Regional Director vs Shaji V.K

P.B.Suresh Kumar, J.

This arbitration appeal is directed against the order dated 4.3.2020 in Arbitration Original Petition No.75 of 2019 on the file of the Additional District Court-V, Palakkad. The appellant, hereinafter called “the Corporation”, was the petitioner in the said proceedings. The subject matter of the proceedings was an arbitral award obtained by the respondent, hereinafter called “the Contractor”, in connection with a works contract awarded to him by the Corporation.

The Corporation entered into a contract on 1.9.2011 with the Contractor for setting up an office for the Corporation at Kozhikode. The work involved in the contract included civil work, partitioning, cabin separation, panelling, supply of modular furniture and kitchen, plumbing, wiring, cabling, air conditioning etc. In terms of the contract, the Contractor was to be paid Rs.49,50,000/- by the Corporation for the work. While the Contractor asserts that the work has been completed, the Corporation maintains that the work has not been completed. The Contractor, however, concedes that the work has not been completed on time. According to him, the work could not be completed on time due to the delay on the part of the Corporation in handing over the site, due to his inability to obtain permission for using electricity, due to his inability to work during day hours on account of the functioning of courts in the proximity of the site of the work, due to the insistence on the part of the Corporation to do extra works, due to the failure of the Corporation in effecting periodical payments on time etc. It is stated by the Contractor that he completed the work on 3.2.2012 and locked down the site, hoping to hand over the site to the Corporation on 6.2.2012. On 4.2.2012, the Corporation took over the site, after breaking open the lock kept by the Contractor. The Contractor then issued a notice to the Corporation on 8.2.2012, invoking the arbitration clause in the agreement and seeking reference of the disputes for resolution by an Arbitrator. In reply to the said notice, the Corporation issued a communication on 15.2.2012 to the Contractor stating that the work has been deserted by him midway, and calling upon the Contractor to complete the work. Later, on 12.3.2012, the Corporation Issued a notice to the Contractor terminating the contract.

In the meanwhile, the Contractor moved the District Court, Kozhikode under Section 9 of the Arbitration and Conciliation Act, 1996 (the Act) seeking an injunction restraining the Corporation from causing obstruction to the work awarded to him. In the said proceedings, the Court appointed an Advocate Commissioner and a Valuer to assess the value of the work executed by the Contractor and they assessed the value of the work carried out by the Contractor at Rs.58,26,000/-. Though the Advocate Commissioner and the Valuer submitted their report as required by the Court, the proceedings was closed as infructuous later on account of the termination of the contract by the Corporation.

The Contractor thereupon moved this Court under Section 11 of the Act for appointment of an Arbitrator for resolving the disputes with the Corporation, and an Arbitrator was accordingly appointed for the said purpose.

Before the Arbitral Tribunal, the Contractor raised a claim against the Corporation for Rs.92,42,886/- under different heads, of which one of the claims was for the value of the works carried out by him including the additional works. The Corporation not only denied the liability, but also raised a counter claim for Rs.18,31,410/- against the Contractor towards the loss allegedly caused to them on account of the breach of the contract committed by the Contractor.

As requested for by the parties, the Arbitral Tribunal permitted the parties to let in evidence in support of their claims before the Court under Section 27 of the Act.

The Arbitral Tribunal did not consider the question whether there was any breach of the terms of the contract on the part of the Contractor. Instead, having regard to the facts and circumstances of the case, the Arbitral Tribunal proceeded to hold that there was an implied contract between the parties to do the additional works and the Corporation is bound to pay for the additional works to the Contractor and fixed the value of the works assessed by the Advocate Commissioner and Valuer appointed in the proceedings under Section 9 of the Act at Rs.58,26,000/- as the amount payable by the Corporation to the Contractor in this regard. All other claims of the Contractor were rejected by the Tribunal. Similarly, the Tribunal rejected the counter claim raised by the Corporation. Accordingly, an award was passed by the Tribunal permitting the Contractor to realise Rs.58,26,000/- from the Corporation, less the amount already paid to him, with interest at the rate of 9% from the date of filing of the arbitration request before this Court till the date of the award and interest at the rate of 18% thereafter, till the date of realisation.

The Corporation challenged the arbitral award in Arbitration Original Petition referred to above under Section 34 of the Act and the same was dismissed by the court below. The Corporation is aggrieved by the said decision of the court below and hence this appeal.

Heard the learned counsel for the Corporation as also the learned Senior Counsel for the Contractor.

