$~24 * + IN THE HIGH COURT OF DELHI AT NEW DELHI O.M.P. 1095/2014 GREAT EASTERN ENERGY CORPORATION LTD ........ Petitioner
Through: Mr Darpan Wadhwa, Mr Aseem Chaturvedi & Mr Shlok Chandra, Advs. UOI versus ..... Respondent Through: Mr K R Sasiprabhu & Mr Somiran Sharma, Advs. CORAM: HON'BLE MR. JUSTICE VIBHU BAKHRU % ORDER
0411.2016 VIBHU BAKHRU, J1 The petitioner has filed the present petition under Section 34 of the Arbitration and Conciliation Act, 1996 (hereafter 'the Act'), inter alia, praying that the arbitral award dated 19.03.2012 (hereafter ' the impugned award') made by an Arbitral Tribunal constituted by Mr. G.B. Patnaik, Mr. K.N. Singh and Mr V.N. Khare, three former Judges of the Supreme Court, be set aside.
2. The disputes involved between the parties principally concern the interpretation of the agreement between them.
3. Sometime in the year 1992, the respondent (Ministry of Petroleum & Natural Gas) had expressed interest in allowing private participation in exploration and development of Coal Bed Methane (CBM). The petitioner O.M.P. 1095/2014 Page 1 of 12 (formerly known as Modi McKenzie Methane Limited) was interested in the business of exploration and development of Coal Bed Methane and accordingly sought approval for its participation as a private enterprise. On 28.12.1992, the respondent gave its approval in favour of the petitioner and thereafter, the parties entered into a Memorandum of Understanding dated 15.12.1993 (hereafter ‘the MOU’).
4. In terms of the said MOU, the petitioner was required to pay a "Signature Bonus" of `1 crore to Coal India Limited which, the petitioner did on 27.01.1994. Thereafter on 31.05.2001, the parties entered into a contract (hereafter 'the Agreement') for exploration and development of CBM.
5. The dispute between the parties essentially concerns the interpretation of clause 15.1 (b) of the Agreement, which also required the petitioner to pay one time lump sum "Signature Bonus" of USD $ 0.3 million. The said clause is set out below:-
""15.1(b) A fixed one time lump sum signature bonus of United States Dollars zero point three (US$0.3) million is payable by the Company. Rs. One (1) crore of signature bonus already paid by GEECL to Coal India Limited will be adjusted against the signature bonus of United States Dollars zero point three US$0.3) million payable by GEECL to the Government on the date of signing of the Contract as per the exchange rate applicable on that date."
6. It is the petitioner's case that the sum of US$ 0.3 million (three hundred thousand US dollars) payable in terms of clause 15.1(b) of the O.M.P. 1095/2014 Page 2 of 12 Agreement already stood paid in terms of the MOU. It is contended on behalf of the petitioner that the petitioner was not required to pay “Signature Bonus” twice over and had already paid a sum of `1 crore as “Signature Bonus” on 27.01.1994. It is earnestly contended that the word "adjusted" as used in clause 15.1(b) of the Agreement has to be interpreted to mean that the liability to pay signature bonus stood settled.
7. The respondent has disputed the aforesaid contention and asserts that the sum of `1 crore does not set-off the amount payable under clause 15.1(b) of the Agreement, in entirety. It asserts that as per the exchange rate prevalent on 31.05.2001, the amount of US$ 0.3 million would translate to `1.41 crores; therefore, the petitioner would be liable to pay a sum of `41 lakhs after adjusting the sum of `1 crore already paid in terms of the MOU. The respondent also relied upon contemporaneous correspondence at the time of negotiations in support of its contention.
