Case Note & Summary
The appellant, M/s. Shirdi Country Inns Pvt. Ltd., invited a tender for certain work through its consultant. The respondent, M/s. Suvidha Engineers India Pvt. Ltd., submitted its tender, and a work order was issued. The tender work was completed, and the amount due was paid. However, the respondent claimed that it carried out extra work beyond the scope of the basic work order and raised various invoices for the same. Disputes arose between the parties regarding payment for this extra work. By a consent order dated 18th February 2011, in an application under Section 11 of the Arbitration and Conciliation Act, 1996, the Chief Justice appointed a sole arbitrator. The learned arbitrator made an award, which was challenged by the appellant by filing an earlier arbitration petition. By consent of both parties, the award was set aside by order dated 29th October 2012, and the court appointed another arbitrator to adjudicate the disputes. The learned arbitrator made a fresh award on 18th January 2014, which was challenged in Arbitration Petition No. 782 of 2014. The learned Single Judge dismissed the petition by order dated 13th January 2015, leading to the present appeal under Section 37 of the Act. The main legal issues were whether the arbitrator had jurisdiction to entertain the claim for extra work in the absence of a specific arbitration clause for such work, and whether the interest rate of 18% per annum awarded by the arbitrator was excessive. The appellant argued that the arbitrator lacked jurisdiction and that the interest rate was patently illegal. The respondent contended that the arbitrator's findings were based on evidence and not perverse. The court held that there was no dispute that the work was actually carried out, and the appellant did not lead any counter evidence except making denials. The arbitrator's findings on quantum and interest were based on evidence and not perverse. The learned Single Judge had already reduced the interest rate from 18% to 12% per annum, which was not challenged by the respondent. The court found no ground to interfere with the impugned order and dismissed the appeal with no order as to costs.
Headnote
A) Arbitration Law - Challenge to Arbitral Award - Section 34 of the Arbitration and Conciliation Act, 1996 - Scope of Interference - The appellant challenged the arbitral award on the ground that the arbitrator lacked jurisdiction to entertain the claim for extra work as there was no arbitration clause for such work and that the interest rate was excessive. The Court held that the arbitrator's findings on quantum and interest were based on evidence and not perverse, and the learned Single Judge correctly refused to interfere under Section 34. (Paras 1-6) B) Arbitration Law - Extra Work - Jurisdiction - Section 11 of the Arbitration and Conciliation Act, 1996 - The dispute arose from extra work carried out by the respondent outside the basic work order. The arbitrator was appointed by consent under Section 11, and the appellant participated in the proceedings without raising the jurisdiction issue at the outset. The Court held that the arbitrator had jurisdiction to decide the claim for extra work as it was connected to the main contract. (Paras 2-4) C) Arbitration Law - Interest - Rate of Interest - Section 31(7) of the Arbitration and Conciliation Act, 1996 - The arbitrator awarded interest at 18% per annum on the principal amount. The Court held that the rate of interest is within the discretion of the arbitrator and cannot be interfered with unless it is patently illegal or against public policy. The learned Single Judge's decision to reduce the interest rate to 12% per annum was not challenged by the respondent, and the appeal was dismissed. (Paras 5-6)
Issue of Consideration
Whether the learned Single Judge erred in dismissing the petition under Section 34 of the Arbitration and Conciliation Act, 1996 challenging the arbitral award which allowed the respondent's claim for extra work and interest.
Final Decision
The appeal is dismissed. The impugned order dated 13th January 2015 passed by the learned Single Judge is confirmed. No order as to costs.
Law Points
- Arbitration and Conciliation Act
- 1996
- Section 34
- Section 37
- Scope of interference with arbitral award
- Extra work
- Interest rate
- No counter evidence
