This case came before the Bombay High Court in an appeal against an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996. The appellant argued that the arbitrator had erred in granting compensation to the contractor, even though the contract had clauses that restricted such claims.
The High Court had to decide whether the award suffered from serious legal errors, or whether it was simply a case where the arbitrator had taken a view based on the material before him. The Court also had to keep in mind that under Sections 34 and 37 of the Arbitration Act, courts cannot interfere with an award just because another view is possible.
The dispute arose from a contract between the parties for repair and restoration of 19 minor irrigation tanks in Beed District, Maharashtra. The offer of Respondent for the tender floated was accepted by the Appellant and a work order dated 17 November 2006 was issued. The deadline for the completion of the work allotted was 16 November 2007.
According to the claimant contractor, the department breached the conditions required to be fulfilled under the contract before the work could properly begin, due to which the project took longer than expected and the contractor claimed financial loss.
After trying to resolve the issue through the dispute resolution mechanism provided under the contract, and later through a special civil suit, the matter was transferred to the Commercial Court which further, with the consent of both the parties, referred it to arbitration in 2017.
On 2 February 2019, the arbitral award was delivered under which some claims were rejected, but compensation was granted wherever deemed reasonable including overhead losses, reduced productivity, delayed payments, price escalation, and refund of royalty deductions. In total, around Rs. 10.54 crores was awarded with 12% interest.
The government challenged the award under Section 34, but the Commercial Court dismissed the challenge on 12 April 2022. The present appeal was then filed under Section 37 of the Arbitration and Conciliation Act, 1996.
Legal Issues
Decision
The High Court dismissed the appeal. The Court noted that the government had participated in the arbitration proceedings without raising any objections as to the jurisdiction at the proper stage. As per the court, such objections cannot not be raised later.
On the main issue, the Court observed that the arbitrator had committed no error in examining both the contract and the evidence. The arbitrator was correct to find out that the delay was due to the department’s own actions. Once such a finding was recorded, the department could not rely on restrictive clauses to deny compensation.
The Court made it clear that interpretation of a contract is for the arbitrator to address and decide. Under Sections 34 and 37 of the Act, courts cannot reassess evidence or substitute their own view unless the award is illegal or unreasonable on the face of it. In this case, no such serious defect was found.
Accordingly, the arbitral award was upheld, and the appeal was dismissed.
Case Reference :- Commercial Arbitration Appeal No. 2 of 2022 and Civil Application No. 10992 of 2022 (2JB, Arun R. Pedneker and Vaishali Patil Jadhav JJ., delivered by Arun R. Pedneker, J.)
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