|Name of the Case||National Highways Authority of India v. Hindustan Construction Co. Ltd.|
Original Miscellaneous Petition No. 260 of 2015
|Bench||HON’BLE DR. JUSTICE S. MURALIDHAR|
|Court||Supreme Court of India|
Supreme Court has rightly taken a ‘pro-arbitration’ approach which is the need-of-the-hour in India considering delays in enforcement of awards making arbitration a less attractive option. The aim of the introduction of the arbitration regime was to ensure resolution of disputes with timely recovery while they’re being minimum intervention by court proceedings. This is true especially when it comes to foreign investors investing in India via international arbitration treaties. For instance, an Australian company resorted to invoking the jurisdiction of UNCTRAL Tribunal for enforcement of its award due to more than nine years of delay in seeking enforcement of awards in India. Moreover, when it comes to the application of the ‘two bites of cherry’ doctrine, this Court has rightly held that the same cannot be applied in the circumstances of the present case. While Indian courts had earlier taken a similar view, foreign national jurisdictions have arrived at similar conclusions.
Finally, the Supreme Court removed any doubt as to the insolvency proceedings against the insolvency proceedings. The fact that insolvency regime is not a ‘debt enforcement’ regime has been hammered down by the Court so as to provide a clear ratio that applicability of stay orders in no way violates a party’s interests under insolvency regime by highlighting that an application with respect to a disputed debt cannot be admitted by the adjudicating authority (NCLT) under the IBC regime. In other jurisdictions such as the US there exists a bifurcation when it comes to automatic stays on the enforcement of arbitral awards when it comes to bankruptcy proceedings. While domestic awards can be made subject to the automatic stay of the bankruptcy court, foreign awards could not be meted the same unless the foreign party to the proceeding has sufficient contacts with the United States to subject it to in personam jurisdiction in the United States. Thus, the apex court has made a correct decision so as to make India a lucrative site for companies to seek investment opportunities considering the speedier resolution of disputes under the arbitration regime and enforcement of the awards thereunder We now enter the arena of the disputes pressed before us. While NHAI would contend that a binding mutual settlement with regard to the amount payable to HCC and the other claims had been reached, on behalf of HCC it has been urged that several offers made by HCC to settle all disputes between the parties were never accepted by the NHAI. It is further submitted on behalf of HCC that, in any case, it offers each time were predicated on a time-bound payment by the NHAI which never happened. As such no binding settlement was reached or implemented.
They also note the reason advanced on behalf of the respondent-HCC for exploring a negotiated settlement with NHAI. It is pointed out that amounts running into several crores of rupees were the subject matter of the Arbitral Award dated 21 March 2012. The NHAI had not moved a step towards effecting payment of even a single penny towards this amount which was payments towards a contract successfully completed by the respondents. For the reason the respondent is accountable to its shareholders, creditors, banks and several other parties, it was essential for the HCC to have the money in his hands at the earliest. For this reason, the HCC was willing to look at a time-bound resolution and was willing to make a financial sacrifice in a case NHAI effected payment of the agreed amount.
The petitioner (hereafter „NHAI‟) has filed the present petition under Section 34 of the Arbitration and Conciliation Act 1996 (hereafter „the Act‟), inter alia, impugning the Arbitral Award dated 30.11.2015 (hereafter the „impugned award‟) made by the Arbitral Tribunal constituted by Mr. M.P. Singh, Mr. Pradhan and Mr. R.P. Indoria (presiding) (hereafter ‘the Arbitral Tribunal’). The impugned award was made by the Arbitral Tribunal in the context of certain disputes that had arisen between the parties in relation to the contract dated 21.10.2005 (hereafter ‘the agreement’) entered into between the parties for the execution of the project involving four-laming of the National Highway No.28 from KM 92 to KM 135 of Lucknow-Ayodhya Section of the National Highway. Both the parties had entered into the agreement for execution of the project at a contract price of `2,49,95,04,940/-. The project was to be executed within a period of 36 months from the commencement date. The project was inordinately delayed and the respondent (hereafter ‘HCC’) raised certain disputes in reaction. Non-fixation of the appropriate rate for varied works that comply with Clause 52.2 of Conditions of Particular Applications (“COPA”) and the amounts for undertaking the varied works Payment of additional costs incurred in the extended period of contract i.e. from 07.11.2008 to 22.02.2011 in various heads on account of delays/reasons not attributable to the Claimant.”
facts of the Case
The present petition has been filed in order to challenge Section 87 of the Arbitration and Conciliation Act, 1996 bought in by Section 13 of arbitration and conciliation amendment Act, 2019, and repeal of Section 26 of the Act via the Section 15 of the 209 Act. This petition also challenges the provisions under the insolvency and Bankruptcy code, 2016 on the grounds of it being discriminatory towards the petitioner.
