O.M.P. (COMM)/537/2020 of SMS WATER GRACE BMW PVT. LTD Vs GOVT. OF NCT OF DELHI DIRECTORATE OF HEALTH SERVICES

IN THE HIGH COURT OF DELHI AT NEW DELHI%Judgment delivered on: 13.12.2021

+O.M.P. (COMM) 537/2020

SMS WATER GRACE BMW PVT. LTD.

..... Petitioner

versus

GOVT. OF NCT OF DELHI DIRECTORATE OFHEALTH SERVICES

..... Respondent

CORAMHON’BLE MR JUSTICE VIBHU BAKHRU

JUDGMENT

VIBHU BAKHRU, J

Introduction

1.The petitioner has filed the present petition under Section 34 ofthe Arbitration and Conciliation Act, 1996 (hereafter the ‘A&C Act’)impugninganarbitralawarddated18.03.2020(hereafterthe

‘impugned award’) rendered by the Arbitral Tribunal constituted of aSole Arbitrator (hereafter the ‘Arbitral Tribunal’).

2.The controversy between the parties, essentially, relates to theobligations of the petitioner to collect and treat bio-medical waste fromHealthcare establishments identified by the Government of NCT ofDelhi (the respondent), free of any charge, in terms of Clause 10 of anagreement dated 21.07.2006 (hereafter the ‘Agreement’).

3.The petitioner contends that in terms of the said clause, itsliability to collect, transport and treat bio-medical waste from theHealthcare establishments was limited to approximately 1000 kgs. perday. The respondent disputes the same. According to the respondent,the petitioner was obliged to collect, transport, treat and dispose of allthe bio-medical waste from all Healthcare establishments identified byit, free of charge, during the term of the Agreement.

4.The Arbitral Tribunal accepted the respondent’s contention andrejected the claims made by the petitioner. It also rejected the counter-claims raised by the respondent.

Factual background

5.The petitioner is engaged, inter alia, in the business of treatingwaste material.

6.The Directorate of Health Services, Government of NCT of Delhi(the respondent) had acquired land measuring 1000 sq. meters atGhazipur, Delhi, for establishment of the Centralised Treatment Facility(hereafter ‘CTF’) for treatment of bio-medical waste. It invited tenders

for establishing CTF for bio-medical waste generated from privatehospitals/public nursing homes, diagnostic centers, laboratories/bloodbanks, medical/ISM colleges, as joint venture, on BOT (Build OperateTransfer) basis for period of ten years.

7.The joint venture was premised on the respondent providing thesite and infrastructural support to the selected party/agency forestablishing the CTF, in terms of transferring the site on such terms andconditionsasmaybeapprovedbytheDelhiDevelopmentAuthority/Municipal Corporation of Delhi. The selected tenderer wasobliged to incur all capital expenditure for establishing the CTF as wellas for operation and maintenance.

8.The tender documents also expressly provided that the selectedtenderer would transport and treat bio-medical waste generated inhospitals and dispensaries under the Government of NCT of Delhi(where treatment facilities were not available on site) free of cost.

9.The petitioner tendered for the project and was successful. Therespondent issued Letter of Intent dated 23.04.2006 (hereafter ‘LoI’)and called upon the petitioner to furnish Performance Bank Guarantee.The petitioner submitted the Performance Bank Guarantee on21.07.2006 and thereafter, the parties entered into the Agreement dated21.07.2006.

10.In terms of the Agreement, the respondent agreed to provide theland at Ghazipur for setting up the CTF. And, in terms of Clause 12 ofthe Agreement, the petitioner agreed to pay sum of ₹4,32,000/- to the

respondent as monthly charges till the date of handing over of the siteback to the respondent.

11.In compliance with its obligations, the respondent deliveredpossession of the land at Ghazipur to the petitioner on 07.08.2006. Thepetitioner applied to the Delhi Pollution Control Committee (hereafter‘DPCC’) for Consent to Establish the proposed Centralized Bio-WasteTreatment Facility [under the Air (Prevention and Control of Pollution)Act, 1981 and the Water (Prevention and Control of Pollution) Act,1974] at the site. However, the DPCC declined to grant the Consent toEstablish as sought, by its letter dated 25.06.2007. The petitioner statesthat it immediately handed over the possession of the site at Gazipur tothe respondent.

