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IN THE HIGH COURT OF ALLAHABAD
Manoj Kumar Gupta, Prashant Kumar, JJ.
Union of India and others – Appellants
Versus
Larsen And Tubro Limited (L and T)) – Respondent
Appeal Under Section 37 of Arbitration And Conciliation Act 1996 No. - 433 of 2023
Decided On : 25-05-2023
Arbitration - Dispute Resolution - General Conditions of Contract - Financing Charges - Foreign Exchange Currency Component - Price Variation - Indirect Costs - Liquidated Damages - Final Bill - Interest - Costs of Arbitration
Fact of the Case:
The appellants issued a tender for modernization of a railway workshop, which was awarded to the respondent. Disputes arose during execution, leading to arbitration. The Arbitral Tribunal awarded sums against each claim and a counter claim, totaling to Rs. 5,53,57,597. The appellants filed an application under Section 34 of the Arbitration Act, challenging the award on various grounds.
Finding of the Court:
The Commercial Court rejected the application, holding that both Delhi and Jhansi courts had jurisdiction and the scope of interference under Section 34 was limited. The Arbitration Appeal under Section 37 was also dismissed, as the Arbitral Tribunal's detailed order considered all evidence and claims separately, and the appellants failed to make a case for interference.
Issues: Jurisdiction, Scope of Interference under Section 34, Compliance with Contract Terms, Interest Payment, Costs of Arbitration
Ratio Decidendi: The courts have limited scope of interference under Section 34 and 37 of the Arbitration Act. The Arbitral Tribunal's detailed consideration of evidence and claims is final, and interference is only warranted if the findings are contrary to the contract terms or ex facie perverse.
Final Decision: The Arbitration Appeal under Section 37 of the Arbitration Act is dismissed.
JUDGMENT :
Prashant Kumar, J.
1. Heard Sri Vivek Kumar Singh, learned Senior Standing Counsel for Union of India on behalf of the appellants and Sri. Swetashwa Agarwal, learned counsel for the respondent-claimant.
2. The appellants (herein) came out with a tender for modernization of Jhansi Workshop of North Central Railways. The bid of the respondent (herein) was accepted and tender was awarded to them and an agreement was executed on 27.01.2011 between the parties. As per the agreement, the original date of completion was 18.07.2012 but was extended by the appellants 10 times until 30.11.2015. During the course of execution of the work, certain dispute arose amongst the parties. As per the agreement, there was an arbitration clause. To settle the dispute amongst the parties, the claimant (respondent herein) submitted an application on 04.09.2017 for appointment of Arbitral Tribunal. As per Clause 64 (3) of General Conditions of Contract (GCC), and the Arbitral Tribunal with three member was formed.
3. The Arbitral Tribunal so constituted, entered into a reference and directed the parties to file their statement of claim, statement of defence, counter claim, rejoinder along with other relevant documents before the Tribunal in a time bound manner. The claimant filed statement of claim whereas the appellants filed a counter claim and also statement of defence to the statement of claimant filed by the claimant. The claim of the claimant as per the statement of claim were as follows:-
| Sr. No. | Particulars | Amount in Rs. claimed by the claimant | Revised Claim in Rs. claimed by the claimant |
| Claim no. 1 | Financing Charges towards Inordinate Delay in release of payments against running account bills. | 2,87,14,513 | 2,26,25,891 |
| Claim no. 2 | Claim on account of cost incurred due to Variations in Foreign Exchange Currency Component beyond original contract period. | 2,22,62,582 | 2,21,00,586 |
| Claim no. 3 | Claim on account of non-payment of Price Variation as per clause on Labour and Fuel etc. | 1,15,40,376 | 98,44,886 |
| Claim no. 4 | Claim on account of Indirect Costs incurred during extended stay in the project | 5,44,54,667 | 5,70,04,383 |
| Claim no. 5 | Refund of the amount recovered as token liquidated damages | 2,88,323 | 2,00,000 |
| Claim no. 6 | Payment due against the final bill/ variation for the additional works as per the contract | 1,67,51,576 |
|
| Claim no. 7 | Interest on the claim amount @18% | Not specified | 10,27,41,682 |
| Claim no. 8 | Costs of arbitration | Not specified | 29,88,947 |
| Sr. No. | Particulars | Amount in Rs. |
| Counter Claim | Losses to Railway due to late commissioning of CNC Portal Wheel Lathe, MOD item No.-6 | 8,95,25,520 |
4. The Arbitrator after perusing all the documents and evidence on record filed by the parties had passed a detailed award on 25.12.2018. In this award, the Arbitral Tribunal had awarded the following sums against each claim:-
| Sr. No. | Particulars | Claim Amount in Rs. | Award Sum in Rs. |
| Claim No. 1 | Financing Charges towards inordinate delay | 2,26,25,891 | 1,77,78,727/- |
| Claim No. 2 | Claim for Variations in Foreign Exchange Currency | 2,21,00,586 | NIL |
| Claim No. 3 | Claim for nonpayment of PVC & interest | 98,44,886 | 1,70,18,577/- |
| Claim No. 4 | Claim for Indirect Costs during extended stay in the project | 5,70,04,383 | NIL |
| Claim No. 5 | Refund of the amount recovered as token liquidated damages | 2,00,000 | NIL |
| Claim No. 6 | Payment due against the final bill & interest | 1,67,51,576 | 2,28,70,261/- |
| Claim No. 7 | Interest on the claim amount @ 18% | 10,27,41,682 | NIL |
| Claim No. 8 | Costs of arbitration | 29,88,947 | 7,90,032/- |
|
| Total Award Sum | 5, | |
The court emphasized the wide scope of reference of the arbitrator and the appellant's failure to file a defense, highlighting the limited scope of interference under Section 37 of the Arbitration an....
Judicial scrutiny under the Arbitration and Conciliation Act is limited; courts must respect arbitral awards unless proven to violate public policy or statutory obligations, affirming the principle t....
The main legal point established in the judgment is the limited scope of interference under Section 37 of the Arbitration and Conciliation Act, 1996, and the importance of interpreting the contract a....
The court affirmed that an entity can claim compensation for work performed under a non-finalized contract if the work was conducted at the direction of another party, underscoring the principle of q....
The court affirmed that judicial intervention in arbitral awards is limited to grounds of public policy or patent illegality, emphasizing respect for the Arbitrator's findings.
Clauses in contracts that prohibit claims for damages are against public policy and void under Section 23 of the Indian Contract Act, 1872, as they undermine the sanctity of contracts.
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