High Court of Bombay Dismisses Union of India's Challenge to Arbitral Award in Railway Contract Dispute — Waiver and Estoppel Bind Railways to Pay for Additional Supplies. Court holds that directions to continue production beyond contractual variation limits and acceptance of supplies with 90% payment constitute waiver, precluding denial of payment under Section 34 of Arbitration and Conciliation Act, 1996.

Challenge to an arbitral award under Section 34 of the Arbitration and Conciliation Act, 1996.

The Union of India sought to set aside the arbitral award granting payment to the contractor for additional sleepers supplied beyond the contractual variation limits.

The Union of India contended that the arbitral award was contrary to the terms of the contract and the public policy of India.

The sole arbitrator passed an award in favor of the Respondent contractor, which was challenged by the Union of India.

Whether the arbitral award granting payment for additional sleepers supplied beyond the contractual variation limits is contrary to the terms of the contract and the public policy of India. Whether the Railways' conduct in directing continued production and accepting supplies with 90% payment constitutes waiver and estoppel, binding them to pay for the additional supplies.

The Petitioner (Union of India) argued that the award was contrary to the express terms of the contract, which limited variation to 60% of the original quantity, and that the arbitrator exceeded his jurisdiction. The Respondent (contractor) argued that the Railways' conduct in directing continued production and accepting supplies with part payment estopped them from denying payment, and the award was a reasoned one not warranting interference.

The court held that the Railways' conduct in directing the contractor to continue production beyond the contractual variation limits and accepting supplies with 90% payment constituted waiver and estoppel, precluding the Railways from denying payment for the additional supplies. The court further held that the scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996 is limited and does not permit reappreciation of evidence unless the award is perverse or contrary to the terms of the contract.

This arbitration petition challenges an award passed by a sole arbitrator in a dispute between the parties arising out of a works contract. The contract had a stipulation, clause 20.1, under which the Railways had reserved their right at their sole discretion to vary the contract quantity by plus or minus 30% without assigning any reason at the same price, terms and conditions as the contract. It is an admitted position that the Railways, by their letter dated 12 June 2003, advised the Respondent to target the production of 4,80,000 nos. of sleepers for the year 200304 and make all efforts to achieve the same. By their letter dated 2 March 2004, the Petitioner specifically advised the Respondent to continue with the production of sleepers as instructed vide the former's letter dated 12 June 2003 by accepting 90% payment pending the approval of the Railway Board for the proposed variation in quantity beyond 30% enhanced quantity as above. The court held that the award was not in conflict with the public policy of India as the arbitrator's findings were based on evidence of waiver and estoppel, and the award was a reasoned one.

The dispute arose from a works contract dated 13 August 2003 between the Union of India and Vaman Prestressing Co. Ltd. for supply of sleepers. The contractor claimed payment for additional sleepers supplied beyond the contractual variation limits. The matter was referred to arbitration, and the sole arbitrator passed an award in favor of the contractor. The Union of India challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996 before the High Court of Bombay. The High Court dismissed the petition on 18 January 2019.

• Arbitration and Conciliation Act, 1996: Section 34