12.Thereafter, on 04.11.2009, the respondent allotted new site(land measuring approximately 2000 sq. meters at Nilothi) to thepetitioner in lieu of the site at Gazipur and the parties entered into anAddendum Agreement dated 04.11.2009. The petitioner claims that itcommenced paying monthly charges of ₹4,32,000/- to the respondent with effect from June, 2010 after it had established the CTF. Although,the land at Gazipur was found to be unsuitable by the DPCC andpossession of the same was returned to the respondent, the respondentraised demand of ₹1,71,03,600/- on account of unpaid monthly charges for the period from 07.08.2006 to 04.11.2009 and also leviedpenalty. The petitioner disputed the said demand and the said disputeswere referred to arbitration.

13.A former District and Sessions Judge of Delhi was appointed asthe Sole Arbitrator (hereafter ‘the First Arbitral Tribunal’) toadjudicate the said disputes. The respondent filed claim before theFirst Arbitral Tribunal. The petitioner also filed its counter-claimsclaiming certain amounts towards expenses incurred in respect of theGazipur site and the alleged losses suffered by it. In addition, thepetitioner also raised dispute regarding computation of the period ofthe contract and claimed that the period of ten years was required to becomputed from the date of receipt of Consent to Establish from DPCC.According to the petitioner, the said permission was obtained on21.04.2010 and the period of ten years was required to be reckoned fromthat date.

14.The First Arbitral Tribunal rendered an arbitral award dated11.09.2015 rejecting all claims and counter claims made by the parties.However, the First Arbitral Tribunal accepted the petitioner’scontention that the contract period of ten years would commence witheffect from 21.04.2010, being the date when the DPCC granted theConsent to Establish the CTF. The First Arbitral Tribunal also madecertain observations to the effect that the increase in the term of thecontract, as result of the same being computed from 21.04.2010,would also benefit the respondent as the respondent’s share of treatmentof waste would also increase on account of increase in the generation ofwaste by the Government hospitals.

15.Theaforesaidarbitralawarddated11.09.2015wasnotchallenged by either of the parties.

16.The petitioner claims that in terms of Clause 10 of theAgreement, it was obliged to transport and treat bio-medical waste fromall Healthcare establishments identified by the respondent to the extentof 1000 kgs. per day without any charges; however, it was not obligedto treat bio-medical waste in excess of that quantity.

17.The petitioner further claimed that during the term of theAgreement, certain Mohalla Clinics, which were not in existence at thematerial time, were established at local level and the petitioner was alsorequired to collect, transport and treat bio-medical waste from theseMohalla Clinics. It claimed that the aggregate quantity of bio-medicalwaste collected daily from various Healthcare establishments includingMohalla Clinics was more than three times the quantity of 1000 kgs. asenvisaged earlier and thus, it was entitled to be paid for the same.

18.In view of the above, the petitioner raised demand of₹4,30,83,116/- for the period 01.06.2015 to 31.03.2018. It also raised claim of ₹11,39,994/- for bio-medical waste from Mohalla Clinics asaccording to the petitioner, it was not obliged to collect, transport andtreat waste from these clinics, free of cost.

19.On 13.06.2018, the petitioner issued notice demanding₹4,42,23,110/- along with interest at the rate of 18% per annum. It further called upon the respondent to refer the disputes to arbitration inthe event it was not agreeable to pay the demanded amount.

20.Thereafter,byacommunicationdated08.08.2018,therespondent informed the petitioner that in terms of the Office

Memorandum dated 15.05.2015 issued by the DPCC, the petitioner wasrequired to ‘collect, transport, treat and dispose of entire bio-medicalwaste (BMW) free of cost of Delhi Government Health CareEstablishments’, from the specified area and denied its liability to payany charges for collection and treatment of bio-medical waste from theHealthcare establishments including the Aam Aadmi Mohalla Clinics.The respondent further stated that since the claim was untenable, therewas no requirement to refer the disputes to arbitration.

