2022 Livelaw (Del) 443

IN THE HIGH COURT OF DELHI AT NEW DELHI

HON’BLE MR JUSTICE VIBHU BAKHRU
O.M.P.(COMM.) 390/2020; 12.05.2022
GAIL (INDIA) LTD. versus TRIVENI ENGINEERING & INDUSTRIES LTD.
Contract Law - Liquidated damages can't be imposed when the Engineer-in-
Charge holds that the cause of delay is explained.
Summary: When the Engineer-in-Charge was entrusted with the task of examining
the causes of delay, and it had analysed and accepted the justification provided
by the contractor and recommended several extensions without the imposition of
LD, it was not open for the employer to levy LD when the delay was not attributable
to the contractor and so was determined by the Engineer-in-Charge.
Arbitration and Conciliation Act, 1996 - Section 34 - It is for the arbitrator to decide
on the evidentiary value of any document presented to support the case of either
of the party.
For the Petitioner: Mr Puneet Taneja, Advocate with Ms Laxmi Kumari, Mr Manmohan Singh Narula,
Advocates; For the Respondents: Mr Anunaya Mehta, Mr Vinayak Thakur, Advocates
JUDGMENT
VIBHU BAKHRU, J.
1. The petitioner (hereinafter ‘GAIL’) has filed the present petition under Section 34 of
the Arbitration and Conciliation Act, 1996 (hereinafter ‘the A&C Act’) impugning an arbitral
award dated 20.11.2019 (hereinafter ‘the impugned award’) rendered by an Arbitral
Tribunal comprising of a former Chief Justice of the High Court of Jammu and Kashmir as
the Sole Arbitrator (hereinafter ‘the Arbitral Tribunal’)
2. The impugned award was rendered in the context of disputes that have arisen
between the parties in connection with an agreement dated 28.05.2012 (hereinafter the
‘Agreement’).
3. The controversy in the present case arises in the following context: -
4. Tenders were invited by GAIL (being Tender no. A096/T069/11-12/MS/38) for the
works regarding setting up of a “Dematrialised (DM) Water Plant and Condensate Polishing
Unit (CPU) for GAIL Petrochemical Complex – II at Pata, Uttar Pradesh” (hereinafter the
‘Project’), on the terms and conditions stipulated therein.
5. Pursuant to the said invitation to tender, the respondent submitted its bid for executing
the Project, on 27.02.2012. The respondent’s bid was accepted and thereafter, GAIL issued
a Fax of Acceptance dated 03.05.2012 (hereinafter the ‘FoA’), accepting the respondent’s
bid to execute the Project for a consideration of ₹55 crores inclusive of all taxes and duties
except service tax at the rate of 4.944%. The ‘Extended Stay Compensation’ was stipulated
as ₹10,00,000/- per month. In terms of the FoA, the respondent was required to furnish a
Performance Bank Guarantee and enter into a formal agreement within a period of fifteen
days from the date of the said FoA, as per the provisions of the tender documents.

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6. Subsequently, on 22.05.2012, GAIL issued the Letter of Acceptance (hereafter the
‘LoA’). M/s Engineers India Limited (hereafter ‘EIL’) was appointed as the ‘Engineer in-
Charge’ under the Agreement. The effective date of commencement of the Project was
stipulated as 03.05.2012 and the works were to be completed within a period of eighteen
months, that is, on or before 02.11.2013. Thereafter, on 28.05.2012, the parties signed the
Agreement.
7. The execution of the Project was delayed. GAIL withheld amounts as reduction of
price as stipulated under Clause 27 of the GCC. It also withheld an amount of ₹1,20,00,000/-
as the value of Cathodic Protection System, on the ground that the same was within the
scope of work but was not installed. Disputes arose between the parties regarding the Price
Reduction Schedule (hereinafter ‘PRS’), installation of Cathodic Protection System
(hereinafter ‘CPS’), extra works performed under the Agreement and bank charges.
