Case Note & Summary
The case involves two arbitration petitions under Section 34 of the Arbitration and Conciliation Act, 1996, challenging a common arbitral award dated 30th May 2007. The Union of India (Western Railway) challenged the award primarily on the grant of loss of profit and interest, while the original claimant, M/s. R.P. Shah, challenged the award on the ground that compensation for loss of profit was only 5% instead of 10%. The background is that the claimant was a civil contractor for railway work, and the contract was terminated. The claimant did not accept further extension due to changed conditions, leading to closure. The claimant's representation for loss of profit was contested. Earlier, this Court had set aside a previous award for lack of justification for not granting compensation for loss of profit and denial of interest. The Arbitral Tribunal reheard claims 9 and 16. The Tribunal awarded 5% loss of profit on the withdrawn work and interest at 9% per annum from the date of award till payment. The Court held that the award was reasoned and based on evidence. The Tribunal's discretion on quantum of loss of profit was not interfered with as it was not perverse. The interest rate was also found reasonable. Both petitions were dismissed, upholding the award.
Headnote
A) Arbitration - Loss of Profit - Section 34 Arbitration and Conciliation Act, 1996 - Claimant entitled to loss of profit for breach of contract due to termination - Arbitral Tribunal awarded 5% on withdrawn work, which was not interfered with as it was based on evidence and not perverse - Held that the Tribunal's discretion on quantum of loss of profit is not open to challenge unless patently illegal (Paras 5-10). B) Arbitration - Interest - Section 31(7)(a) Arbitration and Conciliation Act, 1996 - Arbitral Tribunal granted interest at 9% per annum from date of award till payment - Held that interest is discretionary and the rate is reasonable, no interference warranted (Paras 11-13). C) Arbitration - Section 34 Challenge - Scope of Interference - Court cannot re-appreciate evidence or substitute its own view unless award is against public policy or perverse - Held that the award was reasoned and within the Tribunal's jurisdiction (Paras 14-16).
Issue of Consideration
Whether the Arbitral Tribunal's award of 5% loss of profit on withdrawn work and grant of interest is sustainable under Section 34 of the Arbitration and Conciliation Act, 1996
Final Decision
Both arbitration petitions are dismissed. The common award dated 30th May 2007 is upheld. No order as to costs.
Law Points
- Loss of profit is recoverable for breach of contract
- Arbitral Tribunal must provide reasons for award
- Interest under Section 31(7)(a) of Arbitration and Conciliation Act
- 1996 is discretionary
- Court's interference under Section 34 is limited to patent illegality or perversity
