Case Note & Summary
The dispute arose from a contract between the appellant, a Korean company, and the respondent, the National Highways Authority of India (NHAI), for the construction of a bypass on National Highway 26 in Madhya Pradesh. The appellant's bid was accepted in December 2005, and the contract included a price adjustment formula for various components. Following a policy circular issued by NHAI in February 2013, which introduced a new formula for price adjustments, the appellant contested the validity of this circular through a writ petition, which was dismissed on the grounds of an alternative dispute resolution mechanism. Subsequently, the appellant sought interim protection from the Delhi High Court against the implementation of the circular. The dispute was referred to a Dispute Adjudicating Board, which recommended a linking factor for price adjustments. The appellant then initiated arbitration, claiming unpaid price adjustments and interest. The majority of the arbitral tribunal upheld the application of the circular, while a dissenting opinion favored the appellant. The Delhi High Court dismissed the appellant's Section 34 petition challenging the majority award, leading to the current appeal. The Supreme Court analyzed the applicability of the Arbitration and Conciliation (Amendment) Act, 2015, and determined that the amendments were prospective. The court ultimately upheld the majority award, finding it consistent with the contract and not in violation of public policy.
Headnote
A) Arbitration Law - Validity of Majority Award - Majority award upheld as it was within contractual stipulations - Arbitration and Conciliation Act, 1996, Section 34 - The court found that the majority arbitrators' decision was a possible view and did not constitute a jurisdictional error, thus affirming the validity of the award. Held that the application of the linking factor was permissible under the contract (Paras 7-10). B) Public Policy - Conflict with Public Policy - Majority award not in conflict with public policy - Arbitration and Conciliation Act, 1996, Section 34 - The court ruled that the majority award did not shock the conscience of the court and was not contrary to the fundamental policy of Indian law, thus it was not set aside on public policy grounds (Paras 10-12).
Issue of Consideration
Whether the majority award in arbitration was valid and whether the Circular issued by the respondent could be applied.
Final Decision
The Supreme Court upheld the majority award of the arbitral tribunal, affirming that the application of the linking factor was permissible under the contract and did not violate public policy.
Law Points
- Arbitration
- price adjustment
- public policy
- jurisdictional error
- natural justice
