Case Note & Summary
The case involves an appeal by the Union of India (Central Railway) against a decision of a Learned Single Judge of the Bombay High Court, which rejected a petition under Section 34 of the Arbitration and Conciliation Act, 1996, to set aside an arbitral award. The dispute arose from a contract awarded by the Central Railway to M/s. Shyam Constructions for construction of 100 units of Type-I quarters at Kalwa at a tendered cost of Rs. 1.02 Crores. The work was to be completed within 24 months, but delays occurred, and possession was taken over on 27 October 1997. The General Manager of Central Railways constituted an arbitral Tribunal under Clause 64 of the General Conditions of Contract, pursuant to a court order dated 15 June 2003 under Section 11 of the Act. The Tribunal published a reasoned award on 15 February 2008, awarding Rs. 13,47,219 to the respondent on various claims, including work done, security deposit, extra items, watch and ward interest, underutilization of overheads, labour force, and centering and shuttering. The appellant challenged the award before the Learned Single Judge, who dismissed the petition. In appeal, the Division Bench considered whether the award suffered from patent illegality or perversity. The court noted that the Tribunal had considered the evidence and found that the delay was attributable to the employer, and the claims for underutilization were justified. The court held that the findings were not perverse and that the Single Judge had correctly applied the limited scope of interference under Section 34. The appeal was dismissed, and the award was upheld.
Headnote
A) Arbitration Law - Setting Aside Arbitral Award - Section 34 of Arbitration and Conciliation Act, 1996 - Scope of Interference - The court held that interference with an arbitral award under Section 34 is limited to grounds of patent illegality, perversity, or contravention of public policy. The court cannot reappreciate evidence or substitute its own view for that of the arbitrator. (Paras 6-7) B) Arbitration Law - Claim for Underutilization of Resources - Section 34 of Arbitration and Conciliation Act, 1996 - Award of Damages for Delay - The court upheld the award of Rs. 3,00,000 for underutilization of labour force and Rs. 1,20,000 for underutilization of centering and shuttering, as the Tribunal found the delay was attributable to the employer. The findings were based on evidence and not perverse. (Paras 8-9) C) Arbitration Law - Interest on Award - Section 31(7) of Arbitration and Conciliation Act, 1996 - Accrual of Interest - The court held that the direction to pay interest from the date of award if the amount is not paid within thirty days is in accordance with Section 31(7) of the Act. (Para 10)
Issue of Consideration
Whether the Learned Single Judge erred in rejecting the petition to set aside the arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996, on the grounds that the award suffered from patent illegality and perversity.
Final Decision
The appeal is dismissed. The decision of the Learned Single Judge dated 10 March 2011 rejecting the petition to set aside the arbitral award is upheld. No order as to costs.
Law Points
- Scope of interference under Section 34 of Arbitration and Conciliation Act
- 1996 is limited to grounds of patent illegality
- perversity
- or contravention of public policy
- Arbitral Tribunal's findings on facts and interpretation of contract are final unless perverse
- Claim for underutilization of resources can be awarded if delay is attributable to employer
- Interest under Section 31(7) accrues from date of award if not paid within thirty days.