8. The context in which the aforesaid dispute arose are briefly stated hereafter.
9. The respondent, by a communication dated 25.10.2013, requested EIL for provisional
extension of time for a period of four months without imposition of liquidated damages. The
respondent stated that the delays in execution of Project works were caused, inter alia, due
to local disputes, delay in supply items, force majeure events, delay due to rainy season,
delay in supply item and sequential work front. Thereafter, by a letter dated 28.10.2013
addressed to GAIL, EIL recommended that provisional extension of time be granted to the
respondent till 31.01.2014 without prejudice to GAIL’s right to impose PRS as per the
provisions of the Agreement, in the case the delays were attributable to the respondent.
10. On 31.10.2013, GAIL granted provisional extension of time to the respondent till
31.01.2014 without prejudice to its right to impose PRS, in terms of Clause 27.1 of the
General Conditions of the Contract (hereinafter ‘GCC’).
11. By various communications thereafter, the respondent sought further extensions of
time from GAIL as the completion of the Project was delayed. GAIL granted provisional
extension of time till 31.12.2015 without prejudice to its right to impose PRS, in terms of
Clause 27.1 of the GCC.
12. The respondent completed the contractual works on 31.12.2015. Thereafter, GAIL
undertook the exercise of verification of the work done by the respondent and, found that
the respondent had failed to execute the work regarding CPS, which was required for
tankage and underground piping. By communications dated 10.03.2016 and 19.07.2016,
GAIL called upon EIL to look into the aforesaid issue regarding CPS.
13. The respondent, by a letter dated 21.03.2016 addressed to EIL, stated that it had
reviewed the entire basic engineering package, which was thoroughly reviewed and
approved by EIL, and the same did not indicate the requirement of CPS and underground
piping. Therefore, CPS was not a part of the scope of works as mentioned in the LoA.
14. Thereafter, the respondent, by a letter dated 23.05.2016, requested EIL to release the
payment of a sum of ₹23,17,644/- on account of the additional cables provided by it during
the execution of the Project works.

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15. EIL responded to GAIL by a communication dated 29.07.2016 and stated that “as per
DM water tender package, CP for tank bottom plate has not been envisaged considering
new plant installation”.
16. Thereafter, on 11.08.2016, the respondent requested GAIL to release the withheld
amount of ₹1.20 crores on the ground that the CPS was not included in the scope of work.
17. By a communication dated 29.08.2016, EIL referred to the aforesaid letter dated
11.08.2016 issued by the respondent and informed GAIL that CPS work was not envisaged
due to various factors in the scope of works and requested GAIL to release the withheld
amount.
18. On 04.10.2016, the respondent issued a No Claim Certificate, in favour of GAIL and
stated that after scrutinization of all its claims, contentions, disputes, issues with the Project
officials, it was entitled to a sum of ₹5,55,99,888/- towards full and final settlement of its
claims. It further confirmed that with receipt of the said amount, all its claims under the
Agreement would stand fully discharged.
19. Thereafter, by a letter dated 04.10.2016, EIL sent the final bill for an amount of
₹5,55,99,871/-, as raised by the respondent, to GAIL and further, recommended GAIL to (i)
recover an amount of ₹2,38,663/-; (ii) release the withheld amount of ₹5,51,200/-; and, (iii)
withhold a sum of ₹56.35 lacs, since the respondent had failed to complete the works in its
entirety.
20. Thereafter, on 07.02.2017, the respondent requested EIL to release the withheld
amount along with the Final Bill payment as it had completed the remaining works.
Accordingly, EIL, by its letter dated on 07.02.2017, recommended GAIL to release the
withheld amount of ₹56.35 lacs, in favour of the respondent, as all the contractual obligations
had been fulfilled by the respondent and accepted by GAIL.
21. By a letter dated 18.04.2017, GAIL informed EIL regarding the recommendations
received from the Tender Committee. The site recommendations included granting
extension of time to the respondent without imposition of PRS, reduction in scope and
consequent reduction in the contract value by a sum of approximately ₹1.20 crores on
account of failure in non-execution of CPS works and closure of contract considering the
aforesaid deduction. It further requested EIL to resolve the issue pertaining to installation of
CPS and the corresponding deduction and further, the submission of a No Claim Certificate
by the respondent.
22. Thereafter, by a letter dated 04.05.2017, the respondent informed EIL that it would
bear the costs regarding CPS as a goodwill gesture, albeit, the same was not a part of the
scope of the works. It further stated that it had invited bids from reputed vendors for CPS
and received bids varying between ₹35- 40 lacs. It, therefore, requested that the balance
amount be released in its favour. However, GAIL failed to release the aforesaid amount.
