Case Briefs
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M/s S.B. Construction v General Manager Northern Railway


Author Details : Aditi Goel, 4th Year student at Symbiosis Law School, NOIDA.


Citation : OMP (COMM.) No. 35/2018   

Bench : Justice Gurvinder Pal Singh 

Original Copy : N/A

 

Issue in Question:

  • Whether the court had the power to intervene in the Order passed by the Arbitrator?

Background of the Case:

  • The petitioner in this case had filed an objection petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the the arbitral award of Rs. 7,72,038 with an interest rate of 18% from the date of the award to the date of the realisation in favour of the claimant and against the respondent. 
  • A clause in the tender to repair the existing Barat Ghat in Rotak said that the petitioner had to visit the site to make some analysis of the difficulties which could be faced during execution of the work. The work was awarded to the petitioner and was to be completed within three months. The cost of the agreement was Rs. 11,17,526. 
  • The work started on the site and the petitioner was supposed to start the work within 15 days. The first RA bill was generated and paid without any hassle. After this, the petitioner abandoned the site which led to breach of contract and the contractual obligation. While this is what the respondent said, the petitioner said that the respondent did not employ enough men and machinery due to which the work ended up getting grossly delayed. 
  • The Petitioner approached the High Court and the arbitral proceedings turned into the arbitral award. 

The counsel of the petitioner argued that –

  1. No plans were provided to the claimant and no site was handed over to execute the work. 
  2. Claimant’s  letters claimed losses and requested the land as well as the drawings but neither were provided. 
  3. The deadline was extended, the work was stopped on the claim that there was a change in the drawings and insisted on signing a corrigendum against contract law. 
  4. The tender work was called for repair of the Barat Ghar but there was no Barat Ghar to begin with, leading to fraud. 
  5. The Arbitral Tribunal had made an error in granting claims by ignoring the documents and statements supporting the same. 

The counsel of the respondent argued that –

  1. Difference in opinion between the court and the arbitrator is no clause for setting aside the award. 
  2. The court in this case did not have the jurisdiction to entertain a petition under Section 34 of the Acrt. 
  3. The award was given after the arbitrator held hearings and saw evidence of the same. An equal opportunity of presenting the case was also provided to both the parties and not just one. 
  4. The counsel relied on the case of Himachal Joint Venture vs Panilpina World Transport (India) Pvt. Ltd, where it was held that –

When the view taken by the Arbitrator is a plausible view, it is not permissible for the Court to interfere with the Arbitrator’s view merely because another view of the matter is possible. It is not permissible for the court to re-appreciate the evidence placed before the Arbitrator. 

Judgement:

  • Generally in an arbitration suit the arbitrator is chosen by the parties and if there is an error with the award, the orders of the arbitrator are not set aside. It is not open to the court to review all evidence and sit in appeal, neither can the court set aside a finding of fact. 
  • If the arbitrator is qualified and an expert and if they assign cogent grounds and sufficient reasons, then courts do not interfere with the award passed. 
  • Supreme Court in the case of Associate Builders v Delhi Development Authority held that, interference with an arbitral award should only be permissible when the findings of the arbitrator are “arbitrary, capricious or perverse or when conscience of the court is shocked or when illegality is not trivial but goes to the root of the matter.” 

Whilst analysing the claims, the court relied on the following: 

  1. Section 28(3) and Section 31(7) of the Arbitration Act, 1940-  where Section 28(3) says that all terms of contract and trade need to be taken under consideration while deciding and making an award. Section 31(7) talks about the form and content of an arbitral award. 
  2. Ashi Limited v Union of India, where law laid down in Sree Kamatchi Amman Constructions v The Divisional Railway Manager (Works) Palghat & Ors. was appreciated and it held that the Tribunal may grant an award as it may seem reasonable. A person who is denied the use of money to which he is legally entitled has the right to be paid for the deprivation, and this compensation may be referred to as interest compensation or damages.
  3. State of Haryana v S.L. Arora & Co. – By virtue of Clause (b) of Section 31 (7) of the Act, 

“(b) A sum directed to be paid by an arbitral award shall, unless the award otherwise directs, carry interest at the rate of eighteen per centum per annum from the date of the award to the date of payment.”

  • The court held that the arbitrator was justified in the award. The award was given based on the judgement of facts, evidence and the circumstances. There was no bias and there were fair proceedings. Hence, keeping all this in mind, the court decided to not interfere in the case and asked the parties to bear their own costs. 

Critical Analysis: 

  • The entire idea of an arbitrator is to settle the disputes without dragging any legal formalities into it. It is a good clause that the award decided by an arbitrator will not be interfered into unless it is insufficient. This clause surely saves courts a lot of time. They have time to focus on other pressing cases and there is a sharp decline in the number of pending cases. 
  • However, it is important to note that these courts are still there in case there was a proven unjust award awarded to either of the parties. 
  • In the case provided to us, the claims were accepted and rejected on the right basis. They were justified and reasonable as per the analysis and the evidence presented to the arbitrator. 
  • The costs to be awarded need to be corroborated with the evidence and the actual loss that was incurred, as held by this court. 

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