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2025 Supreme(Kar) 890
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
V. KAMESWAR RAO, S. RACHAIAH, JJ.
M/s Larsen And Toubro Limited - Appellant
Versus
M/s Bangalore Metro Rail Corporation Limited - Respondent
COMAP No. 526 of 2022
Decided on : 20-05-2025
For the Appellant :SRI. ANIRUDH KRISHNAN, SRI. RAMKRISHORE KARANAM AND SMT. GARIMA KIRTI, ADVOCATES FOR SRI. NISCHAL DEV B R, ADVOCATE)
For the Respondent:SRI. K ARAVIND KAMATH, SENIOR COUNSEL FOR SRI. BALA NIKIT AND SRI. K N NAGARAJ, ADVOCATES)
An arbitrator's award exceeding contractual limits or ignoring specific no-damage clauses leads to jurisdictional error; parties must adhere to contract terms for claims on damages.
Headnote:(A) Commercial Courts Act, 2015 - Section 13(1A) - Arbitration and Conciliation Act, 1996 - Section 37 - Appeal challenging partial allowance of suit under Section 34 - Award setting aside Rs.28,74,82,181/- for delay-related losses. (Paras 1-3, 18, 27, 30, 32-34)
(B) Jurisdiction of arbitrator - Arbitrator must act within the contract's terms; any award violating contract terms stands outside jurisdiction. (Paras 22-23, 25-26, 31-32, 52)
(C) Notice to claim compensation - Requirement to inform employer about claims during contract extensions is essential and cannot be ignored. (Paras 11, 39-41, 51-54)
(D) Fundamental policy of Indian law - Breach of contract terms by award leads to interference under Section 34 of the Act. (Paras 36-37, 56-57, 58-59)
Facts of the case:
The appellant was awarded partial claims for losses from delays in a contract for constructing elevated metro stations, which the Sessions Judge set aside based on contractual terms prohibiting damages for delays.
Findings of Court:
The Court upheld the Sessions Judge's decision, emphasizing the binding nature of contract terms and arbitration jurisdiction limitations.
Issues: Whether the learned Sessions Judge was justified in setting aside the arbitral award concerning compensation for delays and applicable contract clauses.
Ratio Decidendi: The Court ruled that the arbitrator's disregard for explicit contractual terms, including compensation clauses, indicated a jurisdictional error necessitating interference by the Sessions Judge.
Result: The appeal was dismissed.
JUDGMENT :
V. KAMESWAR RAO, J.
This is an appeal filed under Section 13(1A) of the COMMERCIAL COURTS ACT , 2015 read with Section 37 of the Arbitration and Conciliation Act, 1996 (‘Act of 1996’ in short) challenging the order dated 28.10.2022 in Com.A.S.No.141/2018 passed by the Court of LXXXIII Additional City Civil and Sessions Judge, Bengaluru, (‘Sessions Judge’ in short) whereby the learned Sessions Judge has allowed the suit partially, which was filed under Section 34 of the Act of 1996.
2. The said suit under Section 34 of the Act of 1996 was filed by the respondent herein challenging the Arbitration Award dated 30.04.2018, whereby the learned Sessions Judge has stated as under:
“ORDER
Arbitration Suit filed under Section 34 of the Arbitration & Conciliation Act by the plaintiff employer is partly allowed on following terms.
The award of the learned Arbitral Tribunal dated 30/4/2018, as regards awarding of Rs.28,74,82,181/- on the basis of its finding on issue No.1(d) towards loss suffered by the contractor on account of delay is set aside.
Arbitration suit challenging award with regard to other findings and award on other claims and counter claims is dismissed.”
3. Suffice to state, that the suit filed under Section34 of the Act of 1996 was partially allowed and the award of the Arbitral Tribunal dated 30.04.2018 as regards grant of Rs.28,74,82,181/- on the basis of its finding on Issue No.1(d) towards the loss suffered by the appellant herein on account of delay, is set aside.
4. The subject matter of the appeal is primarily a contract entered between the parties for construction of three elevated Metro Stations at Yeshwanthpur, Soap Factory and Mahalaxmi Stations. The respondent herein accepted the tender vide Letter of Acceptance dated 05.06.2009. An agreement was also entered on 21.12.2009 for the execution of the works. The contract period was for 22 months. The execution of the project is governed by various contracts entered into between the parties including the General Conditions of Contract (in short ‘GCC’) and the Special Conditions of Contract.
5. The relevant facts for the purpose of this appeal shall also include the stipulations that, when the respondent shall consider grant of extension at the end of 22 months, it would not pay any compensation and that despite any grant of extension of time, the contractor should always treat that time is the essence and should take all steps to complete the contract works at the earliest. It was also a contractual condition that, not all drawings would be issued at once and that it would be issued depending upon the actual progress of work at site well in time before commencement of the activity. The land was also to be given progressively depending on the issues of demolition of structures.
6. After the execution of the agreement, the lands were handed over to the appellant as specified in the Letter of Acceptance dated 05.06.2009. The majority of the portion of construction of the three elevated stations came up on the median portion of the road and the land in that regard was handed over progressively. It was the case of the respondent that the remaining 15% of the land at the Soap Factory Station was handed over late due to litigation pending in this Court and thereafter in the Hon’ble Supreme Court till 10.05.2012. The General Consultant conducted meetings at regular intervals and recorded the minutes of the meetings, which were signed by their representatives. It was also the case of the respondent that, the appellant had prepared and submitted the base line program showing plans to complete the project in time. It is a conceded position that five extensions of time were granted by the respondent herein. First extension of time was from 05.04.2011 to 30.11.2011 without liquidated damages and with price variation. The next extension was between 01.11.2011 to 31.05.2012 and the same was without liquidated damages, but price variation frozen as on 30.11.2011. The second ex