23. On 17.10.2017, GAIL informed EIL that it had decided to deduct an amount of
₹1,19,17,861.70 on account of non-execution of the CPS works by the respondent and
accordingly, the executed value of the contract works amounted to ₹53,80,82,138.30/-. GAIL
requested EIL to issue a revised completion certificate and a “fresh unconditional” No Claims
Certificate in view of the aforesaid deduction.

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24. The respondent, by an e-mail dated 30.01.2018, invoked the agreement to refer the
disputes to arbitration and requested GAIL to pay the balance sum of ₹4,65,33,000/- along
with interest at the rate of 15% per annum within a period of seven days of receipt of the
said letter, failing which, the disputes be adjudicated in terms of Clause 43 of the Special
Conditions of Contract (hereafter ‘SCC’). However, the respondent did not receive any
response to the said letter.
25. Thereafter, the respondent approached this Court by way of a petition under Section
11 of the A&C Act for the appointment of an arbitrator. This Court, by an order dated
16.05.2018, appointed the learned Sole Arbitrator to adjudicate the disputes between the
parties.
Arbitral Proceedings
26. Before the Arbitral Tribunal, the respondent filed its Statement of Claims. The claims
made by the respondent in the Statement of Claims are tabulated below:
CLAIM PARTICULARS CLAIMED
No. AMOUNT
1. (a) Retention amount due from GAIL ₹2,75,00,000/-
(b) Interest on the retention amount withheld ₹1,55,39,000/-
2. (a) Amount withheld in terms of Cathodic Protection System ₹1,20,00,000/-
(b) Interest on the Cathodic Protection System amount ₹67,81,000/-
3. (a) Amount of work additionally and actually done by the ₹23,17,000/-
respondent ₹7,32,000/-
(b) Interest on the said amount
4. Charges incurred by the respondent to keep the Performance ₹3,46,000/-
Bank Guarantee alive
5. Pendente lite interest at the rate 18% per annum from
01.07.2018 till date of final award
6 Future interest at the rate of 18% per annum on the sums
awarded in the final award from the date of final award till date of
actual payment
27. GAIL filed its Statement of Defence and raised a counter-claim for a sum of ₹13.84
crores on account of closure of the plant for five days. Alternatively, GAIL raised counter-
claims for a direction to be given to the respondent to install the CPS at its own cost and
expenses along with the costs of shutting down the plant; award of interest at the rate of
18% per annum on the sum of ₹13.84 crores from the date of filing the counter-claim to the
day of payment; and, additionally, the costs and legal expenses for the arbitration.
The Impugned Award
28. By the impugned award, the Arbitral Tribunal allowed majority of the claims preferred
by the respondent. The Arbitral Tribunal entered an award of a sum of ₹2,75,00,000/-
towards the amount retained as PRS (Claim No.1); an amount of ₹80,00,000/- towards the
amount withheld on account of Cathodic Protection System (Claim No.2); an amount of
₹3,46,000/- towards bank charges in lieu of forcing respondent to keep Performance Bank
Guarantee alive beyond 31.03.2017 (Claim No.4). The Arbitral Tribunal awarded interest at
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the rate of 15% per annum for the pre-arbitration period (that is, from 02.07.2016 to
03.07.2018) amounting to ₹41,25,000/- for Claim No.1; and, an amount of ₹21,00,000/-
under Claim No.2 for the pre-arbitration period (that is, from 04.10.2016 to 03.07.2018).
29. Additionally, the Arbitral Tribunal awarded pendente lite interest at the rate of 15% per
annum for the period 04.07.2018 to 20.11.2019 for Claim Nos. 1 and 2 amounting to
₹56,80,822/- and ₹16,92,055/- respectively. Further, the Arbitral Tribunal awarded future
interest at the rate of 15% per annum from the date of the award till its realisation, in case
the awarded amount was not paid by GAIL within a period of one month. The Arbitral
Tribunal also awarded costs quantified at ₹11,25,000/, in favour of the respondent. The
Arbitral Tribunal rejected the counter-claims preferred by GAIL.
