Parties to proceed in a manner which balances the respondent’s precarious financial position with the larger national interest: Delhi High Court
Respondent’s exacerbating financial troubles could not simply be brushed aside and had to be considered in the light of the fact that it had completed significant portions of the project by then and had invested enormous sums in doing so. Being mindful of this, the Court had urged the parties to proceed in a manner which balances the respondent’s precarious financial position with the larger national interest which lay in ensuring completion of the project, the Delhi High Court held in M/S NHPC LTD. v. M/S HINDUSTAN CONSTRUCTION COMPANY LTD. (O.M.P. (COMM) 484/2020) The applicant/respondent is the Award Holder in the arbitral award dated 14.10.2019 passed by a three-member Tribunal in the arbitration conducted between the two parties in relation to disputes arising out of the turnkey execution of the 330 MW hydroelectric power plant project on the Kishanganga River in Bandipora, Jammu &amp; Kashmir (hereinafter referred to as ‘the project’). As per the terms of the contract executed between them on 09.03.2009, the project involved construction of three generating units, viz. Units I, II and III carrying power generation capacity of 110 MW each, and 330 MW in total. Considering the remote and politically charged nature of the project location, there were delays in executing the project which caused losses to both the parties and led to disputes between them as to who was to be blamed for these delays. As a result, the respondent invoked arbitration on 31.01.2017 and the award impugned in the captioned petition came to be passed on 14.10.2019. In its award, the learned Tribunal, after holding the petitioner liable for causing delays, has granted the applicant/respondent a total extension of time of 514 days in the project timeline and a total sum of INR 163.55 crores (inclusive of the costs claimed alongwith the pre-award interest @12% p.a.) along with future interest @ 9% p.a. till the date of actual payment, provided no future interest would be payable if the awarded amount was paid within ninety days of the date of the award. It is an admitted case that the awarded amount was not paid to the respondent during the ninety day period and the captioned petition has been filed by the petitioner assailing the findings in this award. This petition was taken up for the first time on 25.09.2020, Court while issuing notice and directing stay of the award dated 14.10.2019, had directed the petitioner to deposit the awarded amount with the Court by 05.10.2020. At the time, the petitioner had sought time till 24.10.2020 to effectuate the deposit, which request was not accepted by the Court on the ground that almost ten months had passed since the date of passing of the award. The quantum and time period contained in the direction for deposit was assailed by the petitioner before the Supreme Court by way of SLP(C)No.11777/2020 which was listed for 06.10.2020, which implied that the direction for deposit remained in suspension till then. However, the SLP soon came to be dismissed by the Supreme Court by granting the petitioner time till 25.10.2020 to make the deposit as directed. When all these court-ordered extensions of time to make the deposit of the awarded amount came to an end, the petitioner duly deposited the amount before Court. Soon thereafter, the respondent/Award Holder moved the present application seeking release of the amount deposited before Court. The petitioner was granted time to respond to this application and has already filed its reply opposing release of the deposited amount in favour of the respondent. Counsel for the respondent has made the submission that, Once the learned Tribunal, after due appreciation of the evidence on record and the prevailing legal position, categorically concluded in its award that certain amounts are due and payable to the respondent, then the petitioner’s mere act of assailing the award before Court by way of the captioned petition ought not be a valid ground to deprive the respondent of the amounts rightfully due to it. Counsel for the petitioner vehemently opposes the application for release and has contended that the award amount deposited by the petitioner before this Court in accordance with its orders and merely as a precondition for stay, cannot be treated by the respondent/the successful claimant before the learned Tribunal, as its own money. The court was of view that, “All of these considerations have to be seen in the light of the fact that the entire world is reeling under the devastating and compounding financial consequences of the COVID-19 global pandemic. Therefore, when it has been clear all along that (i) the respondent does not have adequate funds to sustain work at the project site, (ii) any further shortage of funds is likely to hamper the progress of the remaining work in a timely and efficient manner and that (iii) the respondent holds an award in its favour which is yet to be tested within the limited scope of interference under Section 34 of the Act, I find merit in the grounds raised and relief sought in this application.”