The learned counsel for the Corporation contended that the finding rendered by the Arbitral Tribunal that there was an implied contract between the parties to do additional works, and that the Corporation is bound to pay to the Contractor for the additional works is perverse inasmuch as it is not supported by any materials on record. It was also contended by the learned counsel that the finding rendered by the Arbitral Tribunal as regards the value of the work executed by the Contractor is also perverse in as much as the same is without any factual basis. Placing reliance on paragraph 10 of the claim statement as also Ext.A2 letter addressed by the Contractor to the Corporation, the learned counsel has elaborated the said submission pointing out that in terms of the said documents, the value of the work executed by the Contractor is only Rs.50 lakhs. According to the learned counsel, when the Contractor himself admits that the value of the work executed by him is only Rs.50 lakhs, the Arbitral Tribunal ought not have granted an award to the Contractor for Rs.58,26,000/- towards the value of the work. It was also contended by the learned counsel that time was the essence of the contract and since there was no dispute to the fact that the work has not been completed within the time stipulated, the Arbitral Tribunal ought to have held that the Contractor has committed breach of the terms of the contract and ought to have adjudicated the loss caused to the Corporation on account of such breach. The omission to consider the issue relating to the breach of contract alleged by the Corporation against the Contractor is a patent illegality committed by the Arbitral Tribunal, submits the counsel. It was also submitted by the learned counsel that the reasons given by the Tribunal for rejection of the counter claim are also perverse, and the Tribunal ought to have upheld the counter claim of the Corporation. It was also submitted by the learned counsel that at any rate, insofar as it has come out that the Corporation got the balance work executed through another contractor by incurring a sum of Rs.21,72,400/-, the Arbitral Tribunal ought to have held that the entitlement if any, of the Contractor is only for Rs.7,77,600/- [Rs.49,50,000 (agreed amount) less Rs.20,00,000 (advance) less Rs.21,72,400 (the expense incurred for getting the balance work executed)]. According to the learned counsel, the aforesaid are patent illegalities liable for correction in a proceedings under Section 34 of the Act. The learned counsel has relied on the decisions of the Apex Court in ONGC Ltd. v. Garware Shipping Corporation Ltd., (2007) 13 SCC 434, Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, Oil and Natural Gas Corporation Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, Madhya Pradesh Power Generation Company Ltd. v. Ansaldo Energia Spa, (2018) 16 SCC 661 and the decision of this Court in K.O. Oommen v. Bajaj Allianz General Insurance Co. Ltd., 2019 (1) KHC 598, in support of the said proposition. It was also submitted by the learned counsel that at any rate, the post award interest granted by the Arbitral Tribunal for the amount covered by the award at the rate of 18% per annum is arbitrary and liable to be interfered with. Placing reliance on the decision of the Apex Court in Vedanta Ltd. v. Shenzhen Shandong Nuclear Power Construction Co. Ltd., (2019) 11 SCC 465, the learned counsel pointed out that the post award interest shall be reasonable and should conform to the prevailing economic conditions and the post award interest granted in the case on hand does not conform to the prevailing economic conditions. It was argued by the learned counsel that although the aforesaid contentions have been raised in the proceedings under Section 34 of the Act, the court below did not appreciate the same.

The learned Senior Counsel for the Contractor pointed out at the outset that there is no admission by the Contractor either in his claim statement or in Ext.A2 letter that the value of the work executed by him was only Rs.50 lakhs. It was pointed out by the learned counsel that in the said documents the Contractor was only pointing out the approximate value and at any rate, insofar as the Contractor has raised a claim in the claim statement for a sum of Rs.58,26,000/- towards the value of the work executed by him, the Corporation cannot be heard to contend that the claimant has admitted the value of the work executed by him as Rs.50 lakhs. The learned counsel has also argued that having regard to the limited jurisdiction of the Court under Section 34 of the Act, none of the contentions raised by the learned counsel for the Corporation to impugn the arbitral award is sustainable in law.

We have examined the contentions advanced by the learned counsel for the parties on either side.

As far as a proceeding under Section 34 of the Act is concerned, the position of law is now settled that the court does not sit in appeal over the arbitral awards and would interfere with the awards only on the limited grounds provided therein. The impugned order of the court below being one rendered after Act 3 of 2016, in terms of which the Act has been amended substantially, for a better understanding of the scope of interference under Section 34, it is apposite to refer to the judgment of the Apex Court in MMTC Limited v. Vedanta Limited, (2019) 4 SCC 163 dealing with the position before and after Act 3 of 2016. Paragraphs 11 to 14 of the said judgment read thus:

“11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the concept of the “fundamental policy of Indian law” would cover compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury reasonableness. Furthermore, “patent illegality” itself has been held to mean contravention of the substantive law of India, contravention of the 1996 Act, and contravention of the terms of the contract.