Submissions
30. Mr. Taneja, learned counsel appearing for GAIL, has assailed the impugned award,
essentially, on four fronts. First, he submitted that the Arbitral Tribunal had erred in awarding
a sum of ₹2,75,00,000/-, which was withheld by GAIL on account of PRS. He stated that
PRS is in the nature of liquidated damages and there is no dispute that execution of the work
was delayed. In the circumstances, GAIL was entitled to levy damages and withhold the
amount towards PRS. He submitted that the Arbitral Tribunal had allowed the respondent’s
claim solely on the ground that EIL, appointed by GAIL as an Engineer-in-Charge, had
recommended the respondent’s request for extension of time without levy of damages. He
submitted that the recommendations of EIL were not binding on GAIL. Clause 27 of the GCC
expressly provided that the decision of the Engineer-in-Charge would be final and binding
on the contractor. However, there was no contractual provision stipulating that GAIL
(Employer) would be bound by the said decision. He submitted that the decision of the
Arbitral Tribunal was in disregard to Clause 27 of the GCC. He submitted that Clause 47 of
the GCC also expressly provides that extension of time would not operate as a waiver of
any provision of the Agreement.
31. He relied upon the decision of this Court in Thermospares India v. B.H.E.L. & Ors.:
(2006) SCC OnLine Del 655 and on the strength of the said decision, submitted that even
though the Arbitral Tribunal had found that EIL had recommended the respondents case for
extension of time as the reasons for the delay were justified; it had not concluded that GAIL
was responsible for the delay. He submitted that unless the Arbitral Tribunal found that GAIL
was responsible for the delay, it could not have awarded refund of PRS. He referred to
paragraph 38 of the said decision, in support of his contention.
32. Second, he submitted that the Arbitral Tribunal’s decision to direct the refund of a sum
of ₹80,00,000/- out of the sum of ₹1,20,00,000/-, which was withheld by GAIL on account of
work relating to CPS, is manifestly erroneous. He submitted that the Arbitral Tribunal had
erred in proceeding on the basis that GAIL had not established the value of CPS included
in the scope of work.
33. Third, he submitted that the award of bank charges is erroneous. The bank
guarantees furnished by the respondent had been retained on account of the disputes
between the parties and therefore, the Arbitral Tribunal’s decision allowing the respondent’s
claim for the same, was manifestly erroneous.

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34. Lastly, he submitted that the decision of the Arbitral Tribunal to award interest at the
rate of 15% on the claims awarded, was excessive and is liable to be set aside.
Reasons & Conclusion
35. The first question to be addressed is whether the impugned award is vitiated by patent
illegality on account of the Arbitral Tribunal deciding the dispute regarding PRS, in favour of
the respondent. GAIL had, in terms of Clause 27 of the GCC, withheld an amount of
₹2,75,00,000/- (Rupees Two Crores, Seventy-five thousand only) on account of delays in
execution of the works.
36. The Arbitral Tribunal found that on a plain reading of Clause 27 of the GCC, EIL (the
Engineer-in-Charge) was entrusted with the primary responsibility to decide the applicability
of PRS. The respondent had sought extension of time for completion of the Agreement on
several occasions and the same were granted on a provisional basis. The Arbitral Tribunal
found that on each occasion, the respondent had provided justification for seeking such
extension of time. At the material time, the reasons for delay, as explained by the
respondent, were neither accepted nor rejected by EIL; it had recommended extension of
time on a provisional basis, without prejudice to the right of GAIL to impose PRS, in case
the same was leviable. The Arbitral Tribunal referred to EIL’s letter dated 28.10.2013,
whereby EIL had recommended provisional extension of time without prejudice to the right
of GAIL to impose PRS “in case it is proved after actual completion that the delays are
attributable to M/s Triveni”. The said letter also indicated that at the material time, EIL had
not carried out any analysis regarding the reasons for the delay. Similar recommendations
were made by EIL on other occasions as well.
37. The Arbitral Tribunal found that GAIL’s right to impose liquidated damages (PRS) was
dependent on whether the delay was attributable to the respondent. The Arbitral Tribunal
also observed that since EIL was required to carry out the analysis of the delay, it was not
open for GAIL to levy the PRS, if EIL found that the delay was not attributable to the
respondent.
