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IN THE HIGH COURT OF HIMACHAL PRADESH SHIMLA
TARLOK SINGH CHAUHAN, ACJ, SATYEN VAIDYA, J.
State of H.P. & Ors. - Appellant
Versus
M/s K.C. Sharma – Respondent
Arb. Appeal No. 104 of 2024
Decided on : 27 -11-2024
| Table of Content |
|---|
| 1. background of the arbitration case (Para 1 , 2 , 3 , 4 , 6) |
| 2. appellants' objections to the award (Para 7 , 10 , 14) |
| 3. court's observations on the arbitrator's findings (Para 8 , 11 , 12 , 13) |
| 4. legal standards under section 34 of the act (Para 15 , 16) |
| 5. dismissal of appeal and final order (Para 20 , 21) |
JUDGMENT :
Satyen Vaidya, J.
1. The appellants have filed the instant appeal under Section 37 of the Arbitration and Conciliation Act, 1996 (for short “the Act”) assailing the judgment dated 07.11.2023 passed by learned Single Judge in Arbitration Case No. 105 of 2021, whereby the petition of the appellant under Section 34 of the Act has been dismissed.
2. Respondent (hereinafter referred to as “the Contractor”) was awarded work of improvement and widening of formation in KM 250/0 to 268/740 on Shimla Wangtoo Section. The scope of awarded work provided for widening of existing road to double lane and construction of retaining walls, breast walls and cross drainage. The award letter was issued on 20.09.1995. The total contract amount was Rs.1,24,23,659/- and the stipulated period for completion of work was two years. The work was started on 29.09.1995 and was completed on 31.03.2001.
3. The contractor raised certain dispute arising out of the contract and invoked arbitration clause. Accordingly, the Arbitrator was appointed.
4. The contractor raised following claims before the Arbitrator:-
| Sr. No. | Description of Claims | Amount claimed. |
| 1. | Claim No.1:- Payment due for the balance amount of escalation payable under Clause 10CC | Rs.27,90,580/- |
| 2. | Claim No.2:-Payment on account of extra earth work beyond schedule of quantities and prescribed deviation limit as per Clause 12-A of the contract agreement. | Rs. 1,02,68,000/- |
| 3. | Claim No.3:- Payment on account of unauthorised deductions made by the appellants from the final bill. | Rs.8,97, 647/- |
| 4. | Claim No.4:- Payment of compensation on account of loss of profit. | Rs.69,74,000/- |
| 5. | 5. Claim No.5:- Interest pendent lite and post award | @24% |
| 6. | Claim No.6:- Cost of arbitration | Nil. |
5. The Arbitrator partially allowed the claims No.1, 2, 3, 5 and6 in following terms.
| Sr. No. | Description of Claims | Amount claimed. |
| 1. | Claim No.1:- Payment due for the balance amount of escalation payable under Clause 10CC | Rs.10,32,900/- |
| 2. | Claim No.2:-Payment on account of extra earth work beyond schedule of quantities and prescribed deviation limit as per Clause 12-A of the contract agreement. | Rs. 81,00,700/- |
| 3. | Claim No.3:- Payment on account of unauthorised deductions made by the appellants from the final bill. | Rs.2,20,758/- |
| 4. | Claim No.5:- Interest pendent lite and post award | @ 9.5% as pendent lite interest and 18% as interest after award. |
| 5. | Claim No.6:- Cost of arbitration | Rs.1,00,000/- |
6. As regards Claim No.4, the same was withdrawn by the contractor during the pendency of the arbitration proceedings.
7. The appellants preferred petition under Section 34 of the Act in this Court which was registered as Arbitration Case No. 105 of 2021 inter alia raising following objections:-
i) The award was illegal.
ii) The award was against basic notion of law and fundamental policy of Indian law.
iii) The Arbitrator had illegally assumed jurisdiction to decide the claim of contractor under Clause 10CC of the contract agreement which was a non arbitrable issue.
iv) The claim No.2 was wrongly adjudicated in favour of the contractor without there being fulfillment of condition precedent i.e. the issuance of notice by the contractor to the Engineer-in-charge within the stipulated time as per Clause 12-A of the contract agreement.
v) The grant of interest and costs to the contractor by the Arbitrator was also objected to on the ground that since the claims of the contractor were not maintainable, therefore, the question of payment of costs and interest did not arise.
vi) The Arbitrator was also accused of having given undue, unreasonable and unwarranted benefits to the contractor without adoption of proper procedure and following the legal provisions.
AI
The jurisdiction of courts under Sections 34 and 37 of the Arbitration Act is limited to specific legal grounds, and mere disagreement with arbitral findings does not suffice for setting aside an awa....
The judgment emphasizes the limited grounds for interference with arbitral awards under Section 34 of the Arbitration and Conciliation Act, highlighting the need for restraint by courts while examini....
The court emphasized that arbitral awards should not be interfered with solely based on disagreements with findings, affirming the limited grounds for appeal under Section 34 of the Arbitration Act.
An arbitrator may award escalated costs due to employer delay despite prohibitory clauses, reinforcing that delays affecting contractor performance can lead to compensatory claims.
The court affirmed that arbitral awards challenging under Sections 34 and 37 are limited in scope, requiring clear evidence of illegality or perversion; otherwise, the Arbitrator's decision stands.
The appellate jurisdiction under section 37 is limited to the grounds prescribed under section 34. Courts cannot re-appreciate evidence or substitute their views for that of the arbitrator, provided ....
The judgment emphasizes the limited scope of interference with arbitral awards and the principle that courts should not interfere with arbitral awards unless there is a patent illegality or violation....
The limited grounds for interference with an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, emphasize the concept of patent illegality and the criteria for setting asi....
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