The award passed by the Arbitral Tribunal can be interfered with in the proceedings under Sections 34 and 37 of Arbitration Act only in a case where the finding is perverse and/or contrary to the evidence and/or the same is against the public policy. Once it is held that the termination was illegal and thereafter when the learned Arbitral Tribunal has considered the claims on merits, which basically were with respect to the unpaid amount in respect of the work executed under the contract and loss of profit. Cogent reasons have been given by the learned Arbitral Tribunal while allowing/partly allowing the respective claims. It is required to be noted that the learned Arbitral Tribunal has partly allowed some of the claims and even disallowed also some of the claims. There is a proper application of mind by the learned Arbitral Tribunal on the respective claims. Therefore, the same is not required to be interfered with, under Sections 34 and 37 of the Arbitration Act.

1
NON­REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
SPECIAL LEAVE TO APPEAL (C) No. 13117 of 2019
The State of Jharkhand & Ors. .. Petitioners
Versus
M/s HSS Integrated SDN & Anr. .. Respondents
J U D G M E N T
M. R. Shah, J.

  1. Aggrieved by the impugned judgment and order dated
    30.01.2019 passed by the High Court of Jharkhand at Ranchi in
    Commercial Appeal No. 01 of 2018, by which the High Court has
    dismissed the said appeal preferred by the petitioners herein under
    Section 37 of the Arbitration and Conciliation Act, 1996 (for short
    ‘the Arbitration Act’) and has confirmed the award declared by the
    learned Arbitral Tribunal, confirmed by the First Appellate Court,
    2
    the original appellants have preferred the present special leave
    petition.
  2. This special leave petition arises out of the contractual dispute
    between the petitioners­State and the respondents in relation to a
    consultancy agreement over construction of six­lane Divided
    Carriage Way of certain parts of Ranchi Ring Road. Respondent
    Nos. 1 and 2 acted as a consortium for providing such consultancy
    and supervisory services. An agreement was entered into between
    the parties on 28.08.2007. The original work period under the said
    agreement was for 36 months, i.e. from 01.10.2007 to 30.09.2010.
    There was a dispute with respect to the non­performance and
    unsatisfactory work done by the respondents. However, the
    respondents were granted extension of contract twice. Thereafter,
    a letter dated 25.11.2011 was issued by the Executive Engineer to
    the respondents and other contractors entrusted with the task of
    construction, granting a second extension of time of contract for
    construction work. The respondents were called upon to make
    compliances with the issues pointed out, at the earliest. In the said
    communication dated 25.11.2011, it was stated that if the
    deficiencies are not removed and/or complied with, in that case,
    3
    there shall be suspension of payment under Clause 2.8 of the
    General Conditions of Contract (for short ‘the GCC’). On
    05.12.2011, a review meeting was held between the parties,
    followed by a letter dated 07.12.2011 issued by the respondentsoriginal claimants in reply/compliance of the aforesaid letter dated
    25.11.2011. It was the case on behalf of the respondents­original
    claimants that without properly considering the said letter of the
    respondents­original claimants dated 07.12.2011, petitioners
    herein issued letter dated 12.12.2011 invoking Clause 2.8 of the
    GCC for suspension of payment, alleging certain deficiencies. It
    was the case on behalf of the respondents­original claimants that
    by letter dated 27.12.2011, they replied to the suspension notice
    and complied with the deficiencies. In reply to the aforesaid
    letters, the petitioners issued letters dated 23.12.2011 and
    28.12.2011 asking the claimants to ensure compliance of the
    pending issues. That by letter/communication dated 09.02.2012,
    the petitioners served a notice upon the respondents terminating
    the contract with effect from 12.03.2012. The said termination
    notice was issued under Clause 2.9.1(a) and (d) of the GCC. The
    respondents­original claimants replied to the said termination
    notice by letters dated 16.02.2012 and 24.02.2012 and requested
    4
    the petitioners to re­consider the matter. However, the dispute
    between the parties was not resolved. The respondents­original
    claimants served a legal notice dated 10.03.2012 and invoked the
    arbitration clause 2.9.1(a). Pursuant to the order passed by the
    High Court, the Arbitral Tribunal was constituted.
