Case Note & Summary
The appeal was filed by M/s. Saloja & Sons against the order of the Single Judge dated 18/12/2006, which set aside the arbitral award on interest and costs. The dispute arose from a contract between the appellant and the Union of India (Railways). The Arbitrator had awarded interest and costs without considering clauses 64.5 and 64.6 of the General Conditions of Contract, which specifically dealt with these aspects. The Single Judge, relying on a previous judgment in Dy. Chief Engineer, Western Railway v. M/s. R.P. Shah, held that the Arbitrator had not considered these binding conditions. The appellant argued that these clauses were not placed before the Arbitrator, so the Single Judge should not have relied on them. However, the Division Bench noted that the existence of the clauses was not disputed. The court found that the Single Judge's interference was within the framework of law, as the parties were bound by the agreed terms. The appeal was dismissed, upholding the Single Judge's order.
Headnote
A) Arbitration Law - Contractual Clauses - Binding Effect - Clauses 64.5 and 64.6 of General Conditions of Contract - The court held that if parties specifically agree on interest and costs, such clauses bind them for all purposes. The Arbitrator ought to have considered these clauses while passing the award. The Single Judge correctly interfered with the award to the extent of setting aside directions on interest and cost of arbitration, as the Arbitrator ignored the contractual conditions. (Paras 2-3)
Issue of Consideration
Whether the learned Single Judge was justified in setting aside the arbitral award on interest and costs based on clauses 64.5 and 64.6 of the General Conditions of Contract, which were not placed before the Arbitrator.
Final Decision
Appeal dismissed. The order of the Single Judge dated 18/12/2006 setting aside the arbitral award on interest and costs is upheld.
Law Points
- Arbitrator must consider contractual clauses binding parties
- Interest and costs governed by agreement
- Court can interfere if award ignores contractual terms
Case Details
2016 LawText (BOM) (07) 51
Appeal (L) No.105 of 2007 in Arbitration Petition No.456 of 2006
Anoop V. Mohta, G.S. Kulkarni
Ms. Shilpa Kapil for Appellant, Mr. Suresh Kumar with Ms. Sangeeta Yadav for Respondent
Union of India, acting through Divisional Railway Manager (Works)
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Nature of Litigation
Appeal against order of Single Judge setting aside part of arbitral award on interest and costs.
Remedy Sought
Appellant sought to set aside the Single Judge's order and restore the arbitral award on interest and costs.
Filing Reason
The Single Judge set aside the arbitral award on interest and costs based on clauses 64.5 and 64.6 of the General Conditions of Contract, which the appellant argued were not placed before the Arbitrator.
Previous Decisions
Single Judge order dated 18/12/2006 setting aside directions on interest and cost of arbitration.
Issues
Whether the Single Judge was justified in relying on contractual clauses not placed before the Arbitrator to set aside the award on interest and costs.
Submissions/Arguments
Appellant argued that clauses 64.5 and 64.6 were not placed before the Arbitrator, so the Single Judge ought not to have relied on them.
Respondent relied on a previous judgment (Dy. Chief Engineer, Western Railway v. M/s. R.P. Shah) to support that the clauses bind the parties.
Ratio Decidendi
Contractual clauses agreed between parties bind them for all purposes, including arbitration. An arbitrator must consider such clauses when passing an award. If the arbitrator ignores them, the court can interfere to set aside that part of the award.
Judgment Excerpts
The condition which binds the parties ought to have been considered by the learned Arbitrator while passing the award including these clauses.
The learned Judge has considered this basic aspect and noting the clauses as well as position of law, that if party specifically agrees with regard to the interest as well as costs, then it binds them for all the purposes.
Procedural History
Arbitration Petition No.456 of 2006 was filed challenging the arbitral award. The Single Judge by order dated 18/12/2006 set aside the award on interest and costs. The appellant filed Appeal (L) No.105 of 2007 against that order. The Division Bench heard the appeal and dismissed it on 4th July 2016.
Acts & Sections
- Arbitration and Conciliation Act, 1996:
