NAVIN CHAWLA, J
1.  This petition under Section 34 of the Arbitration and Conciliation Act 1996 (hereinafter referred as to the ‘Act’) has been
filed challenging the Arbitral Award dated 31.12.2014 passed by the Arbitral Tribunal adjudicating the disputes that have arisen
between the parties in relation to the non-payment of Engineer’s Final Account Certificate (IPC-73) by the petitioner in relation to
the work of ""Six Laning of km.556.00 to km.539.00 and km.535.00 to km. 527.00 of Hyderabad-Bangalore Section of NH-7 in the
State of Karnataka"" (Contract Package No. NS-24/KN)â€.
2. The above referred work had been awarded to the respondent by the petitioner vide Contract Agreement dated 30.08.2001. The
Schedule Date of Completion of the work was 18.03.2004, but was actually completed on 04.04.2008. The date of submission of all the
final account bills by the respondent was 02.04.2009 and the Engineer appointed by the petitioner issued the Final Payment Certificate
on 02.12.2009.Â
3. It is an admitted case between the parties that from the date of submission of the Final Payment Certificate by the Engineer i.e.
02.12.2009 to 05.09.2012, neither did the petitioner raise any grievance regarding the Final Payment Certificate submitted by the
Engineer nor make any payment on account of the same as the question of extension of time was pending consideration with the
petitioner. Finally, the petitioner made part payment to the respondent on 14.03.2013 making certain deductions from the final amount
certified by the Engineer.
4. It is the case of the petitioner that as the Final Payment Certificate issued by the Engineer was not accompanied by the standard
measurement book but was based on certain computer generated sheet, the Final Payment Certificate was not accepted by the
petitioner and the petitioner revised the quantity of the work done by the respondent based on the standard measurement book while
arriving at the final figure of the amount paid to the respondent. This was challenged before the Arbitral Tribunal by the respondent
contending that the Final Payment Certificate issued by the Engineer is final and binding on the petitioner and cannot be challenged by
it.Â
5. The Arbitral Tribunal in its Impugned Award has accepted the said contention and therefore, directed the petitioner to make
payment in accordance with the Final Payment Certificate issued by the Engineer, except revising it with respect to the items of MS
railing and masonry drains.
6. Learned counsel for the petitioner submits that the Arbitral Tribunal has erred in its findings and has not appreciated that the
petitioner was not bound by the Final Payment Certificate issued by the Engineer as it was not based on the standard measurement
book but was based on some computer generated sheet.Â
7. To consider this argument one would have to take note of certain Clauses of the Agreement between the parties. Clause 1.1 of the
conditions of contract defines the term Engineer as under:-
“1.1 Terms which are defined in the Contract Data are not also defined in the Conditions of contract but keep their defined
meanings. Capital initials are used to identify defined terms.
“The Engineer is the person named in the Contract Data (or any other competent person appointed and notified to the Contractor to
act in replacement of the Engineer) who is responsible for supervising the Contractor or administering the Contract,
certifying payments due to the Contractor, issuing and valuing Variation to the Contract, awarding extensions of time, andÂ
valuing the Compensation Events.
(Emphasis supplied)â€
8. Clause 4 deals with Engineer’s decision and is reproduced herein below:-
“Except where otherwise specifically stated, the Engineer will decide contractual matters between the Employer and the Contractor
in the role representing the Employer.â€
(Emphasis supplied)
9. Clause 43.1 in the Special Condition of Contract as amended by the Contract Data provides for the Employer’s Obligation to pay
to the Contractor, amount certified by the Engineer, less the payments already made, within 28 days of the date of each certificate. The
said clause is reproduced hereinunder:-Â
“(Clause 43.1 (As substituted as per item No.25 of Contract Data): Payments shall be adjusted for deductions for advance
payments, retention, other recoveries in terms of the contract and taxes at source, as applicable under the law Within 7 days of the
submission of the monthly statement to the Employer, the Employer shall pay 75% of the net payable amount, subject to deduction and
taxes as applicable under the law. The Employer shall pay the Contractor the amounts certified by the Engineer, less the payments
already made, as above, within 28 days of the date of each certificate. If the Employer makes a late payment, the Contractor shall be
paid interest on the late payment in the next payment. Interest shall be calculated from the date by which the payment should have
been made upto the date when the late payment is made at 12% per
annum.                                                  Â
(Emphasis supplied)â€
10. Clause 43.2 states that if the amount certified is increased in a later certificate as a result of an award by the Dispute Review
Expert or an Arbitrator, the Contractor shall be paid interest upon the delayed payment as stipulated in Clause 43.1. This would show
that it is only the Contractor who can be aggrieved of a decision or a certificate issued by the Engineer.
11. Clause 57.1 relates to the final accounts and indicates that the decision of the engineer shall be final in this regard. The same is re-
produced herein below:-
“The Contractor shall supply to the Engineer a detailed account of the total amount that the Contractor considers payable under the
Contract before the end of the Defects Liability Period. The Engineer shall issue a Defect Liability Certificate and certify any final
payment that is due to the Contractor within 56 days of receiving the Contractor's account if it is correct and complete. If it is not, the
Engineer shall issue within 56 days a schedule that states the scope of the corrections or additions that are necessary.
