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2013 Supreme(Del) 1704
DELHI HIGH COURT
Manmohan Singh, J.
Goel Construction Co. - Appellant
Versus
Union of India - Resopndent
OMP No. 34 of 2013
Decided On : 02-04-2013
For the Petitioner:Mr. R. Rajappan, Advocate.
For the Respondent: None.
An error in the interpretation of the contract by an arbitrator is within their jurisdiction and not a ground for setting aside the award.
Headnote:
Arbitration & Conciliation Act, 1996 - Section 34 - The court emphasized the limited scope of Section 34, which only allows setting aside an award on specified grounds. The court cited precedents to support the principle that an error in the interpretation of the contract by the arbitrator is within their jurisdiction and not a ground for setting aside the award.
Fact of the Case:
The petitioner filed objections challenging an arbitration award. The petitioner had executed a contract with the respondent for construction work, but the work was terminated prematurely. The petitioner raised multiple claims before the arbitrator, who awarded a sum of money to the petitioner. The petitioner challenged the award on various grounds, including lack of reasoning and acting beyond jurisdiction. The court found that the arbitrator had considered all aspects of the case and that the grounds for challenge did not fall under Section 34 of the Arbitration & Conciliation Act, 1996. The court held that the award was final and conclusive, and dismissed the objections.
Finding of the Court:
The court emphasized that the role of the court is limited to examining the grounds for challenge under Section 34 of the Act. The court cannot re-evaluate the evidence or substitute its own interpretation for that of the arbitrator. The court cited precedents to support the principle that an error in the interpretation of the contract by the arbitrator is within their jurisdiction and not a ground for setting aside the award.
Ratio Decidendi: The court held that the objections raised by the petitioner did not fall under the grounds for challenge specified in Section 34 of the Act. The court emphasized the finality and sanctity of arbitral awards and stated that the court should honor and support the award as far as possible. The court also reiterated that an error in the interpretation of the contract by the arbitrator is not a ground for setting aside the award.
Result: The court dismissed the objections raised by the petitioner and upheld the arbitration award. The court held that the award was final and conclusive, and that the petitioner's grounds for challenge did not fall under Section 34 of the Act.
1. The petitioner has filed objections under Section 34 of the Arbitration & Conciliation Act, 1996 (hereinafter referred to as the ‘Act’)by challenging the Award dated 21st September, 2012 passed by the sole Arbitrator.
2. The learned Arbitrator has passed the Award against the respondent to the following effect:
“i) A sum of Rs. 360659/- (claim No. 1: Rs. 120318 + claim No. 4: Rs. 25000 + claim No. 5: Rs. 215341) to the Claimant.
And
ii) Simple interest @9% per annum on amount of Rs. 360659/- with effect from 16.10.2008 till actual date of payment as awarded under against claim No. 7.
However, no future interest shall be paid if the entire awarded amount is paid to the Claimant within 60 days from date of receipt of award by the Respondent.
This is full and final settlement of all the claims of Claimant. Respondent had no claim.”
3. Brief facts are that the petitioner is a registered Government Contractor executing works contracts with Government and other local bodies. The petitioner submits that it entered into a contract with the respondent vide agreement dated 20th January, 2006 for the work of E.O.S.R. to residential quarters under 3/H sub division, New Delhi SH: Repair/Replacement of damaged SW Gully trap and sewer line of Block No. 1 to 37 (Type-1 quarters) and replacement of rusted/worn out G.I. pipes in type-III Quarters at P.K. Road to be completed within a duration of 6 months time, i.e. 21st January, 2006.
4. The case of the petitioner was that it had executed the work to the tune of `25 lakhs against the contract value of `22.43 lakhs still the work has been illegally terminated by the respondent on 7th May, 2008. Disputes arose out of the said contract due to illegal rescission and non-payment of dues by the respondent so they invoked the Arbitration Clause 25 of the Agreement.
5. The petitioner raised total 8 claims and 2 additional claims before Arbitral Tribunal i.e. Sh.Vinod Kumar Malik was appointed as a Sole Arbitrator on 20th December, 2011 by the respondent, who entered upon the reference on 27th January, 2012.
6. The learned Arbitrator held that the time had never been made essence of the contract after 31st October, 2010, the show-cause under clause 3 was issued on 23rd January, 2008; the contract was rescinded on 7th May, 2008 when the contract was not alive after 7th May, 2008. Therefore, the rescission of the contract was held uncontractual and illegal. The claim No. 1 was made in four parts: Mark-A to Mark-D. The petitioner is challenging Claim No. 1’s Mark A&B only in this petition.
7. The main grounds in the objections which challenge the impugned award are that the learned Arbitrator has failed to give any reason for his findings in the award as required under section 31 of the Act. He acted beyond the jurisdiction and passed the award contrary to the well settled provisions of Arbitration and Conciliation Act, 1996 and against the contract. The petitioner executed the work but no payment was made by the respondent who pleaded that the petitioner had executed the work by ignoring the instruction of the Engineer In-charge. The measurement was recorded in the presence of the Local Commissioner appointed by this Court and there was no dispute as to the quantities of the work executed and the rates/amount claimed but the quality of the work was disputed. The work as executed has not been tested for the quality nor rejected by the respondent but are being used bonafidely without making any payment.
8. It is also alleged that the learned Arbitrator has erroneously held that he agreed that the measurements recorded by the Local Commission are for record purposes. The learned Arbitrator made the award in casual and mechanical way without considering the fact that the respondents cannot enjoy the benefit of the work executed under the contract without making the payment due in terms of the contract. The learned Arbitrator has also gone beyond the provisions of substantive law of contract by ign
