The State of Himachal Pradesh had proceeded to terminate the Implementation Agreement with the UHL Power Company Ltd. before expiry: SC

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Shivani Bhati | Jan 14, 2022 | Views 35983

The State of Himachal Pradesh had proceeded to terminate the Implementation Agreement with the UHL Power Company Ltd. before expiry: SC

The State of Himachal Pradesh had proceeded to terminate the Implementation Agreement with the UHL Power Company Ltd. before expiry: SC 

Issue  

Appeal against the common judgment dated 24th May, 2011, passed by the High Court of Himachal Pradesh partly allowing Arbitration Appeal filed by UHL Power Company Limited under Section 37 of the Arbitration and Conciliation Act, 1996. UHL has filed Civil Appeal and the State of Himachal Pradesh has filed Civil Appeal, as both the parties are aggrieved by the impugned judgment.  

Facts  

  • In terms of the award dated 05th June, 2005, the learned Sole Arbitrator had awarded a sum of ₹26,08,89,107.35p. (Rupees Twenty-six crores eight lakhs eighty-nine thousand one hundred and seven and thirty-five paise) in Favour of UHL towards expenses claimed along with pre-claim interest capitalized annually, on the expenses so incurred.  
  • Further, compound interest was awarded in favour of UHL @ 9% per annum till the date of claim and in the event the awarded amount is not realized within a period of six months from the date of making the award, future interest was awarded @ 18% per annum on the principal claim with interest. 
  • Dissatisfied with the award, when the State of H.P. filed a petition under Section 34 of the Arbitration Act, vide judgment dated 16th December, 2008, the learned Single Judge disallowed the entire claim of UHL. 
  • The said judgment was challenged by UHL before HC under Section 37 of the Arbitration Act wherein HC has awarded a sum of ₹9,10,26,558.74 (Rupees Nine crores ten lakhs twenty six thousand five hundred fifty eight and seventy four paise) in Favour of UHL, being the actual principal amount along with simple interest @ 6% per annum from the date of filing of the claim, till the date of realization of the awarded amount.  

Findings  

It has also been held time and again by this Court that if there are two plausible interpretations of the terms and conditions of the contract, then no fault can be found, if the learned Arbitrator proceeds to accept one interpretation as against the other. In Dyna Technologies (P) Ltd. V. Crompton Greaves Ltd. the limitations on the Court while exercising powers under Section 34 of the Arbitration Act has been highlighted. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various Courts.
In Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam Limited, adverting to the previous decisions of this Court in McDermott International Inc. v. Burn Standard Co. Ltd. And Others and Rashtriya Ispat Nigam Ltd. V. Dewan Chand Ram Saran, wherein it has been observed that an Arbitral Tribunal must decide in accordance with the terms of the contract, but if a term of the contract has been construed in a reasonable manner, then the award ought not to be set aside. 

Judgement  

Therefore, Hon’ble Supreme Court, uphold the decision of the Appellate Court that has restored the findings returned in the arbitral award dated 05th June, 2005 to the effect that the State of Himachal Pradesh had proceeded to terminate the Implementation Agreement before expiry of the prescribed period which could have been extended up to 24 months, reckoned from the “effective date”. The State of H.P. had terminated the Implementation Agreement five months prior to the stipulated period by adopting a distorted interpretation of Clause 4 of the Implementation Agreement, which was impermissible. 

To Read Judgement Download PDF Given Below:

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