8. The Arbitral Tribunal considered the rival contentions and concluded that: “With reference to Article 15.1 (b) the Signature Bonus of US$ 0.3 million will be payable by the company and a sum of Rs.1 Crore of Signature Bonus already paid to Coal India Limited will be adjusted against Signature Bonus and 0.3 million US$ payable to the Government on the date of signing of the contract as per exchange rate applicable on that date.” 9. After the award was rendered, the petitioner filed an application styled under Section 33 of the Act submitting that the Arbitral Tribunal had not considered its alternate plea for accounting for interest on the sum of `1 O.M.P. 1095/2014 Page 3 of 12 crore. It was the petitioner's contention that if the amount paid under the MOU is to be adjusted against US$ 0.3 million payable under clause 15.1 (b) of the Agreement at the exchange rate as on 31.05.2001, the petitioner ought to be compensated by way of interests on the amount of One Crore paid under the MOU. The said application was also rejected by the Arbitral Tribunal by an order passed on dated 12.05.2014.
10. Mr Darpan Wadhwa, the learned counsel appearing for the petitioner submitted that the Arbitral Tribunal had grossly erred in interpreting clause 15.1 (b) of the Agreement in the manner as it had done. He submitted that the term “Signature Bonus” connotes an amount required to be paid at the time of signing. The Agreement dated 31.05.2001 only formalised the MOU which had already been signed on 15.12.1993 and the petitioner had paid the Signature Bonus at the relevant time. He earnestly contended that there could be no question of paying the Signature Bonus twice over. And, the word "adjusted" as used in clause 15.1(b) must be read to mean adjustment of the entire liability under the clause. He contended that this would be in conformity with the concept of "Signature Bonus". He further submitted that the last two words of the clause - "that date" - must be read to refer to the date of the MOU (i.e. 15.12.1993) and not the date of the Agreement. He submitted that therefore, exchange rate to be applied for translating 0.3 million US$ in the Indian Currency would be the exchange rate as existing on 15.12.1993.
11. Mr Somiran Sharma, learned counsel appearing for the respondent countered the submission made by Mr Wadhwa. In addition, he submitted that the petition was beyond the period as specified under Section 34 (3) of O.M.P. 1095/2014 Page 4 of 12 the Act and was liable to be dismissed. He has stated that although an application under Section 33 had been filed before the Arbitral Tribunal, the same was not disposed of till 12.05.2014, which was beyond the period of 30 days as specified. Further the Arbitral Tribunal had not extended the said period of 30 days within the said period and therefore had no power to do so thereafter.
12. I have heard learned counsel for the parties.
13. In my view no interference is warranted since the controversy involved relates purely to interpretation of a contractual provision. The Arbitral Tribunal had considered rival contentions and interpreted clause 15.1 (b) in the manner as contended by the respondent; it held as under: “Having regard to the clear language of Clause 15.1 (b), it is difficult for us to accept the contention of Mr. Virmani that the said sum of 0.3 million US$ payable to kite Respondent as Signature Bonus would be as per exchange rate applicable on the date of MOU dated 15.12.1994. .Be it be stated that between the date of MOU and signing of the agreement in course of negotiations and in the correspondence between the parties, it was made clear in the letter exhibit R-4 dated 11.04.2001. With reference to Article 15.1 (b) the Signature Bonus of US$ 0.3 million will be payable by the company and a sum of Rs.l Crore of Signature Bonus already paid to Coal India Limited will he adjusted against Signature Bonus and 0.3 million US $ payable to the Government on the date of signing of the contract as per exchange rate applicable on that date. In view of aforesaid clear understanding between the parties and in view of language of Clause 15.1 (b) we un- hesitantly accept the contention of Sasiprabhu, Learned O.M.P. 1095/2014 Page 5 of 12 Counsel appearing for the Respondent on the construction of Clause 15.1 (b) and hold that under the contract the Claimant was required to pay a sum of 0.3 million US$ as Signature Bonus to the Respondent and a sum of Rs.l Crore already paid to Coal India Ltd. as per MOU would be adjusted against a sum of 