21.In view of the disputes between the parties, the petitioner filed apetition under Section 11 of the A&C Act before this Court for theappointment of an arbitrator. And by an order dated 14.03.2019, thisCourt constituted the Arbitral Tribunal to adjudicate the disputesbetween the parties.

22.The petitioner filed the Statement of Claims before the ArbitralTribunal. The claims made by the petitioner are summarised as under:

23.The respondent had also preferred counter claims. It claimedadditional compensation for use of the extra land provided to thepetitioner. The respondent claimed that in terms of the Agreement, ithad agreed to provide land measuring 1000 sq. metres. However, on04.11.2009, the respondent had handed over land admeasuring overhalf an acre [2000 sq. metres] at Nilothi. Thus, the respondent reasonedthat the petitioner would be liable to pay for the additional land at thesame rate as agreed under the Agreement – an additional amount of₹4,32,000/- per month. The respondent claimed an amount of ₹9,33,33,600/- on account of additional monthly charges for the period 04.11.2009 till 03.07.2019 along with interest at the rate of 18% perannum (Counter-Claim no. 1) on the aforesaid basis. The respondentfurther claimed costs quantified at ₹20,00,000/-.

24.The respondent also claimed compensation from the petitionerfor collecting waste beyond 1000 kgs per day, however, that claim wasnot pressed before the Arbitral Tribunal. It was, accordingly, notconsidered.

The Impugned Award

25.The Arbitral Tribunal examined the language of Clause 10 in thecontext of the Agreement and the Tender Documents. The ArbitralTribunal also considered the evidence led by the parties. It concludedthat there was no maximum limit fixed for collection and treatment ofthe bio-medical waste from the Healthcare establishments as identifiedby the respondent. The Arbitral Tribunal reasoned that no such limit

was mentioned in the Tender Documents and the contract between theparties was premised on the respondent providing the land for settingup the CTF. In consideration, the petitioner had agreed to pay an amountof ₹4,32,000/- and further, to collect and treat bio-medical waste from Government identified Healthcare establishments, free of any charges.

26.The Arbitral Tribunal also noted that the petitioner had not raisedany claim at the material time and the same indicated that it wasunderstood that the petitioner was not entitled to any additionalpayments for collecting, transporting and treating bio-medical wastefrom various establishments under the respondent. In addition, theArbitral Tribunal also noted that the petitioner had made grievanceregarding permission granted to another agency to carry on similar workon the ground that the same had curtailed the quantity of waste availableto it. More importantly, the Arbitral Tribunal found that the FirstArbitral Tribunal had accepted the petitioner’s contention regardingcalculating the term of the Contract from the date of grant of Consentto Establish by the DPCC. It had reasoned that the respondent wouldalso benefit as the waste generated by hospitals and Healthcareestablishments under it, would also increase.

27.The Arbitral Tribunal did not find any merit in the counter-claimsas well. There was no agreement which obliged the petitioner to payenhanced charges on account of the increase in the area of land providedto it. The Arbitral Tribunal rejected the claims and counter-claims filedby the parties.

Submissions

28.Mr Wadhwa, learned senior counsel appearing for the petitionersubmitted that the impugned order is patently erroneous as the findingsof the Arbitral Tribunal to the effect that the petitioner had not raised itsclaims at the material time, is ex-facie erroneous. He submitted thatthere was no dispute that the petitioner had raised bills for collectingbio-medical waste in excess of 1000 kgs. However, the said invoicesremain unpaid. Thus, the reasoning of the Arbitral Tribunal would becontrary to the admitted documents and material on record.

29.Second, he submitted that the impugned award is contrary to theexpress terms of the Agreement. He submitted that Clause 10 of theAgreement clearly mentioned the quantity ‘about 1000 kg/day’ andtherefore, the Agreement had expressly provided the quantum of bio-medical waste that would be collected and treated free of charge.According to him, the said expression did not leave any room for doubtand therefore, the decision of the Arbitral Tribunal is perverse andcontrary to the terms of the Agreement.

