The Supreme Court addressed a dispute between the State of West Bengal and a contractor concerning claims arising from the delayed execution of a road widening and strengthening project. The contractor was awarded Rs. 1,37,25,252 by the Arbitrator for various claims, including interest on delayed payments, but this award was partially set aside by the District Court and the Calcutta High Court under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996. The Supreme Court restored the claims related to interest on delayed payments and the expenses incurred due to uneconomical stoppage of work, while upholding the High Court’s decision to set aside the award for idle labour charges. The judgment emphasizes the necessity of adhering to contract terms while also respecting the arbitrator's discretion under Section 31(7) of the Act.

Background:

• Tender and Work Order: The State of West Bengal issued a tender for the widening and strengthening of the Egra Bajkul road. The contractor's bid was accepted, and a work order was granted with a completion deadline of 18 months.
• Delay in Completion: The project was delayed by five months, with the work being completed on 09.11.2012.
• Claims Raised: The contractor raised a final bill of Rs. 77,85,290 and additional claims due to delays attributed to the State. The dispute was referred to arbitration.

Arbitration Award:

• Claims Awarded: The Arbitrator awarded the contractor Rs. 1,37,25,252, covering several claims, including loss of business, uneconomic utilization of machinery, labour charges, and interest on delayed payments.
• Interest Granted: The Arbitrator granted interest at 12% p.a. for the period before the award and 9.25% p.a. for the period after the award.

Challenges Under Sections 34 and 37:

• District Court’s Partial Set-Aside: The District Court partially set aside the arbitration award, specifically disallowing the claims for loss of business and uneconomic utilization of machinery.
• High Court’s Modifications: The Calcutta High Court upheld the District Court’s decision but further set aside the awards for labour charges and interest on delayed payments, modifying the interest rates.

Supreme Court’s Ruling:

• Restoration of Claims: The Supreme Court restored the arbitration award concerning interest on delayed payments, rejecting the High Court's interference under Section 37. It emphasized that the Arbitrator's reasoning was plausible and did not conflict with public policy.
• Adherence to Contract Terms: The Court upheld the High Court's decision to set aside claims for idle labour, citing the contract's specific prohibition against such claims.

Key Legal Principles:

• Scope of Judicial Review: The judgment reaffirms the limited scope of judicial intervention under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, emphasizing respect for the arbitrator’s discretion unless there is a clear conflict with the contract or public policy.
• Interpretation of Contractual Clauses: The ruling highlights the necessity for arbitrators to carefully consider contractual provisions, especially when such provisions explicitly restrict or prohibit certain claims.