It is only if one of these conditions is met that the Court may interfere with an arbitral award in terms of Section 34(2)(b) (ii), but such interference does not entail a review of the merits of the dispute, and is limited to situations where the findings of the arbitrator are arbitrary, capricious or perverse, or when the conscience of the Court is shocked, or when the illegality is not trivial but goes to the root of the matter. An arbitral award may not be interfered with if the view taken by the arbitrator is a possible  view based on facts. (See Associate Builders v. DDA [Associate Builders v. DDA, (2015) 3 SCC 49 : (2015)  2  SCC  (Civ)  204]. Also see ONGC Ltd. v. Saw Pipes Ltd. [ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705] ; Hindustan Zinc Ltd. v. Friends  Coal Carbonisation [Hindustan Zinc Ltd. v. Friends  Coal Carbonisation, (2006) 4 SCC 445] ; and McDermott International Inc. v. Burn Standard   Co.   Ltd. [McDermott International Inc. v. Burn Standard Co. Ltd., (2006) 11 SCC 181] )

It is relevant to note that after the 2015 Amendment to Section 34, the above position stands somewhat modified. Pursuant to the insertion of Explanation 1 to Section 34(2), the scope of contravention of Indian public policy has been modified to the extent that it now means fraud or corruption in the making of the award, violation of Section 75 or Section 81 of the Act, contravention of the fundamental policy of Indian law, and conflict with the most basic notions of justice or morality. Additionally, sub-section (2-A) has been inserted in Section 34, which provides that in case of domestic arbitrations, violation of Indian public policy also includes patent illegality appearing on the face of the award. The proviso to the same states that an award shall not be set aside merely on the ground of an erroneous application of the law or by reappreciation of evidence.

As far as interference with an order made under Section 34, as per Section 37, is concerned, it cannot be disputed that such interference under Section 37 cannot travel beyond the restrictions laid down under Section 34. In other words, the court cannot undertake an independent assessment of the merits of the award, and must only ascertain that the exercise of power by the court under Section 34 has not exceeded the scope of the provision. Thus, it is evident that in case an arbitral award has been confirmed by the court under Section 34 and by the court in an appeal under Section 37, this Court must be extremely cautious and slow to disturb such concurrent findings.”

As evident from the extracted paragraphs, an award which is patently illegal is liable to be set aside under Section 34 of the Act.

As clarified by the Apex Court in MMTC Limited, while patent illegality was one among the grounds of challenge under Section 34 prior to Act 3 of 2016 under the head 'public policy of India', after the said amendment, the said ground is brought under the newly inserted Section 34(2A) of the Act. Similarly, perversity which was one among the grounds of challenge under the head 'public policy of India' prior to the amendment now falls under the newly inserted head 'patent illegality' [See paragraph 41 of the judgment of the Apex Court in Ssangyong Engineering and Construction Co. Limited v. NHAI, (2019) 15 SCC 131]. The scope of interference under Section 34 on the ground of perversity has been explained by the Apex Court in Associate Builders. Paragraphs 31 and 32 of the judgment in Associate Builders read thus:

“31. The third juristic principle is that a decision which is perverse or so irrational that no reasonable person would have arrived at the same is important and requires some degree of explanation. It is settled law that where:

(i) a finding is based on no evidence, or

(ii) an Arbitral Tribunal takes into account something irrelevant to the decision which it arrives at; or

(iii) ignores vital evidence in arriving at its decision, such decision would necessarily be perverse.

A good working test of perversity is contained in two judgments. In Excise and Taxation Officer-cum-Assessing Authority v. Gopi Nath & Sons [1992 Supp (2) SCC 312] , it was held: (SCC p. 317, para 7)

“7. … It is, no doubt, true that if a finding of fact is arrived at by ignoring or excluding relevant material or by taking into consideration irrelevant material or if the finding so outrageously defies logic as to suffer from the vice of irrationality incurring the blame of being perverse, then, the finding is rendered infirm in law.”

In Kuldeep Singh v. Commr. of Police [(1999) 2 SCC 10 : 1999 SCC (L&S) 429] , it was held: (SCC p. 14, para 10)

“10. A broad distinction has, therefore, to be maintained between the decisions which are perverse and those which are not. If a decision is arrived at on no evidence or evidence which is thoroughly unreliable and no reasonable person would act upon it, the order would be perverse. But if there is some evidence on record which is acceptable and which could be relied upon, howsoever compendious it may be, the conclusions would not be treated as perverse and the findings would not be interfered with.”