30.He referred to the decision in Ramana Dayaram Shetty v.International Airport Authority of India & Ors : (1979) 3 SCC 489and submitted that commercial contract is required to be interpretedstrictly and an interpretation that renders any term of the contractredundant should be avoided. He also referred to the decision of thisCourt in Shapoorji Pallonji and Co. Pvt. Ltd. v. Rattan India PowerLtd and Anr. : (2021) 2 ARBLR 326 and, on the strength of the saiddecision submitted that words appearing in parenthesis must be read asan explanation. He also referred to the decision of the Supreme Court

in M.R. Goda Rao Sahib v. State of Madras : AIR 1966 SC 653 andcontendedthattheword‘about’literallymeans‘almostorapproximately’ and in the context of Clause 10 of the Agreement wouldsuggest the approximate quantity to be collected and treated free of cost.He submitted that the use of the word ‘about’ could not be stretched tomean unlimited quantity. Therefore, variation to some extent may beincluded, however, that could not mean that the petitioner was obligedto collect and treat more than three times the stated quantity.

31.Next, he contended that the Arbitral Tribunal had relied on anOffice Memorandum dated 15.05.2015 to hold that the same had alteredClause 10 of the Agreement. The said decision is perverse as theAgreement could not be unilaterally amended by the respondent byissuing an Office Memorandum.

32.Lastly, he contended that since there was no dispute that thepetitioner had collected and treated bio-medical waste in excess of thequantities as provided under the Agreement, it was entitled to becompensated for the extra work done.

33.Mr Anuj Aggarwal, learned counsel appearing for the respondentcountered the aforesaid submissions. He submitted that it was apparentfrom the nature of the contract between the parties that it was notpossible to fix any quantity of bio-medical waste to be collected andtreated from Healthcare establishments. He stated that the petitionerwas fully aware that the quantities would continue to increase and it hadraised no objections in this regard at the material time. He submittedthat the parties had referred their differences and disputes to arbitration

in the year 2014-15. However, even at that stage, the petitioner had notraised any issue regarding cap on the quantity to be collected andtreated free of charge. He stated that the Agreement expired on20.04.2020 and the petitioner has sought renewal of the contract withoutany caveat as to the quantity of the bio-medical waste that it would treat.Thus, it is clear that the parties have always understood that thepetitioner was obliged to lift bio-medical waste from the GovernmentHealthcare establishments without any limit on the quantities. Hesubmitted that therefore, neither the Agreement nor the Addendumentered into on 04.11.2009 includes any clause for payment of any extraremuneration or charges for bio-medical waste exceeding 1000 kgs perday. He submitted that the petitioner had commenced raising invoicesin the year 2017 for the period 01.06.2015 onwards and the sameindicates that it was an afterthought.

34.Next, he submitted that the petitioner’s contention that he wasentitled to extra charges for collecting bio-medical waste from MohallaClinics is also unsustainable and, the petitioner was obliged to collectand treat bio-medical waste from all Healthcare establishmentsidentified by the respondent, free of cost. Further, the material on recordindicates that bio-medical waste collected from Aam Admi MohallaClinics constituted negligible fraction of the total waste collected bythe petitioner.

35.Insofar as the interpretation of Clause 10 of the Agreement isconcerned, he submitted that the words ‘about 1000 kgs/day’ in theparenthesis were merely indicative of the quantities at the material time.

Reasons and Conclusion

36.The principal question to be addressed is whether the impugnedaward is contrary to the terms of the Agreement between the parties andtherefore, vitiated by patent illegality.

37.Before proceeding further it would be relevant to note that thepetitioner had submitted its tender on the basis of the terms andconditions as set out in the Tender Documents. Concededly, the TenderDocuments did not limit the quantity that was required to be collectedand treated by the selected bidder. The relevant extract from the NoticeInviting Tender dated 07.11.2005 is set out below:-