38. The Arbitral Tribunal examined the evidence and material on record and found that
EIL had, by its letter dated 02.07.2016, recommended the final extension till 31.12.2015 for
completion of the Agreement without the levy of PRS. Reference to the said letter was also
found in the letter dated 04.10.2016. The respondent had called upon GAIL to produce the
said letter, however, GAIL had failed and neglected to do so. In the aforesaid circumstances,
the Arbitral Tribunal inferred that EIL had found that the delays were not attributable to the
respondent. The Arbitral Tribunal further found that GAIL had not rejected the
recommendations of EIL.
39. The findings of the Arbitral Tribunal are based on a detailed examination of the
evidence and material placed on record. It is not open for this Court to e-appreciate the
evidence and supplant its opinion in place of that of the Arbitral Tribunal’s. In any view, this
Court finds no fault with the reasoning or conclusion of the Arbitral Tribunal.
40. In view of the findings that the respondent was not responsible for the delay, the
Arbitral Tribunal awarded a sum of ₹2,75,00,000/-, which was withheld by GAIL as PRS.
41. Mr. Taneja’s challenge to the findings as well as the conclusion of the Arbitral Tribunal
is two pronged. First, he submitted that the same were in disregard to Clauses 27 and 47 of
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the GCC; and, second, that in the absence of any finding that GAIL was responsible for the
delays, the refund of PRS could not be granted in favour of the respondent.
42. Both the contentions are unmerited.
43. Clause 27 of the GCC is relevant and set out below:
“27 Price reduction 27.1 Time is the essence of the Contract. In case the
schedule: CONTRACTOR fails to complete the WORK within the
stipulated period, then, unless such failure is due to Force
Majeure as defined in Clause 26 here above or due to
EMPLOYER’s defaults, the Total Contract price shall be
reduce by ± % of the total Contract Price per complete week
of delay or part thereof subject to a maximum of 5% of the
Total Contract Price, by way of reduction in price for delay
and not as penalty. The said amount will be recovered from
amount due to the Contractor/Contractors Contract
Performance Security payable on demand.
The decision of the ENGINEER-IN-Charge in regard to
applicability of Price Reduction Schedule shall be final
and binding on the CONTRACTOR.
27.2 All sums payable under this clause is the reduction in price
due to delay in completion period at the above agreed rate.”
(emphasis supplied)
44. In terms of Clause 27 of the GCC, GAIL could levy PRS (liquidated damages) in the
event the respondent failed to complete the work within the stipulated period. Thus, it is
implicit in the said clause that PRS could be imposed only if the delay is attributable to the
respondent. Whilst, there is no dispute that the decision of EIL (Engineer-in-Charge)
regarding the applicability of PRS will be binding on the respondent; it is erroneous to
suggest that GAIL could impose PRS, even in circumstances, where the delay was not
attributable to the respondent and was so determined by EIL. The contention that an award
for refund of PRS could be granted only if the Arbitral Tribunal found that the delay was
attributable to GAIL, is unmerited.
45. Mr. Taneja relied upon the decision of a Coordinate Bench of this Court in
Thermospares India v. B.H.E.L. & Ors. (supra) and drew the attention of this Court to
paragraph no. 38 of the said decision, which reads as under:
“38. To some extent I find force in the aforesaid contention of the learned Counsel for the
petitioner. The Arbitrator is a creature of the contract and the award thus must be within the
four corners of the contract. However, this clause would not, in my considered view, imply
that even if the delays were attributable to the respondent the petitioner would be without
any remedy. There were over runs which occurred but there is no finding that the respondent
was at fault. In order for the Arbitrator to have granted any amount on account of this claim
a finding ought to have been arrived at that the delay was occasioned on account of the
factors attributable to the respondent and then only the question of compensation to the
petitioner in this behalf would have arisen.”

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46. He assailed the impugned award on the strength of the aforesaid observations.
Clearly, the said decision is wholly inapplicable to the controversy in the present case. In
that case, one of the disputes related to overrun charges. The arbitral tribunal had awarded
the same in favour of the respondent even though the agreement expressly provided that
no overrun charges would be paid in the event the completion period is extended for any
reason. It is in that context that the Court made the observations as relied upon by Mr Taneja.
