The Arbitral Tribunal must act within the contract's terms and cannot award compensation not claimed, as it violates established arbitration principles.

ORAL JUDGMENT

(PER: HON'BLE MR JUSTICE V KAMESWAR RAO)

This is an appeal filed by M/s. Hindustan Aeronautics Limited challenging the judgment dated 20.02.2020 in A.S. No.129/2015 passed by the Court of X Additional City Civil and Sessions Judge, Bengaluru, whereby the learned Judge has dismissed the suit filed by the appellant herein under Section 34 of the Arbitration and Conciliation Act, 1996 (‘Act of 1996’ in short).

2. Suffice to state that, the learned Arbitrator awarded to the respondent herein an amount of Rs.60.00 Lakhs with future interest at the rate of 12% p.a., with proportionate cost.

3. The facts which are relevant to be noted are that, the parties herein had entered into Operation and Maintenance Contract on 06.10.2005 to carry-out certain works. It was the case of the appellant that the respondent failed to discharge its obligation to the satisfaction of the appellant. The respondent had raised certain invoices claiming an amount of Rs.14,82,74,511/-. But, the appellant had paid a sum of Rs.11,88,67,570/-, after deducting TDS.

4. As disputes arose, the same were referred to an Arbitral Tribunal. On the basis of the pleadings, the Arbitral Tribunal had framed the following 07 issues for its consideration:

“i) Whether the claimant is justified for expenses incurred for maintaining the pilots at Mumbai instead of Delhi?

ii) Whether the claimant is entitled for expenses incurred towards TD/DA Lodging and Boarding of Pilots as alleged?

iii) Whether the claimant proves that it has correctly raised the invoice for fixed monthly charge in respect of VT- HAN from September 2006 onwards as alleged?

iv) Whether the Respondent proves that Delhi was a designated base as per the O&M and it had the approval from DCA and that the responsibility to obtain the facility was on the claimant as alleged in para 2 and 3 of the written statement?

v) Whether the claimant proves that there were lapses on the part of the Respondent in training Pilots and the claim made by the Respondent is unsustainable?

vi) Whether the Respondent prove that payments were made after scrutinizing the invoices and the TDS Certificate were correctly forwarded to the claimant?

vii) Whether the claimant proves that it is entitled for an award against the Respondent for an amount of R. 2,68,01,941/- with interest and cost as claimed?”

5. The Arbitral Tribunal has rejected all the claims of the respondent herein. But, it had on the basis of conclusion drawn by it in Paragraph Nos.103 and 104, has granted an amount of Rs.60.00 Lakhs with interest at 12% p.a., to be paid to the appellant. The award of the Arbitral Tribunal dated 09.05.2015 has been upheld by the learned Sessions Judge in the impugned order by dismissing the suit.

6. The submission of Sri. Pramod Nair, the learned Senior Counsel for the appellant is primarily that, the Tribunal while rejecting all the claims made by the respondent, could not have granted an amount of Rs.60.00 Lakhs as compensation on a finding that, the Tribunal is not precluded to award certain amounts towards the loss sustained by the respondent and also to do the complete justice between the parties, taking into account the preponderance of probabilities and following the principles of natural justice. According to him, the Arbitral Tribunal is required to act within the four corners of the contract. In other words it could only consider those claims, which arise from the contract and not those which had not been sought for in the Arbitration Proceedings. According to him, the Tribunal is not exercising its powers under Article 226 of the Constitu