“The Government of National Capital Territoryof Delhi has planned to utilize the above site forestablishing CTF for BMW as joint venturewith the Private Sector/NGO etc. on BOT basistobeidentifiedandselectedthroughatransparentprocess.Forthisventure,Government of National Capital Territory ofDelhi shall only provide infrastructural supportto the selected Party/Agency in terms of transferof the above site on such terms and conditions asshall be approved by the Delhi DevelopmentAuthority/MunicipalCorporationofDelhi.Neither any additional capital expenditure for theestablishment of the facility nor any recurringrevenueexpenditureforoperationandmaintenance of the facility will be forthcomingfromtheGovernmentofNationalCapitalTerritory of Delhi in this regard. Given the aboveconditions, the Party for the joint venture shall beselected who is able to offer the services to theHospitals/Nursing Homes/Clinics etc. at the

most reasonable rates conforming to all therequired statutory conditions. As land will beprovided by the Government of National CapitalTerritory of Delhi, therefore Biomedical Wastegenerated in Hospitals and Dispensaries underGovernment of National Capital Territory ofDelhi (where onsite treatment facilities are notavailable) will be transported and treated free ofcost by the entrepreneur.”

[Underlined for Emphasis]

38.It is apparent from the above that the respondent had invited bidson the premise that it would provide land for setting up the CTF for bio-medical waste in joint venture with the selected bidder. The selectedbidder would establish, operate and maintain, the facility at its cost andwould also transport and treat bio-medical waste generated by hospitalsand dispensaries under the respondent, where onsite treatment facilitiesare not available, free of cost.

39.Mr Wadhwa contends that the intention of the parties is to bediscerned from the plain language of the Agreement. However, theattendant circumstances and the contemporaneous documents are notirrelevant. It is well settled that the surrounding circumstances,correspondence exchanged between the parties as well as the object ofthe contract are relevant for determining the intention of the partieswhile interpreting Contract.

40.In Transmission Corpn. of Andhra Pradesh Ltd. v. GMRVemagiri Power Generation Ltd.: (2018) 3 SCC 716 the SupremeCourt had observed that “in the event of any ambiguity arising, the terms

of the contract will have to be interpreted by taking into considerationall surrounding facts and circumstances, including correspondenceexchanged, to arrive at the real intendment of the parties.” Thus, theapproach of the Arbitral Tribunal to take note of the Tender Documentswhile interpreting the clauses of the Agreement cannot be faulted.

41.Clause 10 of the Agreement, which is at the centre of the disputesbetween the parties, reads as under:-

“The contractor shall collect, transport, treatand dispose of allBiomedical waste (about1000kg/day)fromallhealthcareestablishments(allhospitals,dispensaries,Medical colleges) identified by the governmentof National Capital Territory of Delhi, free ofcharge during the contract period. ”

42.It is clear from the plain language of the aforesaid clause that thepetitioner had agreed to collect, transport, treat and dispose of ‘allBiomedical waste’ from ‘allhealth care establishments’ identified bythe Government of NCT of Delhi, free of charge during the contractperiod. According to the petitioner, the words ‘about 1000 kg/ day’qualifies the expression ‘allBiomedical waste’. It is at once clear thatthere is conflict between the words in the parenthesis ‘about 1000kg/day’ and the expression ‘all Biomedical waste’.

43.According to the respondent, the words ‘about 1000 kg/day’merely indicates the quantity that was being generated at the materialtime and did not in any manner curtail the obligations of the petitioner

to collect, transport, treat and dispose of all bio-medical waste fromHealthcare establishments identified by the respondents.

44.As stated above, it is clear that Clause 10 of the Agreement is notfree from any ambiguity. The words ‘about 1000 kg/day’ conflicts withthe remaining clause, which contemplates that the Contractor [thepetitioner] “shall collect, transport and treat and dispose of allBiomedical waste…”. In the circumstances, the approach of the ArbitralTribunal to look at the surrounding circumstances and to determine theintention of the parties, cannot be faulted.

45.In Bank of India v. K. Mohandas : (2009) 5 SCC 313, theSupreme Court had observed as under “the intention of the parties mustbe ascertained from the language they have used, considered in the lightof the surrounding circumstances and the object of the contract. Thenature and purpose of the contract is an important guide in ascertainingthe intention of the parties”.

46.In the present case, the Tender Documents clearly set out theintention of the respondent in inviting bids for setting up CTF as ajoint venture and to provide land for setting up the facility. The TenderDocuments made it explicitly clear that the respondent would providethe land, inter alia, in consideration for collection and treatment of thebio-medical waste generated from its establishments, free of cost. It isnot the petitioner’s case that it had submitted its bid with anyreservation; on the contrary, it is asserted that it had submitted its bidpursuant to the tender floated by the respondent and its bid wasaccepted.

