Delhi High Court Modifies Arbitral Award to Correct Computational Error, Cites Landmark Gayatri Balasamy Ruling

New Delhi: In a significant ruling that clarifies the scope of judicial intervention in arbitral awards, the Delhi High Court has held that it can modify an award under Section 37 of the Arbitration and Conciliation Act, 1996, to correct a manifest computational error, even if the specific ground was not raised in the initial challenge under Section 34.

A Division Bench of Justice Anil Khetarpal and Justice Harish Vaidyanathan Shankar relied on the recent five-Judge Constitution Bench judgment in Gayatri Balasamy v. ISG Novasoft Technologies Ltd. to rectify an arithmetical discrepancy in an award arising from a construction dispute.

Background of the Dispute

The case, Jagdish Kaur vs Jasbir Singh Sandhu & Ors. , originated from a 2010 agreement for the construction of a residential property. Disputes arose when the property owner, Jagdish Kaur (Appellant), alleged that the contractor, Jasbir Singh Sandhu (Respondent No. 1), abandoned the work midway.

The matter was referred to arbitration, where the contractor claimed outstanding payments, and the owner filed counter-claims for incomplete work and overpayment. The Arbitrator, in an award dated June 5, 2020, made two crucial findings:

1. The total value of the work executed by the contractor was Rs. 65,44,049 .

2. The total payment received by the contractor from the owner was Rs. 68,00,000 .

Despite finding that the owner had overpaid the contractor by Rs. 2,55,951 , the Arbitrator failed to adjust this amount and instead awarded a sum of Rs. 7,88,965 to the contractor. The owner's challenge to this award under Section 34 was dismissed by the District Judge. The owner then appealed to the High Court under Section 37.

Arguments Before the High Court

The Appellant argued that the award suffered from a "patent illegality" due to the glaring failure to adjust the overpaid amount.

The Respondent contended that this ground of arithmetical error was never pleaded in the Section 34 petition and, therefore, could not be introduced at the appellate stage under Section 37, which has a very limited scope of interference.

High Court's Analysis: The Impact of Gayatri Balasamy

The High Court began its analysis by acknowledging the well-settled principle that the scope of judicial interference under Section 37 is even narrower than under Section 34. However, the Bench noted that this strict view was "significantly eased and modified" by the Supreme Court's Constitution Bench in Gayatri Balasamy .

The Court highlighted that the Gayatri Balasamy judgment empowers courts to modify an arbitral award in specific, narrowly defined circumstances. The High Court quoted the landmark ruling:

> "We affirm that a Court reviewing an award under Section 34 possesses the authority to rectify computational, clerical, or typographical errors, as well as other manifest errors, provided that such modification does not necessitate a merits-based evaluation."

Applying this precedent, the Bench found that the Arbitrator's failure to reconcile the payments received with the value of work executed was a "manifest error" and a "computational discrepancy" apparent on the face of the record.

The Court reasoned:

> "This inconsistency arises not from any interpretative exercise or re-appreciation of evidence but from a manifest error, with regard to the computation of the resulting liability, that is self-evident upon comparing the numerical findings recorded in the Award. Such a computational discrepancy, being objectively demonstrable from the Award itself, constitutes an error apparent on the face of the record."

The Court concluded that this mathematical inconsistency fell squarely within the category of correctable arithmetical errors, enabling it to modify the award without re-evaluating the merits of the dispute.

Final Judgment and Modification

The High Court partly allowed the appeal and modified the arbitral award. It directed that the overpayment of Rs. 2,55,951 be adjusted against the sum awarded to the contractor.

Accordingly, the final amount payable to the contractor was reduced from Rs. 7,88,965 to Rs. 5,33,014 , along with interest. The other parts of the award, including costs and the owner's successful counter-claims, were left undisturbed.