The finding that the question of payment of compensation to the petitioner would arise only
if it was found that the delay was occasioned on account of factors attributable to respondent
was made in the context of the petitioner’s claim for compensation. This was not a case
where B.H.E.L. (the respondent in that case) had claimed any liquidated damages from the
petitioner.
47. In the present case, the respondent has not made any claim for compensation from
GAIL. It is merely resisting GAIL’s claim for levying liquidated damages. The reference to
the case in Thermospares India v. B.H.E.L. & Ors. (supra) is thus, wholly misconceived.
The same does not support the proposition, as sought to be advanced by Mr. Taneja.
48. The contention that the Arbitral Tribunal had disregarded Clause
47.1 of GCC is also unmerited. Clause 47.1 of GCC reads as under:

“47 No waiver of 47.1 Neither the inspection by the EMPLOYER or any of their
rights: officials, employees, or agents nor any order by the
EMPLOYER for payment of money or any payment for
or acceptance of the whole or any part of the Work by
the EMPLOYER nor any extension of time, nor any
possession taken by EMPLOYER shall operate as a
waiver of any provision of the CONTRACT, or of any
power herein reserved to the EMPLOYER, or any right
to damages herein provided, nor shall any waiver of any
breach in the CONTRACT be held to be a waiver of any
other subsequent breach.”
(emphasis supplied)

49. The decision of the Arbitral Tribunal does not rest on the assumption that extension
of time constitutes a waiver of any provision of the Agreement. The decision of the Arbitral
Tribunal rests on the finding that the respondent was not responsible for the delay in
completion of the contract. EIL was entrusted with the task of examining the causes of delay,
and it had analyzed and accepted the justification provided by the respondent.
50. The next question to be examined is GAIL’s challenge to award of an amount of
₹80,00,000/- out of the funds withheld by GAIL on account of CPS. GAIL had withheld a
sum of ₹1,20,00,000/- as the respondent had not executed the work of CPS. According to
the respondent, the work of CPS was not included in the scope of work to be performed
under the Agreement. The works had been satisfactorily completed and a Completion
Certificate had been issued to the respondent. EIL had not directed installation of CPS.
There were communications on record to support the said contention that it was not
envisaged under the Agreement. GAIL had disputed the same and contended that

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installation of CPS was a part of the contract as the same was mentioned in the tender
documents.
51. The Arbitral Tribunal found that CPS was included in the scope of work under the
Agreement as the document titled “Engineering Design Basis (PIPING), Part-1, Engineering
Design Basis, Questionnaire” formed part of the contract documents and was signed by both
the parties. The said document clearly referred to “Cathodic Protection of Tankage and U/G
Piping” and the respondent had agreed to EIL’s observation that it was required to install the
CPS. However, the Arbitral Tribunal also held that the respondent was not in the breach of
the Agreement as EIL had never directed installation of CPS. In view of the finding that
installation of CPS was a part of the scope of work; the Arbitral Tribunal accepted GAIL’s
contention that it was entitled to reduce the value of the CPS from the amount payable to
the respondent. But the Arbitral Tribunal did not accept GAIL’s contention that the value of
the CPS was ₹1,20,00,000/-. GAIL had produced certain documents including a quotation
from one M/s Raychem, in support of its claim for quantification of the said amount. The
Arbitral Tribunal evaluated the evidence produced by GAIL. The Arbitral Tribunal found that
the set of documents produced related to some CPS work awarded to M/s Raychem in the
year 2011, which was prior to the date of the Agreement. The Arbitral Tribunal did not find
the said valuation to be credible. No person from M/s Raychem was produced as a witness
to prove the said document or establish the value of CPS. The other document produced by
GAIL was an unsigned and an undated computer printout, therefore, the Arbitral Tribunal
rejected the same.
52. Mr. Taneja has contended that the Arbitral Tribunal had grossly erred in rejecting the
said documents on the ground that nobody from M/s Raychem was produced as a witness
to prove the document. He stated that GAIL had produced one of its employees as witness
to exhibit the said document and therefore, the Arbitral Tribunal’s decision was vitiated by
patent illegality. This contention is unmerited. The document in question was produced to
establish the value of CPS. The decision of the Arbitral Tribunal that the same required to
be proved by someone from M/s Raychem, who had purportedly authored the said
document, cannot be faulted. The person, who had estimated the value of CPS, was
required to establish the same. The respondent had the right to cross-examine such a
witness to question the said valuation.
