct in law. The Tria-l Court also rejected the appellant's contention that there was misconduct cin the part of the Arbitral Tribunal in passing the Award in respect of Dispute Nos.l and 2. The Trial Court accordingly dismissed the petition filed by the appellant under Section 34 (2)(iii) and (iv) of the 1996 Act for setting aside the Award dated 3 1'03 2OO9'

55. In any event, the Explanation 2 to section 34(2) prohibits the Courtsfromreviewingthematteronmerits.Itisalsosettledthatthe scopeofinterferenceundersection3ToftheActisnarrolt,erthaninan application under section 34 ofthe Act.

56. The law, as settled now, is that the Appcal Court should not intcrfere with the order passed by a Court under section 34 of the 1996 ACtunlesstheorderaswellastheArbitralArvardfall\^,ithinthe conditions available under section 34 of the said Act. [n any event, we have already held tl.at none of the Claims allotvcd by the Arbitral Tribunal, namely, for excess amount recommended bv the Engineer uide Recommendation dated 2O.O4.2OO5 can be interfcrcd lvith since the appcllant did not raise any such objection bclore the Arbitral Tribunal' Moreover, there is no difference in the amounts ccrti[ied by both the clearly Engineers and the Recommendation o[ the second Engineer sLated that the prices escalation and interest is als<.r required to be 36 MB,J & GPK,J ( WA.No.273 oJ 2013 calculated in additi<;n to the a-mount of Rs. I ) 59 ,76,O37 / - and determined the toral amount to be Rs. 13,76 ,31,66g/ -

57. We also reiterate that the appellant gave u l Dispute No.2 durrng the course of the submissiorrr; the challenge to in rl-re Appeal on

28.Oa.2O25. The grounds raised in the present A1 ,1 cal u'ould clearll. sho'.,.' that the appellant admitted to a dispute while ru I :rring the same to the DRB. Tl-re appcllant also insisted on adjudicat.io.r of these disptr tes by the Arbitral l'ribu na[.

58. The findings oi the Arbitral Tribunal \trith r(.Fi rd to seignioragc charges to be levrctr or-r the basis of quantities certifir.r for payment are provided uncrer Memo No. 15953/M1(2llo3-2 dated 04 | 2.2004 issuccl b' the Government o[ Andhra pradesh. The Arbitral 'D i run:rl accordir-rgrr- a'.r'arded Rs.23. Lir.283/-. With regafd to Claim Nr t6, rhe Arhitral Tribunal relied ., Clausc 60.6 of the contract under rhich 5o(2, of tlre rctention mone\ r\.:ls tt> be released on substantial c,r nplction and thc bala,ce of soo/i, upor.r issuancc of Defect Liab ity certil r ate. The Arbitral Tribr-rnal au'ard.:rl Rs.2,.59,O1O/- as the respondr.r r inctrrrcd bernk fluara.tce chargcs on .ccount of the appellant,s failr.r: t. release Lhc mone)" as per Clerusc bo.tr. ,l.hc Trial Court accepted:.r I agreed u,ith the 'ieu' tzrkcn b-r' thc Arbit rnl 'I'ribunai. we hence do n,r lncl anr. crror i.r 37 MB,J & GPK,J CMA.No.273 oJ 2O13 thc impugned order dated 19.11.2012 passed by the Triat Court dismissing the appellant's petition filed under section 34 ot the 1996 Act.

59. The Arbitral Award dated 31.03.2OO9 was replete with reasons and based on correct adjudication of material before the Arbitral Tribunal. The Trial Court accordingly found no grounds to set aside ttre Arbitral Award- This Court also fmds no basis to arrive at a different r:onclusion to that o[ the Arbitral Tribunal and the Trial Court, both ot u,.ho came ro a reasonable and correct finding on the evidence before it- 'lhc Appeal is hcncc u'ithout any merit and should be dismissed-

60. CMA.No.273 of 2OL3, along with all connected applic:rtions, is zrct:ordrngly dismissed. Interim orders, if any, shall stand r,:rcarred_ Thcrc slr:rll be no order as to costs. ,/TRUE COPY// SD/-K.SRINIVASA RAO JOINT REGISTRARa SECTION OFFICER To, 1 The lX Additional Chief Judge ( F T C' ) City Crvil Court at Hyderabad 2. Two CCs to Sri A. Raghuram , Asst Govt' Pleader for Andhra Pradesh' 3. Two CCs to THE ADVOCATE GENERAL' Andhra Pradesh Hrgh Court for the State of A.P. 4 One CC to SRl. BATHULARAJ KIRAN(SC FOR A P R D CORP) Advocate IoPUC] 5 One CC to SRl. S. RAM BABU, Advocate [OPUCI 6 Two CD CoPies Krrlrl'S I (-.t HIGH COURT DATED:08112t2025 JUDGMENT GMA.No.273 of 2013 --1 It ]E 2 6 l: l: 2iJ2[ "(* C) .J ,?., q n DEi: v I DISMTSSTNG 1'I {E Cill,.\ WITHOTJI'COS-fS 1c cq'' ^i?.\ H'- , 1iltt'-'