Case Note & Summary
The appellant, Chennai Metropolitan Water Supply and Sewerage Board, invited tenders for construction of a Permeate Conveyance Pipeline as part of a project funded by the Overseas Economic Co-operation Fund of Japan. The first respondent, SPML Infra Limited, submitted a tender which was accepted, and an agreement was entered into. During execution, the appellant made substantial post-contractual changes in alignment and scope, leading to a drastic reduction in originally contemplated quantities, abnormal delay in handing over the site, issuance of revised drawings and approvals, and increased excavation depth resulting in additional work and expenditure. The first respondent raised claims before the arbitral tribunal, which passed an award partly in favor of the claimant. The appellant filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996 before the learned Single Judge, who partly allowed the petition by setting aside the award only in respect of Claim No.6 and confirming the award in all other respects. Aggrieved, the appellant filed the present Original Side Appeal under Clause 15 of the Letters Patent. The Division Bench considered the limited scope of interference under Section 34, noting that the court does not sit in appeal over the arbitral award and can only set aside the award if it is against the public policy of India or patently illegal. The Bench found that the learned Single Judge had re-appreciated the evidence regarding Claim No.6 and substituted his own view, which was impermissible under Section 34. Consequently, the Division Bench allowed the appeal in part, set aside the order of the learned Single Judge insofar as it set aside the award for Claim No.6, and restored the arbitral award in its entirety. The connected miscellaneous petition was closed.
Headnote
A) Arbitration - Section 34 of the Arbitration and Conciliation Act, 1996 - Scope of Interference - The court examined the limited grounds for setting aside an arbitral award under Section 34, emphasizing that the court does not sit in appeal over the merits of the award and interference is only warranted if the award is against the public policy of India or patently illegal. (Paras 1-22) B) Contract Law - Lump Sum Contract - Post-Contractual Changes - The dispute involved a lump sum contract for construction of a pipeline where the appellant Board made substantial post-contractual changes in alignment and scope, resulting in reduction of quantities and additional excavation. The arbitral tribunal awarded additional compensation for extra work and delay. (Paras 2-5) C) Arbitration - Claim No.6 - Setting Aside of Award - The learned Single Judge set aside the award in respect of Claim No.6 (additional cost due to change in alignment) on the ground that the claim was not supported by evidence. The Division Bench held that the Single Judge exceeded the scope of Section 34 by re-appreciating evidence and set aside that part of the order, restoring the award for Claim No.6. (Paras 6-22)
Issue of Consideration
Whether the learned Single Judge erred in partly setting aside the arbitral award in respect of Claim No.6 and whether the award was liable to be interfered with under Section 34 of the Arbitration and Conciliation Act, 1996.
Final Decision
The Division Bench allowed the appeal in part, set aside the order of the learned Single Judge dated 14.08.2019 in O.P.No.324 of 2009 insofar as it set aside the award for Claim No.6, and restored the arbitral award in its entirety. The connected miscellaneous petition was closed.
Law Points
- Section 34 of the Arbitration and Conciliation Act
- 1996
- Scope of interference with arbitral award
- Public policy
- Lump sum contract
- Post-contractual changes
- Additional work
- Delay in handing over site
