Background
The Madras High Court in Chief Engineer, Metropolitan Transport Project (Railways) v. Engineering Products (I) Limited, 2025, dated 23rd September 2025, by Justice N. Anand Venkatesh, considered cross petitions instituted under Section 34 of the Arbitration and Conciliation Act, 1996. The issue was concerning a construction contract entered into by the Southern Railways with Engineering Products (I) Limited to execute pile foundations and reinforced concrete work at Kotturpuram Station under the MRTS Phase II project from Thirumalai to Velachery. The contract worth ?5.52 crores was accepted and was to be completed by 2001. The project, however, was delayed a number of times, mostly due to the non-availability of drawings and site conditions, and was finally completed on 10th November 2004.
When disputes arose regarding claims and recoveries, an arbitral tribunal rendered an award on 17th November 2014. Both sides challenged different segments of this award to the High Court. The contractor initiated an Arbitration against the rejection or partial allowance of various claims. Meanwhile, the Railways instituted suit challenging the allowance of certain claims, including idle machinery, loss of business, and compensation under certain heads.
Claims before the Tribunal
In the arbitral tribunal, the contractor had made many claims, such as price escalation over the prolonged period, extra coffer dam work, idle machinery and labour, refund of recoveries, loss of profits, and delay compensation. The Railways, on the other hand, put in counterclaims and disclaimed liability, alleging that the majority of the delays were due to the inefficiency of the contractor.
The tribunal held the contractor entitled to price escalation under the Price Variation Clause as the delay was not solely the contractor's responsibility, and it granted ?9,24,035. It also granted ?12,51,604 for extra coffer dam work after establishing that such work was technically essential. For idle boring, ?9,17,952 was granted as a claim, and for idle machinery, ?4,09,659 was granted as compensation. Claims for idle labour, loss of business chances, and excess work were all turned down for lack of documentary evidence. Recovery of gunny bags was found to be not justified, and an award of ?2,95,964 was granted, and partial relief of ?2,72,829 was granted for excess recovery of cement due to joint responsibility. On loss of interest on overdue payment and profit, limited compensation alone was granted, but interest on the final bill and deposit security was refused under Clause 16(3) of the General Conditions of Contract, which specifically excluded interest.
Main law point
In the High Court, the contractor contended that the tribunal's conclusions on main claims were perverse and incomprehensible, to maintain that the award was not intelligible and reasonable. It argued that the tribunal had disregarded critical evidence and relied on an inconsistent rationale in rejecting or limiting valid claims. The Railways, in contrast, upheld the reasoning of the tribunal but prayed for the intervention of the grant of compensation under Claims 5, 8, and 12, contending that such awards were disproportionate and lacked any contract support.
Decision
The court on hearing both parties and perusing the arbitral record, reaffirmed that the ambit of interference under Section 34 of the Arbitration and Conciliation Act is very narrow. A court acting under Section 34 should not reappreciate evidence or impose its own opinion in place of the arbitrators'. The court can only intervene if the award is illegal, or against the policy of Indian law.
Accordingly, both the contractor’s and the Railways’ petitions were dismissed, and the arbitral award was upheld in its entirety.
Case Reference: In the High Court of Madras OP No. 60 of 2018 & Arb O.P(COM. DIV.) No. 77 of 2021, OP No. 60 of 2018 and ARB O.P(COM. DIV.) No. 77 of 2021 Decided on September 23, 2025, [Reserved on : 19.09.2025]
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