 Via Video Conferencing IN THE HIGH COURT OF DELHI AT NEW DELHI Date of Decision: 04.12.2020 O.M.P.484 2020 M S NHPC LTD. Petitioner Through: Ms. Maninder Acharya ASG with Mr. Viplav Acharya Mr. Krishnesh Bapat Mr. Shikhar Kishore Mr. Gauhar Mirza Mr. Prakhar Deep Mr. Nishant Doshi & Mr. Manavendra Gupta Advocates M S HINDUSTAN CONSTRUCTION COMPANY LTD. Respondent Through: Mr. Harish Salve Senior Advocate Mr. Dayan Krishan Senior Advocate with Mr. Rishi Aggarwala Advocate HON BLE MS. JUSTICE REKHA PALLI REKHA PALLI JIA No.10056 2020 This is an application filed by the respondent seeking release of the awarded amount deposited by the petitioner before this Court pursuant to the order dated 25.09.2020 directing the same as a precondition for stay of the award. The applicant respondent is the Award Holder in the arbitral award dated 14.10.2019 passed by a three member Tribunal in the OMP(COMM) 484 2020 arbitration conducted between these two parties in relation to disputes arising out of the turnkey execution of the 330 MW hydroelectric power plant project on the Kishanganga River in Bandipora Jammu Kashmiralong with future interest @ 9% p.a. till the date of actual payment provided no future interest would be payable if the awarded amount was paid within ninety days of the date of the award. It is an admitted case that the awarded amount was not paid to the respondent during the ninety day period and the captioned petition has been filed by the petitioner assailing the findings in this award. 3. When this petition was taken up for the first time on 25.09.2020 this Court while issuing notice and directing stay of the award dated 14.10.2019 had directed the petitioner to deposit the OMP(COMM) 484 2020 awarded amount with this Court by 05.10.2020. At the time the petitioner had sought time till 24.10.2020 to effectuate the deposit which request was not accepted by this Court on the ground that almost ten months had passed since the date of passing of the award. The quantum and time period contained in the direction for deposit was assailed by the petitioner before the Supreme Court by way of SLP(C)No.11777 2020 which was listed for 06.10.2020 which implied that the direction for deposit remained in suspension till then. However the SLP soon came to be dismissed by the Supreme Court by granting the petitioner time till 25.10.2020 to make the deposit as directed. When all these court ordered extensions of time to make the deposit of the awarded amount came to an end the petitioner duly deposited the amount before this Court. Soon thereafter the respondent Award Holder moved the present application seeking release of the amount deposited before this Court. The petitioner was granted time to respond to this application and has already filed its reply opposing release of the deposited amount in favour of the respondent. In support of the application Mr. Harish Salve learned senior counsel for the respondent has made the following submissions: Once the learned Tribunal after due appreciation of the evidence on record and the prevailing legal position categorically concluded in its award that certain amounts are due and payable to the respondent then the petitioner’s mere act of assailing the award before this Court by way of the captioned petition ought not be a valid ground to deprive the respondent of the amounts rightfully due OMP(COMM) 484 2020 to it. In any event there are two primary reasons which show that this petition itself deserves to be rejected at the very outset. The first and the foremost being that the petition is not maintainable as none of the grounds raised therein fall within the ambit of scope of interference set out under Section 34 of the Arbitration & Conciliation Act 1996 (L) (N) (ZZ) and NNN) in the petition show that the petitioner is deliberately attempting to raise issues which are factual in nature and therefore fall outside the purview of Section 34 of the Act especially after the amendment in 2015. Even on facts it is clear that the balance of convenience lies in favour of the respondent especially since it is admittedly a company which has executed development projects for over 90 years and even as on date is engaged in executing 45 projects of like nature. Considering the fact that the respondent as on date is finding it hard to meet its obligation to pay the salaries of its 5000 employees on account of the global pandemic and its pre existing financial troubles it is of utmost importance that this Court direct the deposited monies to be released to the respondent without being asked to furnish any security in exchange thereof. Even otherwise the respondent is a private contractor which has been continuously carrying out the project work on the basis of various extensions of time granted by the petitioner in respect of work arising out of the very same contract which formed the subject matter of the impugned award. It is not only the respondent’s will to continue carrying out the project work OMP(COMM) 484 2020 even the actions of the petitioner signify its will to have the respondent do so. Ultimately the petitioner’s actions ended up delaying the project which precipitated the respondent’s financial troubles since it had invested enormous sums in it all of which formed the basis of the findings given by the learned Tribunal in the impugned award. Delaying payment of the awarded amounts would lead to aggravating the very fire which the award sought to douse which was to prevent any further delay and facilitate smooth continuation in executing the project work. Furthermore the respondent’s equipment is still lying at the project site which is an indicator of its commitment to completing the project. In fact owing to the efforts put in by the respondent over the years the project is operational as on date and has generated electricity for the inhabitants of remote regions in the union territory of Jammu & Kashmir. Therefore this is a fit case wherein the amount deposited by the petitioner ought to be released in favour of the respondent without