The court emphasized the limited scope of interference with arbitral awards and the principle that unless an error of law is patent on the face of the award, the court cannot interfere with the award.

Introduction

1. The challenge in this petition under Section 34 of the Arbitration & Conciliation Act, 1996 (‘the Act’) by IRCON International Limited (‘IRCON’) is to an Award dated 27th January, 2015 passed by the Sole Arbitrator in the disputes between IRCON and the Respondent - Satya Prakash Builders Limited - arising out of a contract dated 20th December, 2004 for “construction of 811 dwelling units for the Married Accommodation Project (‘MAP’) for the Ministry of Defence at New Cantonment, Allahabad”.

Background facts

2. The contract was a ‘fixed rate contract’. The bid of the Respondent was accepted at 37% above the Bills of Quantity (‘BOQ’) rates. It is stated that the BOQ rates were to remain firm till completion save and except as provided by statutory variations in tax / cess or imposition of any fresh tax/cess. According to IRCON, the rates were all inclusive. It did, however, provide for payment when quantity varied or when any job not included in the BOQ was ordered and executed. The contract also prohibited claiming any damages on account of extension of time (EOT), which too would be granted only if the contract itself was extended.

3. The scheduled date of completion was 20 months after the date of the contract, i.e. 4th July, 2006. The contract was completed on 31st December, 2008. According to IRCON, the 51st Running Account (‘RA’) Bill and Final Bill was submitted by the Respondent on 20th April, 2009 and was paid for on 23rd March, 2009, 20th October, 2009 and 21st November, 2009.

4. Even during the pendency of the contract, the Respondent invoked Clause 31 of the Supplementary Agreement whereby disputes or differences were to be referred in the first instance to the Committee for Resolution through Mutual Discussions, Negotiations Deliberations, etc. On 9th June, 2006, the Respondent wrote a letter raising certain disputes. These were referred to the Committee which by a letter dated 22nd November, 2006 gave its decision that was not acceptable to the Respondent.

5. Thereafter the Respondent wrote a letter dated 25th December, 2006 to IRCON requesting that an arbitrator be appointed. The Respondent also set out the disputes between the parties as of the date of that letter. In that letter, the Respondent also reserved its rights to refer any further disputes that may arise between the parties to arbitration.

6. It is stated that the Competent Authority under the contract refused to appoint an arbitrator. This was conveyed to the Respondent by letter dated 24th January 2007. This led the Respondent to file a petition in this Court under Section 11 of the Act. The said petition was disposed of by an order dated 1st May, 2009 which inter alia directed as under:

“The parties had agreed to a qualification of the Arbitral Tribunal. It was agreed that the Managing Director of the Respondent may himself act as sole Arbitrator or may at his option appoint any person as sole Arbitrator, then a panel of at least three names will be sent to the contractor. Such persons may be working/retired employees of the Respondent, who had not been connected with the work. The contractor shall suggest minimum two names out of his panel for appointment as sole Arbitrator. Managing Director will then appoint sole Arbitrator out of the names agreed to by the contractor. Having regard to the qualification required for the Arbitrator, it is directed that the Managing Director of the respondent shall offer a panel of three retired employees of the respondent and the petitioner shall be entitled to nominate one of them as the sole Arbitrator. The sole Arbitrator shall go into the claims and counter claims, if any, of the parties in accordance with law.

The petition is disposed of in terms of the above order.”

7. Pursuant to the above order, IRCON forwarded to the Respondent names of its ex-employees. Of these names, the Respondent chose and requested that any one of them could be appointed as an arbitrator. It is stated that IRCON took