2023 Supreme(SC) 1066

SUPREME COURT OF INDIA
S. RAVINDRA BHAT, DIPANKAR DATTA, JJ.
M/s Unibros - Appellant
Versus
All India Radio - Respondent
Civil Appeal No. 6895 of 2023 [Arising out of SLP (Civil) No. 8791 of 2020]
Decided On : 19-10-2023

IMPORTANT POINTS
(1) Setting aside arbitral award – Claim for damages, whether general or special, cannot as a matter of course result in an award without proof of claimant having suffered injury.
(2) Binding Precedent – Judicial decision of a superior court, which is binding on an inferior court, has to be accepted with grace by inferior court notwithstanding that decision of superior court may not be palatable to inferior court – This principle, ex proprio vigore, would be applicable to an Arbitrator.

Headnote:

(A) Arbitration and Conciliation Act, 1996 – Sections 34 and 37 – Setting aside arbitral award – Claim for damages, whether general or special, cannot as a matter of course result in an award without proof of claimant having suffered injury – Appellant's claim for loss of profit is primarily based on the grounds that appellant, having been retained longer than period stipulated in contract and its resources being blocked for execution of work relatable to contract in question, it could have taken up any other work order and earned profit elsewhere – Second Award fares no better than First Award, for, it is equally in conflict with public policy of India – Factors which weighed in Arbitrator’s mind in first round and second round are one and same – Judicial decision of a superior court, which is binding on an inferior court, has to be accepted with grace by inferior court notwithstanding that decision of superior court may not be palatable to inferior court – Any award of an Arbitrator or a Tribunal that seeks to overreach a binding judicial decision, does conflict with fundamental public policy and cannot sustain – Arbitral award in question, is patently illegal in that it is based on no evidence and is outrightly perverse – Appeal dismissed. (Paras 8, 13, 20 and 21)

(B) Judicial Discipline – Binding Precedent – Judicial decision of a superior court, which is binding on an inferior court, has to be accepted with grace by inferior court notwithstanding that decision of superior court may not be palatable to inferior court – This principle, ex proprio vigore, would be applicable to an Arbitrator and a multi-member arbitral tribunal as well, particularly when it is faced with a judicial decision (either under Section 34 or Section 37 of Arbitration and Conciliation Act, 1996) ordering a limited remand. (Para 14)

(C) Arbitration and Conciliation Act, 1996 – Sections 34 and 37 – Setting aside arbitral award – Hudson’s formula – For claims related to loss of profit, profitability or opportunities to succeed, one would be required to establish four conditions: first, there was delay in completion of contract; second, such delay is not attributable to claimant; third, claimant’s status as an established contractor, handling substantial projects; and fourth, credible evidence to substantiate claim of loss of profitability. (Paras 18 and 19)

Facts of the case:

Appeal is directed towards dismissal of appellant's claim for compensation relating to loss of profits (Claim No. 12). Appellant's claim for loss of profit stems from delay attributed to respondent in completing project. Loss of profit sought in present case is primarily based on the grounds that appellant, having been retained longer than period stipulated in contract and its resources being blocked for execution of work relatable to contract in question, it could have taken up any other work order and earned profit elsewhere.

Findings of Court:

Factors which weighed in Arbitrator’s mind in first round and second round are one and the same. To avoid any charge of being branded as a mirror image of First Award insofar as Claim No.12 is concerned, Second Award appears to have been expressed in language and form different from earlier one without, however, there being any change in substance.

Result : Appeal dismissed.