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Sets Aside Arbitral Awards Over Reliance on Failed Conciliation Talks
In a significant ruling reinforcing the confidentiality of , the has set aside arbitral awards that improperly relied on material from failed conciliation proceedings. Justice Avneesh Jhingan allowed a petition by Eco Green Buildtech Pvt Ltd, quashing both the award and the additional award in its dispute with Vikartan Infrastructure Pvt Ltd over the Sikka Kamya Greens construction project in Greater Noida.
The Dispute and the Attempted Settlement
The conflict arose from a contract for developing Sikka Kamya Greens, valued at ₹53.73 crore, with completion due by . Delays led to claims and counterclaims: Vikartan blamed Eco Green for payment defaults and hindrances, while Eco Green accused Vikartan of abandoning work. After a Memorandum of Understanding failed to resolve matters, arbitration commenced in . During the proceedings, the tribunal attempted conciliation, recording that Eco Green was broadly satisfied with the Local Commissioner’s report and that both parties were hopeful of a settlement. When talks collapsed, the tribunal later used that recorded satisfaction to decide claims.
Why the Court Struck Down the Awards
Justice Jhingan held that the tribunal violated the . Quoting Supreme Court precedents in and , he observed: “In case of an unsuccessful settlement through methods, the confidentiality of such proceedings shall be kept alive… insights of the proceedings shall not be brought to the notice of the court.” The tribunal’s reliance on conciliation material to accept the Local Commissioner’s report and award claims was thus impermissible.
Beyond the confidentiality breach, the court found several damages awards for lack of evidence. The tribunal had granted ₹1.04 crore for idling of rented machinery without proof of actual rent paid, relying solely on its own expertise. Justice Jhingan noted: “The expertise of the tribunal cannot substitute the by the respondent to prove the suffered.” Similarly, the ₹2.84 crore award for additional overheads was based on personal experience and circulars never put to Eco Green, violating . The claim for loss of profit—computed using the —was also set aside, as the formula alone does not obviate the need to prove actual loss, as held in .
The Court’s Final Order
The High Court allowed Eco Green’s petition, setting aside the impugned award and additional award in their entirety. The only claim that survived scrutiny was the refund of Works Contract Tax deducted but not deposited, which the court left undisturbed. The ruling underscores that arbitrators must maintain strict confidentiality of conciliation proceedings and cannot rely on personal expertise to fill evidentiary gaps. It also clarifies that claimants seeking damages for breach must , with formulae serving only as estimation tools.
Justice Jhingan dismissed the petitioner’s challenge to the arbitrator’s mandate, noting that the award was passed within 12 months of pleadings completion. The decision sends a clear message: failed settlement talks cannot later be weaponized in arbitration, and awards lacking evidentiary basis will not withstand judicial scrutiny under .
