Case Note & Summary
The Government of Maharashtra, through the Executive Engineer, Alibag Public Works Division, filed an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, challenging an order of the District Judge, Raigad Alibag, dated 14 October 2004, which substantially rejected the government's application to set aside an arbitral award dated 10 March 2004. The dispute arose out of a Build Operate and Transfer (BOT) contract for construction of a two-lane bridge across Dharamtar Creek on Alibag-Pen Road. The contractor, M/s Patwardhan Infrastructure Private Limited, was awarded the contract in 1999 with a concession period of 13 years 7 months and 26 days. The contractor claimed that the owner failed to provide right of way and that toll collection was delayed, causing delays and additional costs. The arbitral tribunal allowed most of the contractor's claims, awarding escalation costs and interest. The owner appealed, arguing that the award was contrary to the contract terms and public policy. The High Court held that the scope of interference with an arbitral award is limited and that the tribunal's findings were based on evidence. The court found that the owner's failure to provide right of way was a breach of contract and that the contractor was entitled to escalation costs and interest. The appeal was dismissed, and the award was upheld.
Headnote
A) Arbitration - Appeal under Section 37 - Interference with Arbitral Award - Scope of interference is limited to grounds under Section 34 of the Arbitration and Conciliation Act, 1996 - The court cannot re-appreciate evidence or substitute its own view unless the award is contrary to public policy or patently illegal - Held that the award was based on evidence and not perverse (Paras 1-10).
B) Contract Law - BOT Contract - Right of Way - Owner's obligation to provide right of way is a fundamental condition - Delay in providing right of way entitles contractor to escalation costs and extension of time - Held that the owner's failure to provide right of way caused delay and contractor was entitled to compensation (Paras 11-20).
C) Arbitration - Interest - Award of Interest - Arbitral tribunal has discretion to award interest from the date of cause of action to the date of award and future interest - Section 31(7) of the Arbitration and Conciliation Act, 1996 - Held that the award of interest at 18% per annum was not excessive (Paras 21-25).
Issue of Consideration
Whether the arbitral award granting escalation costs and interest to the contractor for delays in construction due to owner's failure to provide right of way and toll collection issues is liable to be set aside under Section 37 of the Arbitration and Conciliation Act, 1996.
Final Decision
The High Court dismissed the appeal and upheld the arbitral award dated 10 March 2004 and the order of the District Judge dated 14 October 2004.
Law Points
- Arbitration award
- Section 37 of Arbitration and Conciliation Act
- 1996
- interference with arbitral award
- public policy
- interest on delayed payments
- escalation costs
- BOT contract
- toll collection
- right of way
Case Details
2013 LawText (BOM) (02) 43
Arbitration Appeal No.8 of 2005
Mr Kuldeep Patil with Mr A.R.Patil for Petitioner; Mr Rajiv Kumar, Senior Advocate with Mr Akshay Patil i/b Mrs Teja Katdare for Respondent No.1
Government of Maharashtra through Executive Engineer, Alibag Public Works Division
M/S Patwardhan Infrastructure Private Limited, through Director Shri Y.G.Patwardhan; Shri R.H.Tadavi
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Nature of Litigation
Appeal under Section 37 of the Arbitration and Conciliation Act, 1996 against order of District Judge rejecting application to set aside arbitral award.
Remedy Sought
Appellant sought to set aside the arbitral award dated 10 March 2004 and the order of the District Judge dated 14 October 2004.
Filing Reason
Appellant challenged the arbitral award granting escalation costs and interest to the contractor for delays in construction.
Previous Decisions
Arbitral award dated 10 March 2004 allowed most claims of contractor; District Judge, Raigad Alibag by order dated 14 October 2004 substantially rejected appellant's application to set aside the award.
Issues
Whether the arbitral award is liable to be set aside under Section 37 of the Arbitration and Conciliation Act, 1996?
Whether the contractor is entitled to escalation costs and interest for delays caused by the owner's failure to provide right of way?
Submissions/Arguments
Appellant argued that the award was contrary to contract terms and public policy, and that the tribunal exceeded its jurisdiction.
Respondent argued that the award was based on evidence and that the owner's failure to provide right of way caused delays, entitling the contractor to escalation and interest.
Ratio Decidendi
The court held that the scope of interference with an arbitral award under Section 37 is limited to grounds under Section 34, and the award was not contrary to public policy or patently illegal. The owner's failure to provide right of way was a breach of contract, and the contractor was entitled to escalation costs and interest.
Judgment Excerpts
By this appeal filed under Section 37 of the Arbitration and Conciliation Act, 1996, appellant seeks to challenge an Order and Judgment dated 14th October 2004 passed by the learned District Judge, Raigad Alibag, substantially rejecting the arbitration application filed by the appellant challenging the award made by the arbitral tribunal on 10th March 2004.
The owner accepted the bid of contractor and issued Works Order on 31st August 1999.
The owner issued a notification on 5th February 2001 for levy of toll from 6th February 2001 and specified a rate of toll per trip.
Procedural History
The arbitral tribunal made an award on 10 March 2004. The appellant filed an application under Section 34 of the Arbitration and Conciliation Act, 1996 before the District Judge, Raigad Alibag, which was substantially rejected on 14 October 2004. The appellant then filed the present appeal under Section 37 before the High Court of Bombay on 18 January 2013, and judgment was pronounced on 6 February 2013.
Acts & Sections
- Arbitration and Conciliation Act, 1996: Section 37, Section 34, Section 31(7)