47.The Arbitral Tribunal also examined the Agreement bearing inmind that it was commercial contract. The Arbitral Tribunal reasonedthat the petitioner was an experienced entrepreneur and would be awarethat the generation of bio-medical waste would not be static and yet, ithad offered and agreed to collect and treat all bio-medical waste fromidentified establishments free of charge. Thus, the Arbitral Tribunalrejected the contention that its obligations were limited to collecting andtreating only 1000 kgs per day.

48.In addition, the Arbitral Tribunal also evaluated the evidence ledby the parties. The petitioner’s witness (CW-1) had deposed that (a) thepetitioner had been lifting bio-medical waste in excess of 1000 kgs./daysince 2015; (b) petitioner had not raised any invoice till 14.09.2017; and(c) there was no written agreement whereby the respondent had agreedto pay the charges as demanded for bio-medical waste in excess of 1000kgs. per day. According to CW-I, there was only an oral discussion.

49.On appreciation and evaluation of evidence, the Arbitral Tribunalconcluded that the petitioner’s demand for additional charges was anafterthought.

50.The Arbitral Tribunal also noted the Office Memorandum dated15.05.2015 issued by the DPCC. The same indicated that meeting ofthe Advisory Committee for bio-medical waste was held on 11.05.2015under the Chairmanship of the Special Secretary (Health and FamilyWelfare), Government of NCT of Delhi regarding re-distribution ofareas among two common Bio-Medical Treatment Facilities in Delhi.

Clause (c) of the said Office Memorandum is relevant and reads asunder:

“As per their agreements with the Directorate ofHealth Services, Govt of NCT of Delhi, Mis SMSWater Grace Pvt. Ltd & Mis Biotic WasteSolution Pvt Ltd. shall continue to collect,transport, treat and disposed of the entireBioMedical Waste (BMW) free of cost of DelhiGovernment Health Care Establishments intheir respective districts;”

51.The respondent stated that the petitioner’s representative waspresent at the meeting, pursuant to which the Office Memorandumdated 15.05.2015 was issued. And, the petitioner had not expressed anyreservations regarding the aforesaid Office Memorandum at thematerial time.

52.It is well settled that an Agreement is to be read as whole. Therewas no provision in the Agreement that could be read to support thepetitioner’s interpretation of Clause 10 of the Agreement. The plainlanguage of Clause 10 of the Agreement does not indicate that the onlyway to interpret it is that ‘1000 kg/ day’ was the maximum limit ofwaste to be collected and treated by the petitioner. There are no wordsin Clause 10 of the Agreement that would support the interpretation that1000 kgs per day was the upper most cap. If the petitioner’s contentionthat the words in the parenthesis ‘about 1000 kg/day’ are to be read asan explanation of the expression ‘allBio-medical waste’ then it mayalso follow that the petitioner had agreed to collect and treat about 1000kgs. per day for the entire term of the contract. Thus, the aggregate

quantity of bio-medical waste to be transported during the term of thecontract would be 36,52,000 kgs [1000 kgs multiplied by 3652 days(365 x 10 + 2 days for leap years)]. However, the petitioner did notprovide any calculation to establish the bio-medical waste collectedduring the entire term of the contract. According to the petitioner, thequantity of bio-medical waste generated per day had exceeded 1000 kgsin the year 2015; but there was no material to indicate the quantity ofbio-medical waste collected and treated by the petitioner prior to June,2015. Thus, Mr Wadhwa’s contention that Clause 10 of the Agreementshould be interpreted literally may not support the claim as made.

53.The decision in Ramana Dayaram Shetty v. InternationalAirport Authority of India & Ors. (supra) is not strictly applicable. Thewords ‘about 1000 kg/day’ are not read as being meaningless; they domention the approximate quantity of bio-medical waste. However, theydo not circumscribe the petitioner’s obligation. The decision inShapoorji Pallonji and Co. Pvt. Ltd. v. Rattan India Power Ltd andAnr. (supra) is not of much assistance to the petitioner. The words inparenthesis in that case were interpreted in view of the surroundingcircumstances and bearing in mind the contract between the parties and,not as determinative of any repugnancy between the expressions used.It is also relevant to note that the said decision was rendered in thecontext of petition under Section 11 of the A&C Act and, theexamination under that section is confined to the existence of anarbitration agreement. view that an arbitration agreement exists, ismerely prima facie view and this Court had clarified the same.