    2.1 The Arbitral Tribunal comprised of nominees of the rival
    parties and a retired Judge of the Jharkhand High Court as the
    Presiding Arbitrator. The respondents­original claimants claimed a
    total sum of Rs.5,17,88,418/­ under 13 different heads, excluding
    interest. The petitioners also filed a counter­claim for
    Rs.6,00,78,736/­ under five heads. The claim of the original
    claimants primarily involved the unpaid amount in respect of the
    work executed under the contract, loss of profit and over­head
    charges, apart from other consequential claims arising out of
    termination. It was the specific case on behalf of the original
    claimants that the termination was absolutely illegal and not being
    in according with the terms of the contract. The counter­claim filed
    by the petitioners­State was for reimbursement on account of
    unsatisfactory performance by the respondents.
    2.2 That, on appreciation of evidence, the learned Arbitral
    Tribunal gave a specific finding that the termination of the contract
    5
    was illegal and without following the procedure as required under
    the contract (paras 17 to 36). That, thereafter the learned Arbitral
    Tribunal proceeded to consider the claims on merits and ultimately
    allowed the claims to the extent of Rs.2,10,87,304/­ under different
    heads as under:
    Claims Amount Allowed Comments
    Claim 1A – Claim
    Unpaid Bills from
    1/11/2011 to
    28/2/2012
    53,37,294 50,59,957 Partly allowed
    Claim 1B – Claim
    Due/Unpaid against
    Bills from Oct 2007
    to Oct 2011
    79,04,819 67,07,032 Partly allowed
    Claim 1C – Claim
    against Design of
    Bridges
    8,30,000 8,30,000 Allowed
    Total Claim 1 1,40,72,11
    3
    1,25,96,98
    9
    Claim 2 – Invoice for
    the month of March,
    2012 (month of
    termination)
    11,05,954 11,05,954 Allowed
    Claim 3 – Claim
    towards Shifting of
    Office from Ranchi to
    site
    1,57,000 ­ Disallowed
    Claim 4 – Claim
    towards Laboratory
    set up at site
    4,41,000 ­ Disallowed
    Claim 5 –
    Demobilisation of
    staff
    5,00,000 ­ Disallowed
    Claim 6 – Bank
    Guarantee charge for
    extended period
    33,730 ­ Disallowed
    6
    Claim 7 – Claim
    towards cost incurred
    to submit record to
    EE in person
    1,28,500 ­ Disallowed
    Claim 8 – Loss of
    profit (for 24 months
    extension period)
    1,18,54,639 19,75,733 Partly allowed
    Claim 9 – Claim
    against Encashment
    of BG
    14,08,765 13,90,000 Partly allowed
    Claim 10 – Claim
    towards solicitor and
    advocates payments
    3,06,200
    Claim 11 – Claim
    towards arbitration
    cost
    10,00,000 10,00,000 Partly allowed
    Claim 12 – Staff
    maintenance fee (3
    months notice pay
    only)
    17,97,084 ­ Disallowed
    Claim 13 – Claim
    towards inability to
    bid for projects bad
    reputation
    50,00,000 ­ Disallowed
    Interest claimed as
    per contract beyond
    60 days of Invoice
    submission
    1,39,89,633 30,18,588 Interest @ 12%
    from the date
    when Tribunal
    got constituted.
    TOTAL OF CLAIMS
    & ALLOWED (Indian
    Rupees)
    5,17,94,61
    8
    2,10,94,30
    4
    % amount allowed 40.71
    2.3 In view of the finding arrived at by the learned Arbitral
    Tribunal that the termination of the contract was illegal and
    without following due procedure as required under the contract and
    7
    in view of allowing the claims of the claimants partly, the Arbitral
    Tribunal dismissed the counter claims submitted by the petitioners.
    2.4 The award declared by the learned Arbitral Tribunal has been
    confirmed by the First Appellate Court in a proceeding under
    Section 34 of the Arbitration Act. The same has been further
    confirmed by the High Court by the impugned judgment and order
    in an appeal under Section 37 of the Arbitration Act.
    2.5 Feeling aggrieved and dissatisfied with the impugned
    judgment and order passed by the High Court dismissing the
    appeal under Section 37 of the Arbitration Act and consequently
    confirming the award passed by the learned Arbitral Tribunal, the
    original respondents­State and others have preferred the present
    special leave petition.