If the Final Account is still unsatisfactory after it has been resubmitted, the Engineer shall decide on the amount payable to the
Contractor and issue a payment certificate, within 56 days of receiving the Contractor's revised account.â€
12. It is not the case of the petitioner that there is any term in the contract which mandates that the Engineer must base its Final
Payment Certificate on the standard measurement book maintained at the site. It is also not the case of the petitioner that the Engineer
has acted fraudulently or in connivance with the respondent regarding the joint measurement and in preparation of the Final Payment
Certificate.
13. In light of the above Clause(s) of the Agreement, the Arbitral Tribunal in its Impugned Award has held as under:-
“17.4 As per GCC sub clause 1.1, the Engineer is responsible for supervising the Contractor, administering the Contract, certifying
payments due to the Contractor, issuing and valuing Variation to the Contract, awarding extensions of time and valuing the
Compensation Events. As per substituted clause in the Contract Data of GCC sub clause 43.1, the Respondent shall pay the Claimant
the full amounts certified by the Engineer within 28 days. From these provisions of the Contract, it is clear that there is no option for the
Respondent to reduce or increase the amount certified by the Engineer. If need be, the Respondent can obtain the clarification from the
Engineer if any on his certifications. If any amounts are reduced by the Respondent while paying the amounts, the Claimant is eligible
for interest at 12% per annum as per substituted GCC sub clause 43.1
17.5 AT also observed that the Engineer has certified the final certificate on 02.12.2009. The Respondent requested the Engineer for
attending the joint meeting, after a gap of about three years, on 19.11.2012 vide their letter dated 16.11.2012, whereas, the Respondent
has to pay full payment within 28 days of Engineer’s certification as per GCC, sub-clause 43.1 i.e. by 30.12.2009.
17.6 From the submissions made by the Respondent, AT has observed that the quantities have been reduced by the Respondent from
the certified quantities by the Engineer. This is not in accordance with the Contract provisions. In view of the clear provision in the
Agreement, AT is unable to accept the Respondent’s delayed action and arguments in proposing to reduce the quantities in some
of the items which were verified by the Engineer based on the joint measurement and certified in accordance with GCC sub clause
57.1. The Respondent can make arithmetic corrections if any, but cannot alter the basic measurements which were taken jointly by the
Claimant and the Engineer based on the RFI approved and after a long interval.
17.7 The arguments of the Respondent for reducing the quantity for the items 1.02(g), 2.01 (c), 2.02 (a), 2.03, 2.04, 2.15, 4.05(a),
4.05(b), 5.12, 6.01 (i) and 6.10 are not as per the contract provisions. As such AT is unable to accept the arguments put forth by the
Respondent.
17.8 In view of the above findings, the AT allows the quantities certified by the Engineer.
17.9 Respondent has objected for payment of the price adjustment for the works carried in the DLP except for the items of MS railing
and masonry drains. Whereas, the Engineer has allowed price adjustment for all the items of work carried during the DLP freezing the
indices prevailing as on March 2008. There is a mistake in adopting the indices for steel component. The Engineer adopted indices of
iron and steel instead of bars and rods as provided in the Agreement. The Claimant submitted revised price adjustment calculations
adopting the indices of bars and rods. This is allowed a per Contract provision.â€
14. In Associate Builders vs. DDA (2015) 3 SCC 49, Supreme Court has laid down the parameters within which an Arbitral Award
can be scrutinized by the Court under Section 34 of the Act and has inter-alia held as under:-
42.3. (c) Equally, the third subhead of patent illegality is really a contravention of Section 28(3) of the Arbitration Act, which reads as
under:
“28. Rules applicable to substance of dispute. (1)-(2) (3) In all cases, the Arbitral Tribunal shall decide in accordance with the terms
of the contract and shall take into account the usages of the trade applicable to the transaction.â€
This last contravention must be understood with a caveat. An Arbitral Tribunal must decide in accordance with the terms of the
contract, but if an arbitrator construes a term of the contract in a reasonable manner, it will not mean that the award can be set aside
on this ground. Construction of the terms of a contract is primarily for an arbitrator to decide unless the arbitrator construes the
contract in such a way that it could be said to be something that no fair-minded or reasonable person could do.
43. In McDermott International Inc. v. Burn Standard Co. Ltd.,(2006) 11 SCC 181 this Court held as under:Â (SCC pp. 225-26, paras
112-13)
“112. It is trite that the terms of the contract can be expressed or implied. The conduct of the parties would also be a relevant
factor in the matter of construction of a contract.  The construction of the contract agreement is within the jurisdiction of the
arbitrators having regard to the wide nature, scope and ambit of the arbitration agreement and they cannot be said to have misdirected
themselves in passing the award by taking into consideration the conduct of the parties. It is also trite that correspondences
exchanged by the parties are required to be taken into consideration for the purpose of construction of a contract. Interpretation of a
contract is a matter for the arbitrator to determine, even if it gives rise to determination of a question of law. [See Pure Helium India
(P) Ltd. v. Oil and Natural Gas Commission, (2003) 8 SCC 593:2003 Supp (4) SCR 561 and D.D.Sharma v. Union of India.] (2004) 5
SCC 325.