53. The decision of the Arbitral Tribunal as to the evidentiary value of any material is
clearly within the jurisdiction of the Arbitral Tribunal and no interference is called for unless
it is found that the Arbitral Tribunal’s decision is manifestly erroneous and its view is one that
is impossible for any person to accept.
54. Indisputably, the decision of the Arbitral Tribunal regarding the evidentiary value of
the two documents produced by GAIL – one, that was prior to the date of the Agreement
and the other, that was unsigned and undated – cannot by any stretch said to be patently
erroneous.
55. Notwithstanding the fact that GAIL had failed to establish the value of CPS, the Arbitral
Tribunal had allowed GAIL to retain an amount of ₹40,00,000/- in view of the respondent’s
admission in its letter dated 04.05.2017 issued to EIL. In its letter, the respondent had
claimed that it had “received bids from reputed vendors varying between ₹35,00,000/- to

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₹45,00,000/- for the total scope of CP for the project”. The Arbitral Tribunal accepted the
average of the two figures as the admitted value of the CPS.
56. In regard to the award of bank charges, the Arbitral Tribunal found that the respondent
was compelled to extend the Performance Bank Guarantee for an amount of ₹5,77,19,200/-
beyond the Defect Liability Period, which ended on 01.04.2017. In terms of the Agreement
between the parties, the Bank Guarantee was required to be released on expiry of the Defect
Liability Period, however, GAIL had not released the same. The respondent was compelled
to keep the Bank Guarantee alive on the threat of invocation by GAIL.
57. In view of the above, the Arbitral Tribunal allowed the respondent’s claim for bank
charges quantified at ₹3,46,000/- paid to the bank for the period after 31.03.2017. This Court
concurs with the view of the Arbitral Tribunal that the respondent was entitled to recover the
costs for the Bank Guarantee. Mr. Taneja’s contention that the Bank Guarantee had been
kept alive in view of the disputes between the parties and thus, the respondent is not entitled
to any charges, is bereft of any merit.
58. This Court is also unable to accept that the impugned award requires any interference
on account of award of interest at the rate of 15% per annum. The contention that pre-award
interest at the rate of 15% per annum and future interest at the rate of 15% per annum is
erroneous and warrants any interference from this Court, is unmerited.
59. In Punjab State Civil Supplies Corporation Limited (PUNSUP) and Anr. v Ganpati
Rice Mills: SLP (C) 36655 of 2016, decided on 20.10.2021, the Supreme Court had
observed that “Section 31 (7) of the Arbitration Act, 1996 grants substantial discretion to the
arbitrator in awarding interest”
60. The award of 15% interest cannot by any stretch stated to be excessive or manifestly
erroneous.
61. Before concluding, it is relevant for this Court to observe that none of the contentions
as advanced on behalf of GAIL fall within the limited scope of Section 34 of the A&C Act. An
arbitral award can be set aside under Section 34(2)(b)(ii) of the A&C Act if it is found to be
in conflict with the public policy of India or under Section 34(2A) of the A&C Act if it is vitiated
by patent illegality. The Supreme Court of India has explained the scope of the said grounds
in various authoritative decisions [See: Associate Builders v. Delhi Development
Authority: (2015) 3 SCC 49; Dyna Technologies Private Limited v. Crompton Greaves
Limited: (2019) 20 SCC 1; and, Delhi Airport Metro Express Pvt. Ltd. v. Delhi Metro Rail
Corporation Ltd.: (2021) SCC OnLine SC 695]. The Supreme Court as well as this Court
have also held in various decisions that this Court does not sit as the first appellate Court
and cannot re-appreciate the evidence and supplant its opinion over that of the Arbitral
Tribunal. An arbitral award, which is contrary to the terms of the contract, is amenable to
challenge under Section 34 of the A&C Act. However, in this case, the contention that the
Arbitral Tribunal had disregarded the clauses of the Agreement is, ex facie, erroneous.
62. In view of the above, the present petition is dismissed with costs quantified at
₹50,000/-. All pending applications are also disposed of.

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