  3. Learned counsel appearing on behalf of the petitioners has
    vehemently submitted that the High Court has materially erred in
    dismissing the appeal under Section 37 of the Arbitration Act and
    has materially erred in not properly appreciating the fact that the
    arbitral award was passed contrary to the materials on record.
    3.1 It is vehemently submitted by the learned counsel appearing
    on behalf of the petitioners that the High Court has materially erred
    8
    in not properly considering that the suspension under the
    agreement was not the suspension of work per se, rather was
    suspension of all payments to the consultants and therefore there
    was no question of dilution/go­bye of the suspension letter. It is
    further submitted by the learned counsel appearing on behalf of the
    petitioners that the High Court has not properly
    appreciated/considered the scheme of the contract. It is submitted
    that in case of non­performance of the contract satisfactorily, the
    first step was suspension of payment and if the failure in
    performance is not remedied, then the consequence which follows is
    the next step that being notice of termination by issuing 30 days’
    notice. It is submitted that suspension is either operative or
    revoked by resuming the payments, for, suspension is suspension
    of payment and not suspension of work/contract. It is submitted
    that therefore the High Court has materially erred in confirming the
    findings recorded by the learned Arbitral Tribunal that the
    termination of the contract was illegal and without following due
    procedure as required under the contract.
  4. While opposing the present special leave petition, learned
    counsel appearing on behalf of the respondents­original claimants
    9
    has vehemently submitted that, as such, there are concurrent
    findings of fact recorded by all the Courts below on the illegal
    termination of the contract. It is submitted that, on appreciation of
    evidence, the learned Arbitral Tribunal (in paragraphs 17 to 36)
    gave the specific findings by giving cogent reasons that the
    termination of the contract was illegal and without following due
    procedure as required under the contract. It is submitted that once
    the findings recorded by the learned Arbitral Tribunal are on
    appreciation of evidence and considering the materials on record,
    the same is rightly not interfered with by the Courts below in the
    proceedings under Sections 34 and 37 of the Arbitration Act.
    4.1 Making the above submissions and relying upon the decisions
    of this Court in the cases of Associate Builders v. DDA (2015) 3
    SCC 49, NHAI v. Progressive­MVR (2018) 14 SCC 688 and
    Maharashtra State Electricity Distribution Co. Ltd. v. Datar
    Switchgear Ltd. (2018) 3 SCC 133, it is prayed to dismiss the
    present special leave petition.
  5. Heard learned counsel appearing on behalf of the respective
    parties at length.
    10
  6. The main controversy is with respect to the termination of the
    contract vide letter/communication dated 09.2.2012 terminating
    the contract with effect from 12.03.2012 invoking Clause 2.9.1(1)
    and (d) of the GCC. That, on appreciation of evidence and
    considering the various clauses of the contract, the learned Arbitral
    Tribunal has observed and held by giving cogent reasons that the
    termination of the contract was illegal and contrary to the terms of
    the contract and without following due procedure as required under
    the relevant clauses of the contract. The said finding of fact
    recorded by the learned Arbitral Tribunal is on appreciation of
    evidence. The said finding of fact has been confirmed in the
    proceedings under Sections 34 and 37 of the Arbitration Act.
    Thus, there are concurrent findings of fact recorded by the learned
    Arbitral Tribunal, First Appellate Court and the High Court that the
    termination of the contract was illegal and without following due
    procedure as required under the relevant provisions of the contract.
    6.1 In the case of Progressive­MVR (supra), after considering the
    catena of decisions of this Court on the scope and ambit of the
    proceedings under Section 34 of the Arbitration Act, this Court has
    observed and held that even when the view taken by the arbitrator
    is a plausible view, and/or when two views are possible, a
    11
    particular view taken by the Arbitral Tribunal which is also
    reasonable should not be interfered with in a proceeding under
    Section 34 of the Arbitration Act.
    6.2 In the case of Datar Switchgear Ltd. (supra), this Court has
    observed and held that the Arbitral Tribunal is the master of
    evidence and the findings of fact which are arrived at by the
    arbitrators on the basis of the evidence on record are not to be
    scrutinized as if the Court was sitting in appeal. In para 51 of the
    judgment, it is observed and held as under:
    51 Categorical findings are arrived at by the
    Arbitral Tribunal to the effect that insofar as
    Respondent 2 is concerned, it was always ready and
    willing to perform its contractual obligations, but was
    prevented by the appellant from such performance.