113. Once, thus, it is held that the arbitrator had the jurisdiction, no further question shall be raised and the court will not exercise its
jurisdiction unless it is found that there exists any bar on the fact of the award.â€
44. In MSK Projects (I) (JV) Ltd. v. State of Rajasthan, (2011)10 SCC 573: 2012 3 SCC (Civ) 818, the Court held : (SCC pp. 581-
82, para 17)
“17. If the arbitrator commits an error in the construction of the contract, that is an error within his jurisdiction. But if he wanders
outside the contract and deals with matters not allotted to him, he commits a jurisdictional error. Extrinsic evidence is admissible in such
cases because the dispute is not something which arises under or in relation to the contract or dependent on the construction of the
contract or to be determined within the award. The ambiguity of the award can, in such cases, be resolved by admitting extrinsic
evidence.  The rationale of this rule is that the nature of the dispute is something which has to be determined outside and
independent of what appears in the award. Such a jurisdictional error needs to be proved by evidence extrinsic to the award. (See
Gobardhan Das v. Lachhmi Ram, AIR 1954 SC 689, Thawardas Pherumal v. Union of India, AIR 1955 SC 468, Union of India v.
Kishorilal Gupta & Bros.,AIR 1959 SC 1362, Alopi Parshad & Sons Ltd. v. Union of India, AIR 1960 SC 588, Jivarajbhai Ujamshi
Sheth v. Chintamanrao Balaji, AIR 1965 SC 214 and Renusagar Power Co. Ltd. v. General Electric Co. (1984) 4 SCC 679: AIR 1985
SC 1156)â€Â
45. In Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran, (2012) 5 SCC 306, the Court held: (SCC pp. 320-21, paras 43-45)
“43. In any case, assuming that Clause 9.3 was capable of two interpretations, the view taken by the arbitrator was clearly a
possible if not a plausible one. It is not possible to say that the arbitrator had travelled outside his jurisdiction, or that the view taken by
him was against the terms of contract. That being the position, the High Court had no reason to interfere with the award and substitute
its view in place of the interpretation accepted by the arbitrator.
44. The legal position in this behalf has been summarised in para 18 of the judgment of this Court in SAIL v. Gupta Brother Steel
Tubes Ltd. [(2009) 10 SCC 63: (2009) 4 SCC (Civ) 16] and which has been referred to above. Similar view has been taken later in
Sumitomo Heavy Industries Ltd. v. ONGC Ltd. [(2010) 11 SCC 296: (2010) 4 SCC (Civ) 459] to which one of us (Gokhale, J.) was a
party. The observations in para 43 thereof are instructive in this behalf.
45. This para 43 reads as follows: (Sumitomo case [(2010) 11 SCC 296 : (2010) 4 SCC (Civ) 459] , SCC p. 313)
43. … The umpire has considered the fact situation and placed a construction on the clauses of the agreement which according to him
was the correct one. One may at the highest say that one would have preferred another construction of Clause 17.3 but that cannot
make the award in any way perverse. Nor can one substitute one's own view in such a situation, in place of the one taken by the
umpire, which would amount to sitting in appeal. As held by this Court in Kwality Mfg. Corpn. v. Central Warehousing Corpn. [(2009)
5 SCC 142 : (2009) 2 SCC (Civ) 406] the Court while considering challenge to arbitral award does not sit in appeal over the findings
and decision of the arbitrator, which is what the High Court has practically done in this matter. The umpire is legitimately entitled to
take the view which he holds to be the correct one after considering the material before him and after interpreting the provisions of the
agreement. If he does so, the decision of the umpire has to be accepted as final and binding.â€
15. Applying the above parameters, I do not find any merit in the challenge made by the petitioner to the above findings of the Arbitral
Tribunal, which are based on the interpretation of the contract and which cannot be said to be unreasonable or perverse.
16. The contention raised by the learned counsel for the petitioner is that the general practice followed in all contracts of NHAI is to
pass the Final Payment Certificate on the Measurement Books maintained at the site. This may be so, however, as long as joint
measurements carried out by the Engineer are not stated to be fraudulent and were not questioned by the petitioner within a reasonable
time as provided in the agreement, in fact, not challenged till almost two years of its submission, the petitioner cannot be heard to
challenge the same.
17. Learned counsel for the petitioner next contended that the respondent has been allowed escalation/price adjustment even in the
work carried out in the Defect Liability Period. I did not find any merit in the said submission.
18. The Arbitral Tribunal in paragraph 17.9 of the Impugned Award has recorded that the Engineer had allowed price adjustment for
all the items of work carried during the Defect Liability Period freezing the indices prevailing on March, 2008. Admittedly, the period
for completion of work has been extended by the petitioner itself till March, 2008, therefore, there is no question of any price
adjustment being given to the petitioner for the period thereafter even in the Impugned Award.
19. In view of the above, I find no merit in the present petition and the same is accordingly dismissed with no order as to costs. Â
