PARSA KENTE COLLIERIES LIMITED versus RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LIMITED

Citation: [2019] 8 S.C.R. 728 · Decided: 27-05-2019 · Supreme Court of India · Bench: ARUN MISHRA · Disposal: Case Partly allowed

Cited by 3 judgment(s) · cites 4 · see the full citation network in Lexace

Judgment (excerpt)

A
B
C
D
E
F
G
H
728
SUPREME COURT REPORTS
[2019] 8 S.C.R.
PARSA KENTE COLLIERIES LIMITED
v.
RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LIMITED
(Civil Appeal No. 9023 of 2018)
MAY 27, 2019
[ARUN MISHRA AND M. R. SHAH, JJ.]
Arbitration and Conciliation Act, 1996: s. 37 – Appeal under
– Jurisdiction of the appellate court while considering the award
passed by the arbitrator – Coal Mining and Delivery Agreement
between the appellant and the respondent for supply of coal –
Disputes between the parties, as regards the escalation price, fixed
costs, amount lying in escrow account and cost of construction of
railway siding – Award by arbitrator allowing the claims under the
heads of ‘price adjustment’, ‘fixed costs’ and ‘escrow account’,
however, rejected under the head ‘construction of railway siding’ –
Award confirmed by the commercial court, however, set aside by the
High Court – Justification of – On appeal, held: With respect to
claim no.1-price adjustment/escalation, interpretation by the
arbitrator was both possible as well as plausible – Merely because
some other view could have been taken, the High Court was not
justified in interfering with the interpretation –Though the High
Court observed that the award passed by the arbitrator with respect
to claim no.1 was against the public policy, but there was no element
of public policy – High Court exceeded in its jurisdiction in
interfering with the award passed by the arbitrator as regards claim
no. 1 – With respect to claim no.2-fixed costs, the High Court rightly
set aside the award passed by the arbitrator – Except the CA’s
certificate, no further evidence had been led with respect to actual
loss – On the contrary, in the relevant year the quantity of the coal
lifted by the respondent was much above the fixed quantity – As
regards, claim no.3-escrow account, the object and purpose of
opening the escrow account was to see that the appellant company
fulfils the contract as per the agreement and till the closure of the
coal blocks – It was not open for the appellant to claim the amount
lying in the escrow account, else the object of opening the escrow
account would be frustrated – Thus, with respect to claim no.3-
   [2019] 8 S.C.R. 728
728
A
B
C
D
E
F
G
H
729
escrow account, the High Court rightly held the reasoning is perverse
or so irrational that no reasonable person could have arrived at on
the material/evidence on record – Thus, the order passed by the
High Court as regards claim no. 1 is set aside and the award passed
by the arbitrator with respect to claim no.1 is restored and the order
passed by the High Court setting aside the award with respect to
claim no.2-fixed costs and claim no.3-escrow account is upheld.
Partly allowing the appeal, the Court
HELD: 1.1 So far as the claim with respect to “price
adjustment/escalation” is concerned, the arbitrator held that the
date of commencement of the first operating year for the purposes
of clauses 5.2.2 read with 5.4.3 would be 25.06.2011 and therefore
zero year for the purpose of price escalation has to be 2011-12.
Accordingly, the arbitrator considered the escalated price in F.Y.
2013-14 at Rs.895/- per MT. However, according to the
respondent, as the date of commencement was changed from
25.06.2011 to 25.03.2013, the zero year for the purpose of price
escalation would be 2013-14. Price escalation is permissible under
the contract/agreement itself and there shall be price escalation
every year as per the formulae mentioned in the agreement,
commencing from the date of commencement. However, it is true
that the initial date of commencement, i.e., 25.06.2011 came to
be extended to 25.03.2013 by mutual agreement. However, the
same was due to force majeure as there was a delay of 21 months
in obtaining the forest clearance and environmental clearance.
The price was quoted in the year 2007-08, applicable from 2011.
However, there was a delay in obtaining the forest clearance and
environmental clearance and therefore the date of
commencement of supply came to be changed.  In between there
would be hike in labour charges, transportation charges, etc.
Though the date of commencement of supply was extended, there
was no corresponding amendment in the relevant clauses of the
agreement with respect to price escalation. There was no specific
agreement that in the year 2013, the appellant would supply the
coal at the same price, without any price escalation. Therefore,
considering the overall facts and circumstances of the case and
by

Excerpt shown. Read the full judgment & AI analysis in Lexace.