0.3 million US$ payable at the exchange rate applicable on the date of signing of the contract. In the absence any dispute between the parties with regard to exchange rate of USD on the date of signing of the contract the conclusion becomes irresistible after adjusting a sum of Rs.l Crore paid to Coal India Ltd. the Claimant is bound to pay further sum of Rs.41 lakhs to the Respondent as claimed by the Respondent in the Counter Claim. In our considered opinion, the exchange rate as prevalent on the date of signing of the contract would apply and not the exchange rate as on the date of signing of the MOU as contended by the Claimant. In view of the aforesaid conclusion of ours the Claimant's claim is wholly misconceived based upon mis-reading of Clause 15.1 (b) of the contract, the Counter Claim of the Respondent therefore be allowed and the Claimant should pay a sum of Rs.41 Lakhs to the Respondent, which has not been paid so far.” 14. The Arbitral Tribunal also considered the petitioner’s contentions regarding the true meaning of the word “adjusted” as used in clause 15.1(b) of the Agreement and held as under: “Mr. Virmani, Learned Sr. Counsel appearing for the Claimant vehementlly contended that if the dictionary meaning of the word adjusted is to be applied to the provisions of Clause 15.1 (b) then it is crystal clear that 0.3 Million US$ was arrived at being equivalent value of Rs.l crore on the date of MOU. It is for this reason the Respondent signed the contract without demanding the balance sum, though expression Signature Bonus signified that the amount has to be paid before signing of O.M.P. 1095/2014 Page 6 of 12 the contract. We are unable to accept this contention, in view of the clear and ambiguous clause 15.1 (b) read with the letter exhibit R-4 dated 11.04.2001 and that the very clause 15.1 (b) itself indicates that the exchange rate, as applicable on the date of signing of contract would be read for payment of 0.3 million US$ towards Signature Bonus. We, therefore, do not find any substance in the arguments of Mr. Virmani, Learned Sr. Counsel appearing for the Claimant.” 15. I find no infirmity with the Arbitral Tribunal’s view. In my view, a plain reading of clause 15.1 (b) does not support the interpretation as canvassed by Mr Wadhwa. Whilst it is correct that the concept of Signature Bonus would imply a one time payment at the time of signing of a contract, however, the parties clearly agreed for payment of a Signature Bonus in terms of clause 15.1 (b) of the Contract. The fact that the working of the said clause placed an additional burden on the petitioner - principally on account of the devaluation of the rupees - does not in any manner indicate that the amount as agreed was not payable by the petitioner. The contention that the words "that date" refers to the date of the MOU does not seem attractive. A plain reading of the last line of clause 15.1 (b) would clearly indicate that the word "that” refers to the date of signing of the Contract; the expression “the Contract” clearly refers to the Agreement and not the MOU. Thus, on a plain reading, the amount of US$ 0.3 million was to be paid in Indian Rupees at the exchange rate on the date of signing of the Agreement - that is on 31.05.2001 - and not the date on which the MOU was signed.
16. More importantly, the Arbitral Tribunal’s interpretation of clause 15.1(b) of the Agreement cannot by any stretch be stated to be perverse or outside its jurisdiction. Therefore, even if it is accepted that the O.M.P. 1095/2014 Page 7 of 12 interpretation of clause 15.1(b) as canvassed by Mr Wadhwa is to be preferred over that of the Arbitral Tribunal, the impugned award cannot be set aside.
17. The question of interpretation of the terms of a contract is a question within the jurisdiction of the Arbitral Tribunal. Thus, even if it is accepted that the Arbitral Tribunal had made an error, the same would be an error within its jurisdiction and would not warrant any interference by this Court in the present proceedings. Unless a court finds that the decision of an arbitral tribunal is perverse or fails the test of wednesbury principle, it cannot interfere with the said decision. This is so because a decision, which is perverse or militates against a plain meaning of the terms of the agreement concerned, would strike at the root of the jurisdiction of an arbitral tribunal.
18. It is well settled that the question as to interpretation of an agreement between the parties is clearly within the jurisdiction of the Arbitrator.