Issues in the Case
- Interpretation of Section 36 of 1996 Act- The petitioner start their argue that Section 36 of the Act has been established on the line of Article 36 of UNCITRAL model laws and the explanation of the same in terms of awarding automatic -stay on enforcement of arbitral tribunal has to be re-address in the light recommendations made by 246th law commission report through arbitration and conciliation amendment Act.
- Removal of BCCI judgement
The petitioner argues that the apex court had taken into compensation and dismissed the provision of Section 87. On the grounds of it being contradictory to statement of objects and reasons of the amendment Act 2015. Thus, without a pointed reference to the BCCI judgment removing the basis of the judgment, the legislative cannot pass such the amendment Act, 2019. It was further argued that the failure to remove to bases makes Section 87 unreasonable, excessive and arbitrary thus rends the provision constitutionally infirm. The court disagreed with the petitioner’s argument that a pointed reference to a Supreme Court judgement by the legislature is mandatory to introduce amendments with respect to the same.
- Constitutional challenge to Amendment Act, 2019
The petitioner argued that the 2019 amendment Act violates the very objective of arbitration regime which is to ensure the timely legal remedy in the form of enforceable and binding arbitral awards. Section 87 under the amendment Act, 2019 was introduced with an intention to streamline the conflicting opinions of various high courts in terms of applying Section 26, amendment Act 2015 and due to retrospective application of Section 26
- Constitutional challenge to insolvency and Bankruptcy code
The petitioner brought the court’s attention towards the practical financial hardship such a grant of automatic stat creates on them. In the case where awards are passed by the arbitral tribunals when the dispute arose between the parties and the same is challenged before the courts, the provision of automatic stay leading to remarkable delay in the release of funds to the companies like the petitioners. This case was further argued that even though the financial position of the company is an important yardstick when it comes to determining insolvency but it comes at a later stage during the formulation of the resolution plan.
The Judgement of the Case
- This appeal is preferred by the appellant company ( writ petitioner) against the judgement of the learned single judge dated 20.12.1996 in CWP. 2421/96, dismissing the writ petition.
- The dispute is regarding the acceptance of lenders for laying at 4 Lane road in West Bengal for the National Authority of India with the money given as soft loan by the Asian Development Bank to the union of India.
- The respondents 1to 4 in this appeal are the National Highways Authority of India, the chairman of the said authority, Mr. Yogendra Narain, Union of India, M/s B simian and co. The petitioner company has sought the issuance of a writ of certiorari quashing the letter of acceptance if any issued by the NHAI in favor of the 4th respondent for laying off part of NH-2 Highway in west Bengal.
- Bids were called by the NHAI for contract Ii in West Bengal and the bids could be submitted either for option A or for option B. Petitioner submitted bids for both options petitioner’s was the lowest for option A. The 4th respondent did not submit any bid for option B for cement concrete road as offered by the petitioner, and for that option, petitioner’s bud was lowest and so recommended the same to the ADB.
- During the pendency of the writ petition before the learned single judge, it was desired that the NHAI may find out from the Asian Development Bank because they wanted that the flexible option A of the 4th respondent is accepted by the NHAI. Pursuant thereto the correspondence between the NHAI and Asian Development Bank has been filed. There was a letter dated 9.5.1996 from the Asian development bank to the NHAI stating that the bank would not be able to confirm the award until it had received confirmation on certain aspects relating to the contracts.
- Instructions for Variations The Contractor shall not make any such variation without the instruction of the Engineer. Provided that no instruction shall be required for increase or decrease in the quantity of any work where such increase or decrease is not the result of an instruction given under this Clause but is the result of the quantities exceeding or being less than those stated in the Bill of Quantities.”