Case Note & Summary
The petitioner, ICICI Bank Limited, filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging an arbitral award dated 30 December 2015 passed by the learned arbitrator in favor of the respondent, M/s. Welways Engineers (India). The dispute arose out of a contract awarded by the petitioner to the respondent for civil, plumbing, sanitary, and road works for the construction of ICICI Disaster Recovery Data Centre at Jaipur. The respondent had raised various claims, which were allowed by the arbitrator. The petitioner impugned the award on several grounds, including that the arbitrator had awarded interest on mobilization advance despite the contract providing for interest-free advance, awarded loss of profit without any evidence, and awarded pendente lite interest on amounts already paid. The court, after hearing both sides, held that the award on these specific claims was patently illegal and set aside the same. However, the court upheld the award on other claims. The court also noted that the arbitrator had not considered the contract terms properly and had acted beyond the scope of the arbitration agreement. The petition was partly allowed, and the award was modified accordingly.
Headnote
A) Arbitration Law - Setting Aside Arbitral Award - Section 34 of the Arbitration and Conciliation Act, 1996 - Patent Illegality - The court examined whether the arbitral award suffered from patent illegality or was contrary to public policy. The court held that the award on certain claims was patently illegal and set aside the same, while upholding other claims. (Paras 1-30) B) Contract Law - Mobilization Advance - Interest - The contract provided for interest-free mobilization advance. The arbitrator awarded interest on the mobilization advance from the date of termination of contract. The court held that the arbitrator could not award interest on an interest-free advance, as it would be contrary to the contract terms and patently illegal. (Paras 15-20) C) Contract Law - Loss of Profit - Evidence - The respondent claimed loss of profit on the balance work. The arbitrator awarded the same without any evidence of actual loss. The court held that loss of profit cannot be awarded in the absence of proof of loss, and the award was patently illegal. (Paras 21-25) D) Arbitration Law - Pendente Lite Interest - Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 - The arbitrator awarded pendente lite interest on amounts already paid by the petitioner. The court held that the arbitrator could not award interest on amounts already paid, as it would be contrary to the Act and patently illegal. (Paras 26-30)
Issue of Consideration
Whether the arbitral award dated 30 December 2015 is liable to be set aside under Section 34 of the Arbitration and Conciliation Act, 1996 on grounds of patent illegality and being contrary to public policy, particularly regarding claims for loss of profit, interest on mobilization advance, and pendente lite interest.
Final Decision
The court partly allowed the petition and set aside the arbitral award on the claims for loss of profit, interest on mobilization advance, and pendente lite interest on amounts already paid. The award on other claims was upheld.
Law Points
- Arbitration award can be set aside if it is patently illegal or contrary to public policy
- Arbitrator cannot award interest on mobilization advance when contract provides for interest-free advance
- Loss of profit cannot be awarded without evidence of actual loss
- Arbitrator cannot award pendente lite interest on amounts already paid
- Section 34 of Arbitration and Conciliation Act
- 1996
