Fact
In the case NHPC v J P Associates Limited a suit was filed by the petitioner under Section 34 of the Arbitration and Conciliation Act, 1996. The petitioner suggested an upstream area work and a downstream area work package for a hydroelectric project on the Chenab River. The petitioner also solicited new bids for the project. After merging with Jaypee Cement Limited, the joint venture between Jaiprakash Industries Limited and Statkraft Anlegg AS became known as Jaiprakash Associates Limited, the respondent in this case. JP Associates was given the job for the two packages, and the two parties entered into a contract outlining the work’s parameters, including its timeline. Despite time extensions, the respondent was ultimately given the certificate of completion but was unable to complete the work within the 33-month deadline due to a number of obstacles. As a result, the respondent also provided the final bill for the two packages, claiming a total of Rs. 360.56 Crores, which the petitioner disputed for a number of reasons. Invoking the arbitration provision, the respondent caused the formation of an Arbitral Tribunal with three arbitrators, one of whom served as the presiding arbitrator, and the beginning of arbitration proceedings between the parties. The Minority and Majority Award was made by the Tribunal, and it is being contested in the current petition.
Issue
- Are the Arbitral Tribunal’s findings regarding the increased expenses supported by any evidence or reasoning?
- Was the Arbitral Tribunal prohibited by the Act and the parties’ contract from making the Award in accordance with equity and good conscience?
Analysis of Court decree
e Delhi High Court’s retired Justices B. P. Jeevan Reddy and Sh. K. K. Madan approved the respondent’s claims while rejecting the counterclaims. The court overturned the impugned award because it failed to justify the decision to award additional costs of 60 crore rupees in favour of the respondent and against the petitioner. The Court ruled that the grant of additional costs must not stand in the light of the aforementioned facts, circumstances, claims made on behalf of the parties, arguments put up, law reaffirmed, and analysis made. The reasons for the allocation of additional costs totalling Rs. 60 crores in favour of the respondent and against the petitioner are not stated in the contested award. In the second stage, it was outside the purview of the Arbitral Tribunal to make an award based on estimates of equity because there was no evidence on file to support the amount of the additional costs requested.
The Court further observed that the Tribunal proceeded with granting an award based on estimates and equity after taking note of the respondent’s failure to provide any evidence or material before the Tribunal to substantiate its claims of costs and the quantum thereof, which the Tribunal had categorically observed in its findings. It has not been demonstrated that the Tribunal was permitted to act in accordance with equity in the contract or through any other communication. As a result, the Tribunal was not permitted to make an according to the right and good award.