54.This Court is unable to accept the contention that Clause 10 ofthe Agreement must be read as to limit the petitioner’s obligation tocollect and treat bio-medical waste from the Healthcare establishmentsidentified by the respondent, to maximum of 1000 kgs per day.

55.Having stated the above, it is also necessary to mention that theview of this Court with regard to the petitioner’s case is not relevant asthe scope of examination in these proceedings is limited to ascertainingwhether the impugned award is vitiated by patent illegality or that theimpugned award is in conflict with the public policy of India. Clearly,none of the two grounds are met. It is well settled that an ArbitralTribunal is also the final authority for interpreting the contract and theimpugned award cannot be interfered with merely because differentinterpretation is possible.

56.In Mc Dermott International Inc. v. Burn Standard Co. Ltd. &Ors. : (2006) 11 SCC 181, the Supreme held as under:

“112. It is trite that the terms of the contract canbe express or implied. The conduct of the partieswould also be relevant factor in the matter ofconstruction of contract. The construction ofthe contract agreement is within the jurisdictionof the arbitrators having regard to the widenature, scope and ambit of the arbitrationagreement and they cannot be said to havemisdirected themselves in passing the award bytaking into consideration the conduct of theparties. It is also trite that correspondencesexchanged by the parties are required to be takenintoconsiderationforthepurposeofconstruction of contract. Interpretation of

contract is matter for the arbitrator todetermine, even if it gives rise to determinationof question of law. (See Pure Helium India (P)Ltd. v. ONGC [(2003) 8 SCC 593] and D.D.Sharma v. Union of India [(2004) 5 SCC 325] .)

113. Once, thus, it is held that the arbitrator hadthe jurisdiction, no further question shall beraised and the court will not exercise itsjurisdiction unless it is found that there existsany bar on the face of the award.”

[Underlined for Emphasis]

57.In Associate Builders v. Delhi Development Authority : (2015)3 SCC 49, the Supreme Court had further explained as under:

“42.3. (c) Equally, the third subhead of patentillegality is really contravention of Section 28(3)of the Arbitration Act, which reads as under:

“28.Rules applicable to substance of dispute.—(1)-(2)***

(3) In all cases, the Arbitral Tribunal shall decidein accordance with the terms of the contract andshall take into account the usages of the tradeapplicable to the transaction.”

This last contravention must be understood witha caveat. An Arbitral Tribunal must decide inaccordance with the terms of the contract, but ifan arbitrator construes term of the contract in areasonable manner, it will not mean that theawardcanbesetasideonthisground.Construction of the terms of contract isprimarily for an arbitrator to decide unless thearbitrator construes the contract in such way

-that it could be said to be something that no fairminded or reasonable person could do.”[Underlined for Emphasis]

58.It is also relevant to refer to the decision of the Supreme Court inSumitomo Heavy Industries Ltd. v. ONGC Ltd. : (2010) 11 SCC 296,wherein the Supreme Court had observed as under:

“43. … The umpire has considered the factsituation and placed construction on theclauses of the agreement which according tohim was the correct one. One may at thehighest say that one would have preferredanother construction of Clause 17.3 but thatcannot make the award in any way perverse.Nor can one substitute one's own view in sucha situation, in place of the one taken by theumpire, which would amount to sitting inappeal. As held by this Court in Kwality Mfg.Corpn. v. CentralWarehousingCorpn. [(2009) 5 SCC 142 : (2009) 2 SCC(Civ) 406] the Court while consideringchallenge to arbitral award does not sit inappeal over the findings and decision of thearbitrator, which is what the High Court haspractically done in this matter. The umpire islegitimately entitled to take the view which heholds to be the correct one after consideringthe material before him and after interpretingthe provisions of the agreement. If he does so,the decision of the umpire has to be acceptedas final and binding.”

