Case Note & Summary
The Union of India, through the General Manager, Western Railway, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award dated 21 April 2011. The dispute arose from a contract awarded to R.S. Jiwani, Engineers and Contractors on 23 November 1992 for Rs.16,23,524 with a five-month completion period. The contractor could not complete the work on time and was granted extensions. Disputes arose, and the contractor invoked arbitration on 6 October 1997. The arbitrator allowed several claims, including Claim No. 1 for Rs.25,330/- for idling of establishment due to prolongation of the contract. The petitioner argued that Clause 17.3 of the General Conditions of Contract expressly prohibited any claim for damages or compensation for delay, regardless of the cause, and that the arbitrator ignored this clause. The respondent contended that the arbitrator found the petitioner responsible for the delay, making the prohibition inapplicable. The court examined Clause 17.3 and held that it clearly barred any claim for damages or compensation for delay, irrespective of the cause. The arbitrator had not considered this clause despite it being raised. The court concluded that the arbitrator exceeded its jurisdiction by allowing the claim in the face of the express prohibition. Consequently, the court set aside the award to the extent of Claim No. 1 and dismissed the petition in respect of other claims.
Headnote
A) Arbitration - Challenge to Arbitral Award - Section 34 Arbitration & Conciliation Act, 1996 - Prohibition Clause - Claim for idling of establishment due to prolongation of contract - Clause 17.3 of General Conditions of Contract expressly prohibits any claim for damages or compensation for delay, irrespective of cause - Arbitrator allowed claim despite specific objection - Held that arbitrator exceeded jurisdiction by awarding claim in teeth of prohibition clause - Award set aside to that extent (Paras 1-6).
Issue of Consideration
Whether the arbitral tribunal could award compensation for idling of establishment due to prolongation of contract in the face of Clause 17.3 of the General Conditions of Contract which prohibits any claim for damages or compensation for delay.
Final Decision
The court set aside the arbitral award to the extent of Claim No. 1 (Rs.25,330/-) and dismissed the petition in respect of other claims.
Law Points
- Arbitral tribunal cannot award damages or compensation for delay when contract expressly prohibits such claims
- Clause 17.3 of General Conditions of Contract bars compensation for delay irrespective of cause
- Arbitrator exceeds jurisdiction by ignoring express contractual prohibition
