The Bombay High Court, in a recent ruling [1], has reaffirmed India’s pro-arbitration stance by emphasising the limited scope of judicial interference with arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996 (“Act”), and by underscoring the Arbitral Tribunal’s primacy in matters relating to appreciation and admissibility of evidence.
The Arbitration Petition arose out of a government contract awarded by the Central Public Works Department (“CPWD”), a government body, for the renovation of a swimming pool. However, owing to the Government’s failure to provide timely drawings, measurements and possession of the site, the progress of the work was adversely affected. Further, due to delays in making payments, the Respondent incurred substantial losses and additional expenditure, which led to the invocation of arbitration and reference of its claims before the Learned Arbitrator appointed in terms of the government contract.
Bridgehead Law Partners, through Ranit Basu, Maitri Malde, Dua Shaikh and Harshada Nirmal, represented the Respondent before the Hon’ble Bombay High Court.
In the arbitral proceedings, the Government contended that the delay in completion of the project was solely attributable to the Respondent. The Respondent, thereafter, filed additional claims in accordance with the procedure prescribed under the agreement. The Learned Arbitrator accepted the said claims for adjudication and subsequently passed a reasoned arbitral award in favour of the Respondent.
The Learned Arbitrator observed that the escalation in costs and inflationary impact arising due to the prolonged duration of the project were directly attributable to the delays caused by the Government. Additionally, the Respondent had raised certain claims before the Learned Arbitrator under the heads of idling of equipment and travelling costs. However, since these claims were not supported by any documentary evidence, the same were categorically rejected by the Arbitral Tribunal.
Aggrieved by the arbitral award, the Union of India filed an Arbitration Petition under Section 34 of the Act before the Hon’ble Bombay High Court, challenging the award on the grounds that the Respondent’s claims were contradictory and that the delay in completion of the project was attributable to the Respondent. The Union further contended that the Arbitrator had erroneously awarded amounts without adequate basis.
The Government in the said arbitral proceedings had sought to challenge the date of completion of the project, which was duly determined by the Arbitrator in view of his power as the master of evidence and on due perusal of the evidence placed on record. Upon a detailed assessment of the evidence placed on record by both parties, the Arbitral Tribunal held that the delay in completion of the works and consequent costs overruns was solely attributable to the Government.
The Hon’ble Bombay High Court in the said ruling delivered by Hon’ble Shri Justice Somasekhar Sundaresan upheld this finding and observed that the Arbitral Tribunal is the sole authority competent to examine issues relating to time overruns and escalation of costs. While adjudicating the petition filed under Section 34 of the Arbitration and Conciliation Act, 1996, the Hon’ble Bombay High Court carefully examined whether the challenge satisfied the statutory ingredients prescribed under the said provision being –
- Patent illegality
- Invalidity of the arbitration agreement
- Improper notice of invocation of arbitration agreement
- A dispute not contemplated by or falling outside the terms and scope of submission to arbitration;
- Composition of the Arbitral Tribunal being in contravention with the agreement between the parties; and
- Contravention of the public policy of India
In the said order, the Hon’ble High Court placed reliance on several judicial precedents to reiterate that an arbitral award cannot be interfered with in a casual or routine manner, as such interference would defeat the very purpose of arbitration as an alternative dispute resolution mechanism.
The Hon’ble High Court noted that the Arbitral Tribunal had properly appreciated the evidence and that its conclusions were supported by the record. It was further observed that the Tribunal’s rejection of certain claims due to absence of documentary proof demonstrated due application of mind and a balanced approach.
The Court further observed that it falls squarely within the jurisdiction of the Arbitral Tribunal to assess the quantum of damages based on the evidence produced before it, and that such findings cannot be interfered with unless they fall within the ingredients prescribed under Section 34 of the Act.
In conclusion, the Hon’ble Court held that the challenge failed to satisfy the statutory requirements under Section 34 of the Act, and reiterated that a court exercising jurisdiction under Section 34 does not act as an appellate forum to re-appreciate evidence or review the merits of an arbitral award.
For more information about the aforesaid order or its implications you may write to us at: solutions@bridgeheadlaw.com.
Ranit Basu | Partner
Harshada Nirmal | Associate
Views expressed are personal to the authors and do not constitute as legal advice.
[1] Bombay High Court, Principal Bench – Arbitration Petition no. 1106 of 2016.