Leave us a Message

Calcutta High Court Sets Aside an Arbitral Award Based on Personal Expertise Instead of Evidence

Overview

In this matter, the Calcutta High Court, basically analysed whether an arbitral tribunal can ignore the expert evidence and use its own personal expertise to decide a dispute. The appeal was filed by ITD-ITD CEM Joint Venture after a Single Judge had set aside an award passed in its favour. 

The case was not about who was liable for the damage, but about how an arbitral tribunal should decide a case. The Court had to examine whether relying on personal opinions instead of actual evidence affects the validity of an arbitral award. 

 

Facts of the Case

The dispute arose from a contract given by Kolkata Metro Rail Corporation to ITD for construction of an underground metro tunnel. Tunnel Boring Machines were used to carry out the process.

On 31 August 2019, an incident took place which resulted in the water entering the tunnel. It caused serious damage to the nearby properties and areas. This led to multiple claims as to who was responsible for the incident. 

To investigate the matter, institutions, such as IIT Madras, and IIEST Shibpur prepared expert reports. These reports concluded that the damage occurred due to irresponsible handling of the machines, and included issues such as improper greasing and wrong alignment. These reports were prepared at a later stage because it took some time to retrieve and then examine the machines from the site. 

During the arbitration proceedings, the reports were rejected by the tribunal while stating that they were delayed and appeared that they had been prepared only to support the KMRCs case. The tribunal on its own personal expertise passed an award holding KMRC responsible for the losses. 

This award was further challenged before a Single Judge of the Calcutta High Court under Section 34 of the Arbitration and Conciliation Act. It was set aside on the ground that the tribunal had acted in an improper manner. Aggrieved by the same, the ITD filed an appeal under Section 37 before the division bench of the Calcutta High Court.

 

Legal Issues

  1. Whether a tribunal can ignore the expert evidence and rely on its own personal expertise and understanding. 
  2. Whether using personal expertise violates the basic principles of fairness. 
  3. Whether the arbitral award can be set aside on the basis of being perverse and unreasonable.

 

Decision

The Calcutta High Court held that the arbitral award is unsustainable and upheld the decision of the Single Judge to set it aside. 

It was stated that although the arbitrators have technical expertise when it comes to certain subject matters, they cannot use their personal knowledge instead of relying on actual evidence on record. The decision of the tribunal must be based on evidence produced by the parties and not on assumptions by the tribunal itself. 

It was also held that the tribunal applied different standards while analysing the evidence. The reports submitted by the KMRC were rejected due to delay, even though it was explained by the time required to retrieve and examine the machines. 

Further, the Court held that the tribunal failed to consider the terms of the contract, which clearly stated that the responsibility for any third-party damage would be on the contractor. Ignoring the same made the award perverse, and unreasonable. 

Since the approach of the tribunal wasn’t backed by principles of fairness and proper reasoning, the Court upheld the decision of the Single Judge and held that the award was rightly set aside.