the requirement of directing the respondent to furnish any security. The petitioner’s case that the awarded amount deposited with the court under Section 34 proceedings can only be released in favour of the applicant respondent if it furnishes adequate security is based on a plain misreading of the provisions of the Act. Per contra the statute and specifically Section 36(3) thereof makes it clear that it is only for this Court to ascertain the conditions for stay of the award. Moreover any comparison drawn by the petitioner between a petition of this kind and appellate proceedings against a money OMP(COMM) 484 2020 decree is wholly misplaced especially in the light of the fact that any appeal preferred against a money decree is subject to very different parameters since the scope of interference of a court of first appeal is much wider than the scope of interference of a court dealing with a petition under Section 34 of the Act. On the other hand Ms.Acharya learned senior counsel for the petitioner vehemently opposes the application for release and has contended that the award amount deposited by the petitioner before this Court in accordance with its orders and merely as a precondition for stay cannot be treated by the respondent the successful claimant before the learned Tribunal as its own money. In furtherance of this submission she places reliance on Order 41 Rule 5 of the Code of Civil Procedure 1908 as also Section 36(3) of the Act to contend that the latter makes it evident that an arbitral award is akin to a money decree. Therefore the same parameters ought to be applied while directing release of the award amount deposited with a court as in the case of money decrees. Thus if this Court were to direct the release of the deposited award amount it ought to be subject to furnishing of security by the respondent. In support of her contention Ms.Acharya places reliance on the decisions in M s Dewan Chand v. UOI & Anr. 2015 SCC Online Del 9060] PSL Ramanathan Chettiar & Ors. V. ORMPRM Ramanathan ChettiarSouth Delhi Municipal Corp. v. M s Radhey Shyam Indian Oil Corp. Ltd. V. FEPL Engineering(P) Ltd.&Anr. OMP(Comm) 144 2019 order dated 30.07.2020] and NTPC v. Ritwik Project Pvt. Ltd. 484 2020 14.10.2020] all in order to contend that the deposit of the awarded amount by the party challenging the award for obtaining a stay thereon is not akin to paying the money to the opposite party. She therefore submits that this Court ought to keep this principal in account and not permit any release in favour of the respondent without any guarantee. Moreover she has drawn the attention of this Court to its recent decision dated 28.07.2020 dismissing OMP(I) 150 of 2020 which was a Section 9 petition preferred by the respondent seeking certain interim reliefs with respect to the bank guarantees it had furnished to the petitioner. It is her contention that if the Court did not find any merit in the contentions of the respondent at that time but instead took the view that the respondent had not been carrying out work at the requisite pace then that on its own sufficiently bolsters the case of the petitioner in its Section 34 petition. She finally submits that in the light of the respondent’s own claims of financial troubles and the fact that the petitioner is a public sector undertaking it is all the more necessary to protect the petitioner’s interest by dismissing this application and rejecting the respondent’s prayer to be allowed to forego the requirement of furnishing sufficient security while seeking release of the amounts accruing to it under an award which is yet to withstand the scrutiny of appellate proceedings. I have considered the submissions of the learned senior counsel for the parties and perused the record with their assistance. At the outset it may be appropriate to note that petitioner non applicant has not denied that the respondent has been carrying out work at the project site in Kashmir in terms of the OMP(COMM) 484 2020 agreement between the parties and that it has gathered manpower and equipment at the project site which continues to be there till date. It is also not denied that the petitioner has indeed granted repeated extensions of time to the respondent for carrying out this work. Further it is an admitted position that the project is operational as on date in that it has been generating electricity for the use of its intended beneficiaries i.e. the inhabitants of some of the remote regions in the union territory of Jammu & Kashmir. It is against this backdrop that the respondent’s request for release of the amount deposited by the petitioner as a precondition for stay of the award in these proceedings has to be considered. Although the petitioner’s challenge to the arbitral award is still to be considered by this Court on merits it prima facie emerges from a perusal of the grounds in the petition that the petitioner is indeed trying to assail findings mainly based on appreciation of facts. The question whether these findings actually invite interference of this Court under Section 34 of the Act can be decided once and for all only after the pleadings are complete. However at the same time it is a settled position of law that a court exercising its jurisdiction under Section 34 of the Act does not sit in appeal over the award passed by an arbitrator which is considered final and binding in normal course. This has to be read in conjunction with the fact that Ms. Acharya while making her detailed submissions has not been able to seriously dispute that most of the grounds assail factual findings. Therefore in my view at this stage the award cannot be presumed to be in contravention of the public policy of India or suffering from a patent illegality as spelt out in OMP(COMM) 484 2020 Section 34 of the Act or any other illegalities which would render the award per se illegal or liable to be set aside. 