The scope of review U/S 37(2)(b) of the Arbitration Act is very limited, courts cannot alter the conclusion of the Tribunal based on a detailed inquiry: Delhi HC

The Delhi High Court With Justice Sachin Datta held that the scope of review of an interim order is very narrow when the tribunal examines the facts in detail before formulating an opinion under Art. 17. The court cannot change the conclusion reached by the tribunal if it is based on the complex facts of the case.

Facts:

Ongoing arbitration proceedings regarding the Concession Agreement (California) concluded between the parties regarding the work of ‘Six-lane Shamlaji to Motachilodha (93.210 km section) of NH-8’ in Gujarat (Design). The respondent granted the petitioner an exclusive right pursuant to Art. 3.1 section Californiafor a license and authority to construct, operate and maintain the project during a construction period of 730 days from the date of interim commercial operation (PCOD). Paragraph 4.4 section California stipulates that the scheduled commencement date of the Concession period is the day on which financial closure occurs and all conditions precedent specified in paragraph 4.1 of the Act are met. California are fulfilled.

The applicant was granted an extension of time. However, the entire project could not be completed until the extended period. The appellant demanded the separation of an uncompleted section of the motorway, on which work could not be continued due to the lack of land availability. A formal application has been submitted to the Independent Engineer (TJ) by the appellant to issue an interim completion certificate in accordance with clause 14.3.2 of the contract as, according to the appellant, the construction had been completed on the land provided to it.

The IE considered the part of the project where no work could be carried out and acknowledged the remaining work that needed to be carried out in the accessible areas. As a result, IE prepared two lists: “Leveling Job List-A (Punch List-A)” and “Leveling Job List-B (Punch List-B)”, specifying the tasks that remain to be completed. In recommending that the concessionaire receive an interim certificate of completion for a partially completed project, the Independent Engineer made the issuance of the certificate conditional on the completion of a number of checklist items. The concessionaire was also obliged to submit an undertaking regarding outstanding tasks and conclude a supplementary agreement.

There were difficulties in the issuance of the provisional graduation certificate due to which the respondent (NHAI) issued a suspension notice under section 30(3) on March 11, 2024. 1 of the Act California. Thereafter, the appellant approached the Delhi High Court u/s 9 of the A&C Act seeking suspension of the suspension notice and prayed for grant of PCOD. The only judge compare by order of March 20, 2024, it suspended the effect of the suspension notice until the next hearing date. The defendant, feeling aggrieved, filed an appeal under Art. 37 section 1 letter b) to the adjudicating panel. Division bench compare order dated May 14, 2024, dismissed the appeal by issuing directions for NHAI to take over the entire premises and allow the parties to file an application before the tribunal under Section 17. Thereafter, the appellant filed an application before the tribunal under Section 17. 17, which was considered compare order of September 2, 2024. The Court annulled the suspension decision with effect and enforceability.

This appeal was filed pursuant to Art. 37 section 2 letter b) of the A&C Act, challenging the tribunal’s decision issued under Art. 17.

Reports:

The petitioner made the following submissions:

• The faculty bench’s order clearly stated that the suspension would continue. In the absence of any application by the respondent to set aside the said order, the tribunal had no power to modify the interim orders passed by the division bench.
• The decision did not specify the reasons for lifting the suspension.

The respondent submitted the following requests:

• The appellant’s allegations do not meet the rules on interference with appeals of this nature. The Court did not exercise its jurisdiction arbitrarily or ignore settled principles of law governing the granting or refusal of an interlocutory injunction.
• Referring to the fact that the suspension of the appellant was not an issue in dispute before the Tribunal, they raised the same in their written submissions and the parties also submitted extensive arguments in this regard.

Court’s analysis:

The court noted that the tribunal had carefully considered the sequence of events leading to the issuance of the IE letter/communication dated October 25, 2023 and the suspension notice dated March 11, 2024. The Tribunal noted deficiencies in a number of items of works included in the Punch List A and B, even though they are not exclusively punch list items as provided for in Section 42.1 of the Code California. After reading points 14.3.1 and 14.3.2 Californiathe tribunal found that IE did not have the exclusive authority to issue an interim certificate for part of the project. The Court therefore dismissed the application under Art. 17, finding that the defendant (appellant in this case) did not reach PCOD, the defendant’s parent company (appellant in this case)Chetak Enterprises Pvt. Ltd., sponsored the appellant and the project to the lenders. The parent company made an undertaking in the event that the appellant failed to meet its financial obligations to the lenders. Respondent (appellant in this case) may ask its parent company to credit the project trust account with funds ensuring repayment of debts due by August 31, 2024. The defendant would not have suffered irreparable harm if the court had not issued interim orders.

The Court then examined the factual aspects leading to the issuance of the suspension notice. The Tribunal lifted the suspension notice dated March 11, 2024 because the appellant, despite having been issued notices of grace period under s. 31 section California. The appellant did not remedy the deficiencies indicated in these notices. This failure led to a ‘concessionaire default’ as defined in clause 31.1 of the Act California. The appellant had many opportunities to remove the defects before submitting the notice under Art. 30 section 1 of the Act Californiasuspending the appellant’s rights and engaging a third party to complete the balance sheet. The Tribunal found that, for the safety of users, the use of national roads is more important than the collection of taxes from the national road. The court noted that the tribunal had reviewed in detail the circumstances that compelled the defendant to issue the suspension order. The tribunal’s decision cannot be named “unjustified” one.

The court observed that the factual aspects relevant to the rejection of the appellant’s application for an interim completion certificate are closely related to the issue of suspension of the licensee under clause 30.1 of the Act California. The same facts that led to the rejection of the appellant’s application for an interim certificate of completion also form the basis for initiating suspension proceedings against the appellant. To be clear, the division bench ordered that the suspension be stayed until the tribunal considers the issue of interim measures. The suspension aspect was crucial in considering the application for temporary protection. The conclusions reached by the Adjudicating Team result from a detailed examination of the facts, in accordance with the requirements of the District Court’s decision of May 14, 2024. IN World Window Infrastructure Pvt. z o. o In. Central Warehouse Company 2021: DHC: 3798the coordinate panel found that the scope of the order issued by U/S 17 is very limited. Limitation to be applied when considering a petition under Art. 34 also applies to appeal against interim order u/s 37(2)(b). Therefore, the court dismissed the complaint.

Case title: Shamlaji Expressway Private Limited v. National Highways Authority of India

Case number: ARB. A. (COMM.) 50/2024 and IA No. 40486/2024

The Applicant’s Representative: Advocates Tejas Karia, Dr. Amit George, Abhishek Gupta, Suyuash Gupta, Prakhar Deep, Nishant Doshi, Anirveda Sharma, Mukesh Kumar, Ms. Meenakshi Sood, Arvind Singh and Ms. Nitya Nath.

The defendant’s attorney: Attorneys Manish Bishnoi, Gunjan Sinha Jain, Muskaan Gopal and Khubaib Shakeel.

Click here to read/download the order