    Another specific finding which is returned by the
    Arbitral Tribunal is that the appellant had not given
    the list of locations and, therefore, its submission
    that Respondent 2 had adequate lists of locations
    available but still failed to install the contract objects
    was not acceptable. In fact, on this count, the
    Arbitral Tribunal has commented upon the working
    of the appellant itself and expressed its dismay about
    lack of control by the Head Office of the appellant
    over the field offices which led to the failure of the
    contract. These are findings of facts which are arrived
    at by the Arbitral Tribunal after appreciating the
    evidence and documents on record. From these
    findings it stands established that there is a
    fundamental breach on the part of the appellant in
    carrying out its obligations, with no fault of
    Respondent 2 which had invested whopping amount
    of Rs 163 crores in the project. A perusal of the
    12
    award reveals that the Tribunal investigated the
    conduct of the entire transaction between the parties
    pertaining to the work order, including withholding of
    DTC locations, allegations and counter­allegations by
    the parties concerning installed objects. The
    arbitrators did not focus on a particular breach qua
    particular number of objects/class of objects.
    Respondent 2 is right in its submission that the
    fundamental breach, by its very nature, pervades the
    entire contract and once committed, the contract as a
    whole stands abrogated. It is on the aforesaid basis
    that the Arbitral Tribunal has come to the conclusion
    that the termination of contract by Respondent 2 was
    in order and valid. The proposition of law that the
    Arbitral Tribunal is the master of evidence and the
    findings of fact which are arrived at by the arbitrators
    on the basis of evidence on record are not to be
    scrutinised as if the Court was sitting in appeal now
    stands settled by a catena of judgments pronounced
    by this Court without any exception thereto [ See
    — Associate Builders v. DDA, (2015) 3 SCC 49 :
    (2015) 2 SCC (Civ) 204 and S. Munishamappa v. B.
    Venkatarayappa, (1981) 3 SCC 260] .
    As held by this Court in catena of decisions, the award passed by
    the Arbitral Tribunal can be interfered with in the proceedings
    under Sections 34 and 37 of Arbitration Act only in a case where
    the finding is perverse and/or contrary to the evidence and/or the
    same is against the public policy. (see Associate Builders v. DDA
    (2015) 3 SCC 49 etc.)
    13
    6.3 In the present case, the categorical findings arrived at by the
    Arbitral Tribunal are to the effect that the termination of the
    contract was illegal and without following due procedure of the
    provisions of the contract. The findings are on appreciation of
    evidence considering the relevant provisions and material on record
    as well as on interpretation of the relevant provisions of the
    contract, which are neither perverse nor contrary to the evidence in
    record. Therefore, as such, the First Appellate Court and the High
    Court have rightly not interfered with such findings of fact recorded
    by the learned Arbitral Tribunal.
    6.4 Once it is held that the termination was illegal and thereafter
    when the learned Arbitral Tribunal has considered the claims on
    merits, which basically were with respect to the unpaid amount in
    respect of the work executed under the contract and loss of profit.
    Cogent reasons have been given by the learned Arbitral Tribunal
    while allowing/partly allowing the respective claims. It is required
    to be noted that the learned Arbitral Tribunal has partly allowed
    some of the claims and even disallowed also some of the claims.
    There is a proper application of mind by the learned Arbitral
    Tribunal on the respective claims. Therefore, the same is not
    required to be interfered with, more particularly, when in the
    14
    proceedings under Sections 34 and 37 of the Arbitration Act, the
    petitioners have failed.
  7. Once the finding recorded by the learned Arbitral Tribunal
    that the termination of the contract was illegal is upheld and the
    claims made by the claimants have been allowed or allowed partly,
    in that case, the counter­claim submitted by the petitioners was
    liable to be rejected and the same is rightly rejected. No
    interference of this Court is called for.
  8. In view of the above and for the reasons stated above, the
    present special leave petition deserves to be dismissed and is
    accordingly dismissed. However, in the facts and circumstances of
    the case, there will be no order as to costs.
    …………………………….J.
    (ARUN MISHRA)
    ……………………………..J.
    (M. R. SHAH)
    New Delhi,
    October 18, 2019.