9. Ms. Acharya has also contended that as per Section 36(3) of the Act a Court which is examining an award even under the limited scope of Section 34 of the Act ought to apply the same parameters which are applicable with respect to the stay of an ordinary money decree under the Code of Civil Procedure 1908 and the release of the deposit made as a precondition for such stay. As per her this would imply that no order for release of the deposited amount can be passed by this Court without requiring the applicant to furnish the requisite security in exchange for the same. On a careful consideration of this contention I find myself unable to agree with her on this aspect for two reasons. Firstly the two statutes which are sought to be compared viz. the Code of Civil Procedure 1908 and the Arbitration and Conciliation Act 1996 contain certain provisions which in practice can be equated on certain basic principles but at the same time they are vastly different since the Act is a substantive and procedural statute on the subject of arbitration and the scope of interference under Section 34 thereof is a lot narrower. Secondly the language of the provision sought to be relied on i.e. Section 36(3) of the Act does not make it binding for the Court to follow the precepts governing the stay of a money decree but only lays down a guiding principle that the Court ought to pay due regard to it. In any event Section 36(3) of the Act only deals with the power of the Court to grant a stay on an award directing money payment and does not deal with the parameters for releasing the deposited amount in favour of OMP(COMM) 484 2020 the Award Holder. For this purpose it may be useful to extract the bare text of Section 36(3) of the Act which reads as under: “Section 36 : Enforcement 3) Upon filing of an application under sub section for stay of the operation of the arbitral award the Court may subject to such conditions as it may deem fit grant stay of the operation of such award for reasons to be recorded in writing: Provided that the Court shall while considering the application for grant of stay in the case of an arbitral award for payment of money have due regard to the provisions for grant of stay of a money decree under the provisions of the Code of Civil Procedure 1908” It is therefore evident that the parameters governing the release of an amount which has been deposited before a court as a precondition for stay of a money decree under the CPC need not be strictly followed by this Court in all preconditional deposits for stay made in petitions arising out of arbitration. Thus the power of this Court to stay an award and release the amounts obtained as a precondition for such a stay as also its power to decide the conditions thereof still retains a discretionary characteristic which can be exercised by this Court in a judicious manner which in its opinion fits the facts and circumstances of the case. 11. On this aspect the petitioner has placed reliance on four judgments to oppose release of the deposited amounts in favour of the applicant today which have been carefully considered by this Court. I OMP(COMM) 484 2020 find that the decision in Dewan Chandis not applicable here since the claim raised in that case was for an amount which did not form a part of the award which was under challenge but was rather for certain bank charges which the executing court had held it entitled to. The decision in PSLR Chettiar is also not applicable to this case since this Court is not sitting in appellate jurisdiction over a money decree rather it is dealing with an award and as discussed hereinabove the parameters of conditional deposit in the case of a money decree and arbitration need not necessarily be the same. I have also considered the decisions in South Delhi Municipal Corporation supra) and Indian Oil Corp. Ltd.and find them inapplicable as well. In fact all these decisions have a common thread running through them wherein the concerned Courts have directed release of the preconditional amounts deposited before the court subject to furnishing of requisite security but neither are these decisions applicable to the facts of the present case nor do they have a binding effect of the kind which defeats the discretionary powers vested in this Court under the Act to make appropriate directions in the facts of each case. 12. On facts apart from the admitted positions noted hereinabove the petitioner has sought to remind this Court of its decision in the Section 9 petition which had been filed by the respondent. However I am of the opinion that while raising this contention the petitioner has failed to pay heed to the observations of this Court towards the end of that very decision the relevant extracts whereof read as follows: “Before I conclude even though I have not been persuaded by the OMP(COMM) 484 2020 arguments made against invocation of the bank guarantees I am constrained to note my dismay at the gridlock prevailing between the parties in the present case and its likely impact on the completion of the project. On the one hand the respondent NHPC wants the petitioner to continue with the project but it does not want to extend any further financial assistance or leniency at the same time. On the other hand the petitioner believes that it is owed certain amounts from the respondent and on account of its