Case Note & Summary
The appellant, M/s R. N. Tandon and Sons, a contractor, was awarded a contract by the respondent, Union of India, for construction of bridges in the Metpanjara-Kohli Section of Central Railway. The contract included a price variation clause allowing escalation. However, when the contract agreement was signed, an unknown official of the respondent unilaterally struck off the price variation clause and endorsed 'escalation clause not applicable' without the appellant's knowledge or consent. The appellant completed the work and claimed price escalation. Disputes arose and were referred to arbitration. The Arbitral Tribunal awarded Rs. 7,36,469/- with interest at 8% per annum towards price escalation. The respondent challenged the award before the District Judge, Nagpur, who set aside the award on the ground that the price variation clause was not part of the contract. The appellant appealed under Section 37 of the Arbitration and Conciliation Act, 1996. The High Court held that the District Judge exceeded his jurisdiction by reappreciating evidence and substituting his own view. The court noted that the price variation clause was part of the contract when signed by the appellant and was struck off unilaterally by the respondent without consent. The court restored the arbitral award, allowing the appeal.
Headnote
A) Arbitration Law - Setting Aside Award - Section 34, Arbitration and Conciliation Act, 1996 - Grounds for Setting Aside - The court can set aside an arbitral award only on grounds specified in Section 34, such as incapacity, invalidity of arbitration agreement, lack of proper notice, or contravention of public policy. The District Judge exceeded jurisdiction by reappreciating evidence and substituting his own view. (Paras 1-10) B) Contract Law - Unilateral Alteration - Price Variation Clause - The price variation clause in the contract was struck off by an unknown official of the respondent without the appellant's consent. The appellant had signed the contract with the clause intact. The unilateral deletion without consent is not binding on the appellant. (Paras 3-5) C) Arbitration Law - Appeal under Section 37 - Scope - In an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, the appellate court cannot reappreciate evidence or interfere with findings of fact unless perverse. The District Judge's order setting aside the award was based on reappreciation of evidence and hence unsustainable. (Paras 6-10)
Issue of Consideration
Whether the District Judge was justified in setting aside the arbitral award granting price escalation to the contractor on the ground that the price variation clause was struck off from the contract?
Final Decision
Appeal allowed. The judgment and order dated 18th December 2007 passed by the District Judge, Nagpur is set aside. The arbitral award dated 30th June 2006 is restored. No order as to costs.
Law Points
- Arbitration award can be set aside only on grounds under Section 34 of Arbitration and Conciliation Act
- 1996
- Price variation clause cannot be unilaterally deleted without consent
- Contractor entitled to price escalation if clause is part of contract
- Court cannot reappreciate evidence in appeal under Section 37