The various judgments relied on by the learned counsel for the Corporation as referred to in paragraph 10 above would only lay down more or less the proposition aforesaid. Having thus understood the scope of interference under Section 34 of the Act, let us examine the question whether there is any infirmity in the award of the Arbitral Tribunal.

As noted, the first and foremost contention raised by the learned counsel for the Corporation is that the finding rendered by the Arbitral Tribunal that there was an implied contract between the parties to do additional works and the Corporation is therefore bound to pay to the Contractor for the additional works, is perverse. The materials on record indicate that the arrangement initially made between the parties was to the effect that the Contractor shall make provision for 20 seats in the office to be set up by the Contractor for the Corporation. The specific case set out by the Contractor before the Arbitral Tribunal was that in the course of the execution, the representatives of the Corporation insisted the Contractor to raise the numbers of the seats from 20 to 30 and accordingly, he had to re-do the work afresh midway and that he has to be paid for the extra work carried out by him. The Corporation denied the said case set out by the Contractor. Having regard to the notes of the Assistant Engineer dated 28.10.2011 and 8.12.2011 submitted to the higher officials of the Corporation which are marked in the proceedings as Exts.A7 and A8 and the letter dated 23.1.2012 addressed by the Contractor to the Regional Director of the Corporation which is marked in the proceedings as Ext.A9, the Arbitral Tribunal accepted the case set out by the Contractor, holding that there was an implied contract between the Contractor and the Corporation which attracts the broad principles of Section 9 of the Indian Contract Act, 1872. It is apposite in this regard to refer to the following passage in Ext.A7 note :

“As per the design and scope of work, the Contractor has to arrange seating for 20 staff in the hall. Now, the JD as well as the officials demanded to arrange 30 seats in the hall (10 seats extra) and this caused shifting of facilitation centre to the varandah involving some additional work/cost. The Contractor proposed a front entrance glass door with sensor/automatic arrangement which will improve the dignity of the office and appearance as well. Everybody is in favour of this as we are setting up a modern office. But, this may cause some extra expenditure as well.”

The relevant finding rendered by the Arbitral Tribunal in this regard as contained in paragraph 15 of the arbitral award reads thus :

“15. I am not inclined to accept the denial, or to think that the contractor resorted to a 50% increase in the seating arrangement on his own. It is beyond comprehension that a contractor would do more work, than he is obliged to do, that too, when he known that no payment would be made for it. There is no logic thinking that a contractor, as if on a hunch, or inspiration coming like a bolt from the blues, would venture on something suicidal from a commercial or business angle. We come across some cases, where contractors do much less than what they are required to do, either in the matter of using materials, or in adhering to quality. But, we seldom see contractors in the role of volunteers. There are indications which led support to the Contractors case that the additional work was done on directions from the corporation, and with their knowledge and consent. Letter A-7, A-8, A-9 and a discussion shown to have taken place with the contractor, reinforce this view. PW1 in his evidence in the Court in proceedings under section 27 of the Act, has stated that he was asked to do additional work and that he had asked for written orders, which were promised, but not given. Under A-1, the corporation has the power to supervise the work. Letter B-4 from the Deputy Director to his Engineer requires that officers to visit the spot once a week and to ensure compliance with the plan. If the contractor was doing things on his own, surely, it could have been stopped. But, it was not stopped. This also reinforces the view that the additional work, was pursuant to an implied contract. This must be viewed along with A-7, A-8 and A-9 and the oral evidence. To erase the effect of this evidence, the corporation would say that their former employee Shri Sasidharan, an Engineer went out of his way to help the contractor in supporting the case of the claimant. Shri Sasidharan cannot be wished away, because there were others including a Deputy Director of the Corporation in the discussion. A-7, A-8 and A-9 show the involvement of the corporation in the additional work done. I hold that there was an implied contract or agreement between the contractor and the corporation which attracts the broad principles of section 9 of the Contract Act. I hold that the Contractor has to be paid for the additional work.”

We do not find any infirmity in the said finding, warranting interference in a proceedings under Section 34 of the Act, the scope of which has been explained above.

