Case Note & Summary
The State of Maharashtra, through the Executive Engineer, appealed against an order of the District Judge-9, Pune, dated 5th July 2007, which rejected its application under Section 34 of the Arbitration & Conciliation Act, 1996, challenging an arbitral award dated 30th June 2004. The dispute arose from a construction contract awarded to M/s. Gupta Construction Co. for building the Institute of Hotel Management and Catering Technology at Pune. The arbitral tribunal allowed some of the contractor's claims. The State appealed under Section 37, arguing that the award was contrary to Clause 52(5) of the agreement, which required the contractor to submit monthly accounts of claims. The High Court, per Justice R.D. Dhanuka, dismissed the appeal, holding that the interpretation of contractual clauses by the arbitral tribunal is not open to challenge under Section 34 unless it is patently illegal or perverse. The court found no such illegality and upheld the District Judge's order. The court also noted that the appellant's submissions were limited to the interpretation of Clause 52(5) and did not demonstrate any error in the award. The appeal was dismissed with no order as to costs.
Headnote
A) Arbitration Law - Challenge to Arbitral Award under Section 37 - Scope of Appeal - The court considered the limited grounds for challenging an arbitral award under Section 37 read with Section 34 of the Arbitration & Conciliation Act, 1996. The appellant-State argued that the award was contrary to Clause 52(5) of the agreement requiring monthly submission of claims. The court held that the interpretation of contractual clauses by the arbitral tribunal is not open to challenge unless it is patently illegal or perverse. The District Judge's rejection of the Section 34 application was upheld as the award did not suffer from any error apparent on the face of the record. (Paras 1-4)
B) Contract Law - Interpretation of Clause 52(5) - Monthly Claim Submission - The appellant contended that the contractor failed to submit monthly accounts as required by Clause 52(5), and thus the claims were barred. The court noted that the arbitral tribunal had considered this clause and found that the contractor had submitted claims within the stipulated time or that the clause was not mandatory. The court held that the interpretation of a contract clause by the arbitral tribunal is final and cannot be interfered with under Section 34 unless it is so unreasonable that no reasonable person would accept it. (Para 4)
Issue of Consideration
Whether the arbitral tribunal's award allowing the contractor's claims was contrary to Clause 52(5) of the agreement and whether the District Judge erred in rejecting the Section 34 application.
Final Decision
The appeal is dismissed. The order dated 5th July 2007 passed by the learned District Judge-9, Pune, rejecting the appellant's application under Section 34 of the Arbitration & Conciliation Act, 1996, is upheld. No order as to costs.
Law Points
- Arbitration
- Section 37 of Arbitration & Conciliation Act
- 1996
- Section 34 of Arbitration & Conciliation Act
- Clause 52(5) of agreement
- Patent illegality
- Interpretation of contract clauses
- Monthly claim submission requirement
Case Details
2013 LawText (BOM) (04) 108
Arbitration Appeal No. 29 of 2007 in Civil Misc. Application No. 716 of 2004
Mr. S.M. Gorwadkar along with Mr. A.R. Patil, A.G.P. for the appellant. Ms. Sheetal Kumar along with Ms. Nupur Mukherjee i/by M/s.N.N. Vaishnawa and Co. for respondents.
The State of Maharashtra, Ministry of P.W.D. Of Govt of Maharashtra, (Through the Executive Engineer, Pune (P.W.), Division, (Bldgs), Govt Milk Supply Scheme Compound, Datye Bungalow, Kirkee, Pune 411 003)
M/s. Gupta Construction Co., M. Shrivananda, Shri. V.D. Chhatre, Shri. M.G. Dharap
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Nature of Litigation
Appeal under Section 37 of the Arbitration & Conciliation Act, 1996 challenging the rejection of a Section 34 application against an arbitral award.
Remedy Sought
The appellant (State of Maharashtra) sought to set aside the order dated 5th July 2007 of the District Judge-9, Pune, which rejected its application under Section 34 of the Arbitration & Conciliation Act, 1996, and consequently to set aside the arbitral award dated 30th June 2004.
Filing Reason
The appellant was aggrieved by the arbitral award allowing some claims of the respondent contractor and the subsequent rejection of its Section 34 application by the District Judge.
Previous Decisions
The arbitral tribunal passed an award on 30th June 2004 allowing some claims of the respondent. The appellant filed an application under Section 34 before the District Judge-9, Pune, which was rejected on 5th July 2007.
Issues
Whether the arbitral tribunal's award was contrary to Clause 52(5) of the agreement requiring monthly submission of claims.
Whether the District Judge erred in rejecting the Section 34 application.
Submissions/Arguments
The appellant argued that the arbitral tribunal decided contrary to Clause 52(5) of the agreement, which required the contractor to submit monthly accounts of claims. The contractor failed to comply, and thus the claims should have been rejected.
The respondent argued that the interpretation of Clause 52(5) by the arbitral tribunal was correct and not open to challenge under Section 34.
Ratio Decidendi
The interpretation of contractual clauses by an arbitral tribunal is not open to challenge under Section 34 of the Arbitration & Conciliation Act, 1996, unless it is patently illegal or perverse. The court found no such illegality in the award allowing the contractor's claims despite the alleged non-compliance with Clause 52(5).
Judgment Excerpts
By this petition filed under section 37 of the Arbitration & Conciliation Act, the appellant seeks to challenge the order and judgment dated 5th July, 2007 passed by the learned District Judge-9, Pune rejecting the application filed by the appellant under section 34 of the Arbitration & Conciliation Act, 1996 by which the appellant has impugned the arbitral award dated 30th June, 2004 passed by the arbitral tribunal allowing some of the claims made by the respondent contractor.
Mr. Gorwadkar, the learned counsel, appearing for the appellant has canvassed for consideration of this court three submissions as under : (1) The arbitral tribunal has decided contrary to clause 52(5) of the agreement.
Procedural History
The respondent contractor was awarded a contract for construction work. Disputes arose and were referred to arbitration. The arbitral tribunal passed an award on 30th June 2004 allowing some claims. The appellant (State) filed an application under Section 34 of the Arbitration & Conciliation Act, 1996 before the District Judge-9, Pune, which was rejected on 5th July 2007. The appellant then filed the present appeal under Section 37 before the High Court.
Acts & Sections
- Arbitration & Conciliation Act, 1996: Section 37, Section 34