financial constraints has raised a demand for these amounts and has also opposed encashment of the bank guarantees as it would deepen its financial woes. Although it is not for this Court to decide these issues which are arbitrable at the instance of either party it cannot be ignored that a lot of the public exchequer has been utilised in this project through the Respondent. Permitting this gridlock to continue and aggravating it by encashing the bank guarantees would only delay completion of the project at a time when the nation is already reeling from the lethal outbreak of COVID 19. Irrespective of the disputes between the parties greater regard ought to be given to the fact that ultimately it is the general public which would benefit from this project and therefore an endeavor should be made to provide them this benefit at the earliest. 13. Thus the fact remains that even while deciding against the respondent in its Section 9 petition for reasons which were strictly based on the peculiar facts thereof and the prevailing position of law relating to bank guarantees this Court had noted that the respondent’s exacerbating financial troubles could not simply be brushed aside and had to be considered in the light of the fact that it had completed significant portions of the project by then and had invested enormous sums in doing so. Being mindful of this the Court had urged the OMP(COMM) 484 2020 parties to proceed in a manner which balances the respondent’s precarious financial position with the larger national interest which lay in ensuring completion of the project. Thus even at that time the Court had observed that it was crucial for the respondent to have sufficient funds to ensure that it can finish the project. All of these considerations have to be seen in the light of the fact that the entire world is reeling under the devastating and compounding financial consequences of the COVID 19 global pandemic. Therefore when it has been clear all along thatthe respondent does not have adequate funds to sustain work at the project site any further shortage of funds is likely to hamper the progress of the remaining work in a timely and efficient manner and that the respondent holds an award in its favour which is yet to be tested within the limited scope of interference under Section 34 of the Act I find merit in the grounds raised and relief sought in this application. In arriving upon this conclusion due regard has been paid to the fact that the respondent is admittedly a company of repute in the infrastructure development sector with over 90 years of experience in carrying out work of this kind. It is also presently engaged in executing 45 projects which are similar to the project in this case and by necessary implication also require equally enormous investments in carrying out the work effectively. Ultimately the primary consideration of the Court is to ensure that the project work continues and is completed soon. To that end it appears important to accommodate the company engaged in this endeavour which is presently finding it difficult to sustain its employees. To let this OMP(COMM) 484 2020 situation aggravate any further would mean to indirectly cost us a project of great national significance since it is serving the important function of providing electricity to a remote and sensitive areas of the nation. I am therefore of the view that it will be in the interest of justice to release the amount deposited by the petitioner before this Court in favour of the respondent without requiring the respondent to furnish any security. 15. At the same time the petitioner’s apprehension that the recovery of any amount released to the respondent at this stage may become impossible owing to the respondent’s precarious condition is justified. Therefore for this reason it is deemed appropriate to direct the release to be subject to an affidavit ̉ filed by the respondent undertaking to restitute the released amount with interest @ 7 % per annum in case the captioned petition were to succeed. The respondent is directed to file the affidavit within three days from today. In these circumstances the application is allowed. 17. At this stage learned senior counsel for the applicant submits that on account of the restricted functioning of this Court’s registry and the possible health risks associated with a physical visit to collect the amount as directed to be released hereinabove this Court may consider directing the Registry to release the amount directly in its bank account. The respondent’s apprehensions cannot be said to be unfounded and therefore the prayer for digitally remitting the amount to the respondent’s account deserves to be accepted. It is accordingly directed that upon receiving the affidavit of undertaking from the respondent the Registry shall release the OMP(COMM) 484 2020 awarded amount as deposited by the petitioner along with interest accrued thereon in favour of the respondent by digitally remitting the same in the bank account of the respondent bearing the following particulars: Account Details: Hindustan Construction Co. Ltd. Bank ICICI Bank Ltd Address CIBD Mumbai Branch Account No. 039305005472 RTGS IFS Code ICIC0000393 It is made clear that the direction for release of the deposited amount in favour of the applicant respondent shall be subject to the final outcome of the captioned Section 34 petition and is being passed in the peculiar facts and circumstances of this case. 20. The application is disposed of in the aforesaid terms. O.M.P(COMM) 484 2020 21. At request list on 15.04.2021. DECEMBER 04 2020 REKHA PALLI J. OMP(COMM) 484 2020 