59.In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran :(2012) 5 SCC 306, the Supreme Court referred to its earlier decision in

Sumitomo Heavy Industries Ltd. v. ONGC Ltd. (supra) and expresseda similar view. The relevant extract of the said decision is set out below:

43. In any case, assuming that Clause 9.3 wascapable of two interpretations, the view taken bythe arbitrator was clearly possible if not aplausible one. It is not possible to say that thearbitrator had travelled outside his jurisdiction,or that the view taken by him was against theterms of contract. That being the position, theHigh Court had no reason to interfere with theaward and substitute its view in place of theinterpretation accepted by the arbitrator.capable of two interpretations, the view taken bythe arbitrator was clearly possible if not aplausible one. It is not possible to say that thearbitrator had travelled outside his jurisdiction,or that the view taken by him was against theterms of contract. That being the position, theHigh Court had no reason to interfere with theaward and substitute its view in place of theinterpretation accepted by the arbitrator.44. The legal position in this behalf has beensummarised in para 18 of the judgment of thisCourt in SAIL v. Gupta Brother Steel TubesLtd. [(2009) 10 SCC 63 : (2009) 4 SCC (Civ) 16]and which has been referred to above. Similarview has been taken later in Sumitomo HeavyIndustries Ltd. v. ONGC Ltd. [(2010) 11 SCC296 : (2010) 4 SCC (Civ) 459] to which one ofus (Gokhale, J.) was party. The observations inpara 43 thereof are instructive in this behalf.summarised in para 18 of the judgment of thisCourt in SAIL v. Gupta Brother Steel TubesLtd. [(2009) 10 SCC 63 : (2009) 4 SCC (Civ) 16]and which has been referred to above. Similarview has been taken later in Sumitomo HeavyIndustries Ltd. v. ONGC Ltd. [(2010) 11 SCC296 : (2010) 4 SCC (Civ) 459] to which one ofus (Gokhale, J.) was party. The observations inpara 43 thereof are instructive in this behalf.

45. This para 43 reads as follows: (Sumitomocase [(2010) 11 SCC 296 : (2010) 4 SCC (Civ)459] , SCC p. 313)”

60.In MSK Projects (I) (JV) Ltd. v. State of Rajasthan : (2011) 10SCC 573, the Supreme Court explained that even an error in regard toconstruction of contract is an error within his jurisdiction and wouldnot warrant any interference in proceedings under Section 34 of theA&C Act. The Arbitral Tribunal would commit jurisdictional error

only if it deals with matters outside the contract and those not allottedto it. The relevant observations of the Supreme Court are as under:

“17. If the arbitrator commits an error in theconstruction of the contract, that is an errorwithin his jurisdiction. But if he wanders outsidethe contract and deals with matters not allottedto him, he commits jurisdictional error.Extrinsic evidence is admissible in such casesbecause the dispute is not something whicharises under or in relation to the contract ordependent on the construction of the contract ortobedeterminedwithintheaward.Theambiguity of the award can, in such cases, beresolved by admitting extrinsic evidence. Therationale of this rule is that the nature of thedispute is something which has to be determinedoutside and independent of what appears in theaward. Such jurisdictional error needs to beproved by evidence extrinsic to the award.(See GobardhanDas v. LachhmiRam [AIR1954 SC 689] , Thawardas Pherumal v. UnionofIndia [AIR1955SC468], UnionofIndia v. Kishorilal Gupta & Bros. [AIR 1959SC 1362] , Alopi Parshad & Sons Ltd. v. Unionof India [AIR 1960 SC 588] , JivarajbhaiUjamshiSheth v. ChintamanraoBalaji [AIR1965SC214]and RenusagarPowerCo.Ltd. v. General Electric Co. [(1984) 4 SCC 679: AIR 1985 SC 1156] )”

61.In view of the above, this Court does not find that the ArbitralTribunal has committed any jurisdictional error or its interpretation ofClause 10 of the Agreement is perverse and warrants any interferencein these proceedings.

62.The petition is unmerited and is, accordingly, dismissed.

VIBHU BAKHRU, J

December 13, 2021pkv/rk/v