| |

Supreme Court Sets Aside High Court’s Order in Arbitration Dispute Between NHPC and Patel Engineering

The Supreme Court of India recently delivered a significant ruling in the case of NHPC Limited vs. M/s. Patel Engineering Limited, addressing the scope of post-award relief under Section 9 of the Arbitration and Conciliation Act, 1996. The case revolved around the High Court’s direction for NHPC to release the awarded sum while the limitation period for challenging the award was still ongoing.

The Supreme Court’s decision underscores the importance of ensuring that the rights of the parties under arbitration law are not prematurely curtailed.

Background of the Case

The arbitration dispute arose when an arbitral tribunal made an award on 22 April 2016. The tribunal subsequently disposed of applications under Section 33 on 4 June 2016. This meant that NHPC had time until 3 September 2016 to challenge the award under Section 34 of the Act.

However, the respondent, Patel Engineering, filed an application under Section 9 on 13 June 2016, seeking enforcement of the award even before the limitation period for filing a challenge had expired. The Punjab and Haryana High Court, through its order dated 22 August 2016, directed NHPC to release the awarded sum along with interest, subject to Patel Engineering providing a bank guarantee for one year.

Petitioner’s Arguments (NHPC Limited)

The legal counsel for NHPC challenged the High Court’s decision on the following grounds:

  • The Section 9 application was premature since the limitation period for challenging the arbitral award under Section 34 was still valid.
  • The High Court acted beyond its jurisdiction by directing NHPC to make payments before the award had attained finality.
  • The court’s order was contrary to the settled legal principle that enforcement measures should not be ordered before the challenge period had lapsed.

Respondent’s Arguments (Patel Engineering Limited)

Patel Engineering, in its defense, argued that:

  • The awarded sum was due and payable, and NHPC was attempting to delay compliance with its obligations.
  • The requirement of providing a bank guarantee as directed by the High Court adequately protected NHPC’s interests.
  • The application under Section 9 was legally permissible to secure the awarded amount in case NHPC attempted to evade payment.

Supreme Court’s Judgment

A bench comprising Justice Dr. Dhananjaya Y. Chandrachud and Justice M.R. Shah examined the case and noted that the High Court’s decision was flawed. During the hearing, it was brought to the Court’s attention that the arbitral award had been set aside on 29 November 2018 by the Special Commercial Court in Gurugram. As a result, the foundation on which the High Court had passed its order ceased to exist.

The Supreme Court, in its ruling, observed:

“Since the arbitral award has been set aside, the basis on which the impugned order was passed by the High Court ceases to survive.”

Accordingly, the Court set aside the High Court’s order dated 22 August 2016. It further clarified that this judgment should not be interpreted as a determination on the correctness of the High Court’s ruling but was merely a consequence of the award being set aside.

Final Outcome

The appeal was allowed, and the Supreme Court’s decision effectively nullified the High Court’s direction to NHPC. The ruling ensures that interim relief under Section 9 is not misused to preemptively enforce an award before the challenge period expires.

Conclusion

This judgment strengthens the framework for arbitration proceedings in India by reaffirming the principle that an award cannot be enforced while it remains subject to judicial review. It serves as a crucial precedent for ensuring due process in arbitration enforcement.


Petitioner Name: NHPC Limited.
Respondent Name: M/s. Patel Engineering Limited.
Judgment By: Justice Dr. Dhananjaya Y. Chandrachud, Justice M.R. Shah.
Judgment Date: 30-11-2018.

Don’t miss out on the full details! Download the complete judgment in PDF format below and gain valuable insights instantly!

Download Judgment: NHPC Limited vs Ms. Patel Engineeri Supreme Court of India Judgment Dated 30-11-2018.pdf

Direct Downlaod Judgment: Direct downlaod this Judgment

See all petitions in Arbitration Awards
See all petitions in Enforcement of Awards
See all petitions in Dispute Resolution Mechanisms
See all petitions in Judgment by Dhananjaya Y Chandrachud
See all petitions in Judgment by Mukeshkumar Rasikbhai Shah
See all petitions in allowed
See all petitions in Quashed
See all petitions in supreme court of India judgments November 2018
See all petitions in 2018 judgments

See all posts in Arbitration and Alternate Dispute Resolution Category
See all allowed petitions in Arbitration and Alternate Dispute Resolution Category
See all Dismissed petitions in Arbitration and Alternate Dispute Resolution Category
See all partially allowed petitions in Arbitration and Alternate Dispute Resolution Category

Similar Posts