The next contention of the Corporation to be dealt with is as regards the finding rendered by the Arbitral Tribunal as to the value of the work executed by the Contractor. The materials on record would indicate that although the work has not been completed by the Contractor to the satisfaction of the Corporation, the Contractor has completed a substantial portion of the work. In so far as the Contractor had to do additional works also beyond the contemplation of the contract and in so far as there is no contract between the parties as to the payment to be effected for the additional works directed to be executed by the Contractor, the value of the works carried out by the Contractor needs to be assessed. It is for the said purpose that the Contractor has applied for appointment of an Advocate Commissioner and a Valuer in the proceedings instituted by him against the Corporation under Section 9 of the Act and the Advocate Commissioner and the Valuer has assessed the value of work executed by the Contractor at Rs.58,26,000/-. It appears that later, in the proceedings under Section 27 of the Act, the works executed by the Contractor for the Corporation were assessed twice. Ext.X1 is one of such reports and Ext.X2 is another report. The value of the work in terms of Ext.X1 is Rs.64,76,300/- and the value of the work in terms of Ext.X2 is Rs.50,03,530/-. On an appraisal of the materials on record, the Arbitral Tribunal chose to accept the assessment of the value of the work made in the proceedings under Section 9 of the Act.

As noted, the said decision of the Arbitral Tribunal is assailed by the Corporation mainly on the ground that in paragraph 10 of the claim statement before the Arbitral Tribunal and also in Ext.A2 letter addressed by the Contractor to the Corporation, the Contractor has conceded that the value of the work executed by him was only Rs.50,00,000/-. We have perused meticulously the contents of the claim statement as also Ext.A2 letter addressed by the Contractor to the Corporation. As rightly pointed out by the learned counsel for the Contractor, there is no admission by the Contractor either in his claim statement or in Ext.A2 letter that the value of the work executed by him was only Rs.50,00,000/-. The figure Rs.50,00,000/- was referred to by the Contractor in the said document only in the context of the approximate value of the work executed which was yet to be assessed by him. In so far as the value of the work was assessed by the Advocate Commissioner and Valuer appointed in the proceedings under Section 9 and in the absence of any argument against the manner in which the value of the work was assessed by them, the Arbitral Tribunal cannot be found fault with for having accepted the said valuation. Even otherwise, having regard to the limited scope of the jurisdiction of the court under Section 34, as explained in the preceding paragraphs of this judgment, we do not think that the court exercising the power under Section 34 would be justified in interfering with the said decision of the Arbitral Tribunal.

We have meticulously perused the statement of defence and counter claim submitted by the Corporation. Even though a tabulation of claims was incorporated in the statement of defence by way of counter claim, as rightly noted by the Arbitral Tribunal, there is no pleading in the defence statement as regards the facts supporting the claim, as required in terms of the provisions contained in Section 23 of the Act. Even then, it is seen that the Arbitral Tribunal has referred to each and every claim and rejected the same with supporting reasons. Paragraphs 25 to 33 of the award of the Arbitral Tribunal read thus :

Notwithstanding that, I will refer to the 'claims' in para 35 of the reply statement on merit. There is a claim referring to unfinished works. By comparing A-1, R-2 work order and the three valuation reports A-5, X-1, X-2 it cannot be said that R-2 work order deals with the unfinished work. It could be for new items of work not envisioned in A-1, R-18 give strength to this inference. R-18 speaks of 'enhanced requirements' and modification/alterations. This is more so in the absence of a statement of facts, grounds and contentions by way of a Counter Claim petition. Treating a defence, as Counter Claim, relief cannot be granted. "Claim No.1" is accordingly rejected.

"Claim No.2" for Rs. 11,00,000/- is for "entrusting the remaining work", to new Contractors. I do not see how the process of entrustment, can cost anything. At best ancillary expenses, are only an adjunct to the process. The claim is rejected.

"Claim No. 3" is as vague, as vague could be. Claim No.3 is for delay in implementing schemes, while claim No.4 is for loss of goodwill. They are nothing but sophistications without any merit or basis.

"Claim No.5" is for estimated loss of 30% man hours due to obstruction and other disturbances. The basis for such estimation is not available. Corporation speaks of salaries and allowances for 20 members of staff. We do not know if such staff was recruited for any additional work, arising on account of the new construction, or whether they were already working in the Corporation. Exhibit R- 22 does not take things any further. For want of evidence the claim is rejected.

It is true that for some hours the Contractor locked up part of the premises. No doubt, the contractor acted in an unbecoming and unbusiness like manner. That by itself, is not a ground to grant the relief prayed for. Claim No.5 is rejected.

"Claim No.6" is for estimated loss of man hours' etc. There is no cogent evidence to support these imaginary losses. The claim is rejected.

