Case Note & Summary
The dispute arose out of a contract awarded by the National Highways Authority of India (NHAI) to Somdatt Builders-NCC-NEC(JV) for four-laning of a highway section in Uttar Pradesh. The contract was a unit rate contract with a Bill of Quantities (BOQ). A dispute arose regarding item No. 7.07 of the BOQ, specifically the sub-item for geogrid used in reinforced earth walls. NHAI had provided an erroneous estimate of the quantity of geogrid at the tender stage, and when the actual quantity required for execution as per the approved design exceeded the BOQ quantity, the Engineer sought to revise the rates under Clause 52.2 of the Conditions of Particular Application (COPA). The contractor contested this, arguing that there was no change in design or instruction by the Engineer, and the increase was merely due to NHAI's wrong estimate. The Dispute Review Board (DRB) recommended payment at BOQ rates. The Arbitral Tribunal, by a majority, upheld the DRB's decision, holding that the Engineer had no power to revise rates for the additional quantity. NHAI challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996, but the Single Judge dismissed the application. NHAI then appealed under Section 37, and the Division Bench set aside the award and the Single Judge's order, holding that the Engineer had the power to revise rates. The Supreme Court allowed the appeal, restoring the arbitral award and the Single Judge's order. The Court held that the Division Bench exceeded its limited jurisdiction under Section 37 by interfering with concurrent findings of fact by the DRB, Arbitral Tribunal, and Single Judge. The Court emphasized that the increase in quantity was not due to any change in design or instruction by the Engineer but due to NHAI's own erroneous estimate, and therefore, Clause 52.2 was not attracted. The BOQ rate applied to the entire quantity.
Headnote
A) Arbitration Law - Appeal under Section 37 - Limited Scope - The appellate court under Section 37 of the Arbitration and Conciliation Act, 1996, has extremely limited jurisdiction and cannot interfere with concurrent findings of fact by the DRB, Arbitral Tribunal, and Single Judge unless perverse or contrary to law. - Held that the Division Bench erred in overturning the well-reasoned concurrent findings without satisfying the narrow grounds for interference (Paras 17-18, 20-21). B) Contract Law - Variation Clause - Interpretation of Clauses 51 and 52 of COPA - Where the increase in quantity of geogrid was due to the employer's erroneous estimate at the tender stage and not due to any change in design or instruction by the Engineer, the variation clause (Clause 52.2) is not attracted. - Held that the BOQ rate applies to the entire quantity, and the Engineer has no power to revise rates for additional quantity required for actual execution as per approved design (Paras 9-11, 19-20). C) Arbitration Law - Section 34 - Setting Aside of Award - The Single Judge correctly dismissed the application under Section 34 as the arbitral award was not in conflict with the public policy of India and was a plausible interpretation of the contract. - Held that the view taken by the Arbitral Tribunal was a possible view and not open to interference under Section 34 (Paras 12, 20).
Issue of Consideration
Whether the Division Bench of the High Court was justified in setting aside the arbitral award and the order of the Single Judge under Section 37 of the Arbitration and Conciliation Act, 1996, by holding that the Engineer had power to revise rates for increased quantity of geogrid under Clause 52.2 of COPA, despite no change in design or instruction by the Engineer.
Final Decision
The Supreme Court allowed the appeal, set aside the judgment of the Division Bench of the Delhi High Court dated 17.11.2009, and restored the arbitral award dated 03.06.2005 and the order of the Single Judge dated 29.08.2007. The Court held that the Division Bench exceeded its limited jurisdiction under Section 37 of the Arbitration and Conciliation Act, 1996, and that the increase in quantity did not attract Clause 52.2 as there was no change in design or instruction by the Engineer.
Law Points
- Arbitration
- Contract Interpretation
- Variation Clause
- BOQ Rate
- Section 37 of Arbitration and Conciliation Act
- 1996
- Limited Scope of Appeal
- Concurrent Findings