19. In Sumitomo Heavy Industries Limited v. Oil and Natural Gas Commission of India: (2010) 11 SCC296 the Supreme Court stated as under:-
"“.....The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn. the Court while considering O.M.P. 1095/2014 Page 8 of 12 challenge to arbitral award does not sit in appeal over the findings and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the agreement. If he does so, the decision of the umpire has to be accepted as final and binding.” 20. The aforesaid view was reiterated by the Supreme Court in Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran: (2012) 5 SCC306 In that case, the Supreme Court held as under:-
"“43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute its view in place of the interpretation accepted by the arbitrator.” 21. In Steel Authority of India Ltd. v. Gupta Brother Steel Tubes Ltd.: (2009) 10 SCC63 the Supreme Court had expressly held as under:-
"“....an error relatable to interpretation of the contract by an arbitrator is an error within his jurisdiction and such error is not amenable to correction by Courts as such error is not an error on the face of the award”. The Court further held that “If the conclusion of the arbitrator is based on a possible view of the matter, the court should not interfere with the award”. O.M.P. 1095/2014 Page 9 of 12 22. Although the decisions in Steel Authority of India Ltd. (supra) and Sumitomo Heavy Industries Limited (supra) were rendered in the context of the Arbitration Act, 1940, the view expressed therein is still good law as the scope of interference under the Act has not been widened but has only been narrowed down considerably.
23. In Mcdermott International Inc. v. Burn Standard Co. Ltd and Others.: (2006) 11 SCC181 the Supreme Court held as under:-
"112. It is trite that the terms of the contract can be express or implied. The conduct of the parties would also be a relevant factor in the matter of construction of a contract. The construction of the contract agreement, is within the jurisdiction of the arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot, be said to have misdirected themselves into consideration the conduct of the parties. It is also trite that correspondences exchanged by the parties are required to be the purpose of construction of a contract. Interpretation of a contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See Pure Helium India (P) Ltd. v. Oil & Natural Gas Commission: AIR2003SC4519and D.D. Sharma v. Union of India : (2004) 5 SCC325. into consideration the award by taking taken for 113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its jurisdiction unless it is found that there exists any bar on the face of the award.” O.M.P. 1095/2014 Page 10 of 12 24. In my view, the manner in which the Arbitrator has interpreted the Contract is clearly within his jurisdiction and cannot be interfered with unless his view is found to be perverse or unreasonable.
25. In Oil and Natural Gas Corporation Ltd. v. Western Geco International Ltd: (2014) 9 SCC263 the Supreme Court had held as under:
"39. No less important is the principle now recognised as a salutary juristic fundamental in administrative law that a decision which is perverse or so irrational that no reasonable person would have arrived at the same will not be sustained in a Court of law. Perversity or irrationality of decisions is tested on the touchstone of Wednesbury principle of reasonableness. Decisions that fall short of the standards of reasonableness are open to challenge in a Court of law often in writ jurisdiction of the Superior courts but no less in statutory processes wherever the same are available."
26. In the present case, the impugned award cannot be stated to be perverse or unreasonable on the anvil of the Wednesbury principle and, thus, the same cannot be set aside.
27. Undisputedly, the view as expressed by the Arbitral Tribunal as to the interpretation of clause 15.1 (b) of the Agreement is a plausible view and it is not open for this court to supplant its view over that of the Arbitral Tribunal. Plainly, the arbitral award is not in conflict with the public policy of India.
28. In view of the above, the present petition is dismissed.
29. It is seen that the disputes involved in the present petition fall under O.M.P. 1095/2014 Page 11 of 12 the definition of ‘Commercial Dispute’ as defined under Clause 2(1) (c) of the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015. Accordingly, the Registry is directed to re-number the present petition as OMP (Commercial) and while allotting the new number, the Registry shall also indicate on the file, the old registration number of the case. VIBHU BAKHRU, J NOVEMBER04 2016 pkv O.M.P. 1095/2014 Page 12 of 12