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No Extra Payment for Additional Work in : Restores
In a significant ruling that reinforces the limited scope of judicial interference with arbitral awards, a Division Bench of the has restored a “nil” award that rejected a ₹28.37 crore claim for additional work under a . The court held that the Single Judge had exceeded his jurisdiction under , by re-appreciating evidence and substituting the arbitrator's interpretation of the contract with a more favourable view.
A Tale of Two Interpretations: High Court Restores Arbitrator's
The dispute arose from 's “Lion Project” to expand the capacity of its chemical plant at Kotputli, Rajasthan, from 1,000 MT to 1,500 MT per annum. Otsuka engaged for the construction stage on a turnkey basis for a lump sum price of ₹71 crore, formalised through an agreement dated . Minutes of a meeting on had clarified that minor modifications would not attract extra payment, while major modifications incorporated after would be charged at mutually agreed rates.
Trans Engineers completed the project on and received the full contract amount by . However, between 22 and , it raised 26 proforma invoices totalling ₹28.37 crore, claiming payment for additional work allegedly arising from changes in the project scope.
The : No Proof of Major Additional Work
The , by an award dated , dismissed both Trans Engineers' claims and Otsuka's , resulting in a “nil” award. The arbitrator found that Trans Engineers had failed to prove that the alleged additional work was major or substantial, that no written instructions for such work existed, and that no mutually agreed rates for extra payment had been established. The arbitrator also noted that the proforma invoices were raised only after completion of the project, which undermined the genuineness of the claims.
Why the Single Judge's Reappraisal Was Unwarranted
Trans Engineers challenged the award under Section 34 of the Act. On , the Single Judge set aside the award, concluding that the arbitrator had misread the contractual framework and that the P&IDs dated formed the baseline for additional work. The Single Judge also drew an from Otsuka's “” offer of ₹3 crore to settle the dispute.
On appeal, the Division Bench reversed that decision. The court emphasised that the learned Single Judge had acted as a court of appeal rather than confining himself to the limited grounds under Section 34. The Bench observed that the arbitrator's interpretation of the contract was a plausible one and could not be interfered with merely because another view was possible.
Legal Analysis: A Must Be Respected
The court reiterated the settled legal position that an arbitral tribunal is the final authority on the construction of contractual terms and on findings of fact. Interference is warranted only if the interpretation is or one that no reasonable person could have reached. The Division Bench, quoting the 's decision in , noted that “a by the arbitrator on facts is to be respected as the arbitrator is the ultimate master of the quantity and quality of evidence to be relied upon.”
The court further clarified that the Single Judge's reliance on Otsuka's failure to specifically dispute the extra work and its “” offer did not discharge the on Trans Engineers. “Merely because the appellant had not specifically disputed the performance of extra work by the respondent or had made a '' offer to settle this dispute with the respondent, it cannot be said that the burden of proving its claim on the respondent stood discharged,” the court held.
Key Observations: A Must Be Respected
“The learned Single Judge, in fact, seems to have proceeded on what would have been a more appropriate interpretation of contractual terms, which, in our respectful opinion, is to travel beyond the scope of scrutiny of an Award under Section 34 of the A&C Act.” — Para 79 of the judgment
“If the conclusion of the arbitrator is based on a of the matter, the Court should not interfere. But where, on a full reading of the contract, the view of the arbitral tribunal on the terms of a contract is not a , the award would be considered and as such amenable to interference.” — Para 72 (citing OPG Power Generation)
“Merely because the appellant had not specifically disputed the performance of extra work by the respondent or had made a '' offer to settle this dispute with the respondent, it cannot be said that the burden of proving its claim on the respondent stood discharged.” — Para 83
Court's Decision: Award Restored, Appeal Allowed
The Division Bench allowed Otsuka's appeal, set aside the Single Judge's judgment dated , and restored the nil . The court directed that parties shall bear their own costs. The ruling reinforces the principle that courts exercising jurisdiction under Sections 34 and 37 of the Act must not substitute their own views for those of the arbitrator, even if they believe a different interpretation is more appropriate. This decision is a reminder that the finality of arbitral awards is a cornerstone of the arbitration framework in India.