"Claim No. 7" for expenditure for conducting other cases and legal advice is ambitious, but not tenable. It is rejected.

"Claim No. 8" is for the amount paid to security staff for the period after the termination of the period of contract with the Contractor, to guard the tools, machines etc of the Contractor. The Corporation had no obligation to do this. If they volunteered to do it as good Samaritans, they cannot expect the Contractor to compensate. This claim is puerile and is also rejected. The Corporation has been making issues out of trifles, For example, the authority of the Lawyer who sent a notice was challenged for want of a Vakkalath. Likewise, in another context the conduct of the Contractor was disapproved as he did not apologize.

All the "Claims" advanced by the Corporation in the disguise of a Counter Claim, cannot stand.

There are neither any grounds in the memorandum of appeal dealing with the sustainability or otherwise of the reasons stated by the Arbitral Tribunal for rejecting the counter claim as narrated in paragraphs 25 to 33 of the arbitral award nor any attempt on the part of the counsel for the Corporation to demonstrate that the reasons, on the basis of which the Arbitral Tribunal has rejected the counter claim are unsustainable except an omnibus statement in ground 'S' of the memorandum of appeal that the reasons stated by the Arbitral Tribunal for rejecting the counter claim are unsustainable. We do not, therefore, find any merit in the arguments advanced by the learned counsel for the Corporation as regards the rejection of the counter claim by the Arbitral Tribunal as well.

There is also no substance in the argument advanced by the learned counsel for the Corporation that in so far as the Corporation got the remaining work executed through another contractor incurring an expense of Rs.21,72,400/-, the Tribunal ought to have reduced the said amount from the amount found payable to the Contractor, for, as noted, the execution of the work by the Contractor was not as contemplated originally by the parties and there are no materials as regards the particulars of the work that the Corporation got executed through the other contractor.

There is also no substance in the argument raised by the learned counsel for the Corporation that the Arbitral Tribunal has not considered the issue as to whether there is breach of the terms of the contract on the part of the Contractor. True, the contract entered into between the parties prescribes a time for completion of the work. According to the Corporation, the time prescribed in the contract was the essence of the contract and that therefore, in so far as the work was admittedly not completed within the time stipulated in the contract, the Arbitral Tribunal ought to have held that the Contractor has committed breach of the terms of the contract and ought to have adjudicated the issue relating to the loss caused to the Corporation on account of the same. As noted, the work was not executed as contemplated by the parties initially. There have been lot of changes, and as found by the Arbitral Tribunal, in the course of execution of the work, the Corporation had directed the Contractor to execute additional works as well. In other words, it is a case where the parties to a contract agreed to alter the terms of the contract originally fixed by adding additional works within the scope of the work. When the terms of the contract was substantially altered, the time originally fixed for the completion of the work would become irrelevant [See Juggilal Kamlapat v. N.V. Internationale Crediet-En-Handels Vereeninging ‘Rotterdam’, AIR 1955 Cal 65]. It appears that it is on account of the said reason that the Arbitral Tribunal did not consider the question as to whether there is breach of the terms of the contract on the part of the Contractor as regards the time limit prescribed in the original contract for completion of the work. The omission to consider the issue relating to the breach of contract alleged by the Corporation, in the circumstances, cannot be said to be an illegality, much less a patent illegality.

In Vedanta Ltd. it has been held by the Apex Court that the courts may reduce the interest rate awarded by an Arbitral Tribunal where such interest rate does not reflect the prevailing economic conditions or where it is not found reasonable or where it does not promote the interests of justice. In the case on hand, for the post award period, the Arbitral Tribunal has awarded interest at the rate of 18% per annum. The arbitral award is one rendered on 21.7.2016. Having regard to the facts and circumstances of the case, we are of the view that the interest granted for the post-award period in the case on hand neither reflects the economic conditions prevailing at the time of passing the award nor the same could be regarded as reasonable or one that would promote the interests of justice. Interest at the aforesaid rate during the relevant period would be penal in nature. Having regard to the rate of interest granted by the Apex Court in Vedanta Ltd. for the post-award period in respect of an arbitral award passed on 09.11.2017 and having regard to the fact that the arbitral award in the case on hand was one rendered on 21.7.2016, we are of the view that appropriate rate of interest for the post-award period in the case on hand will be 9% per annum.

In the circumstances, the arbitral award and the order passed by the court below are affirmed, subject to the modification that the post-award interest to which the Contractor is entitled would be only at the rate of 9% per annum.