Arbitrator's Decision To Choose Internationally Recognised Formula Based On Expertise For Computing Damages Can't Be Faulted: Delhi High Court

The Delhi High Court bench of Justice Manoj Kumar Ohri has held that different formulae may be applied depending on the circumstances, and the choice of method for computing damages falls within the arbitrator's discretion. Sections 55 and 73 of the Indian Contract Act, 1872 (Contract Act) do not prescribe any specific formula for the calculation of damages. Therefore, the arbitrator's decision to apply any internationally recognized method, based on their expertise, cannot be faulted. Brief Facts: The present petition has been filed raising certain objections under Section 34 of the Arbitration & Conciliation Act, 1996 ( Arbitration Act) against the award dated 22.01.2009 (“impugned award”) delivered by the Arbitral Tribunal, comprising a Sole Arbitrator (“AT”). The impugned award pertains to a contract dated 24.12.1987, executed pursuant to a public tender issued by the petitioner for the construction of 152 houses (76 each for Category-II and Category-III) and 114 scooter garages, including water supply and related works, under Group-I of the Self-Financing Scheme (SFS), Sector-I, Pocket K & L, at Sarita Vihar. The stipulated commencement date was 03.01.1988, with a scheduled completion date of 02.04.1989. However, the work was actually completed on 31.03.1992. Contentions: The Petitioner submitted that the claims awarded in favour of the respondent has been passed without giving due consideration to the evidence and are against the provisions of the Agreement entered into between the parties. It was further submitted that the Arbitral Tribunal (AT) has failed to provide reasons for non-applicability of Clause 10 of the agreement, which bars any compensation or damages on account of any delay in non-supply of materials by the Department. It was also submitted that the AT has awarded the claim relying solely on the CPWD price index which is not approved of by this Court as in other cases it is not held to be the correct method. Moreover, no evidence was led by the respondent to buttress its claim for loss of profits. It was also argued that since the respondent had failed to submit the RA Bills, final bills and 10CC bill, lading the petitioner with the burden of preparation of the bills, the petitioner is not liable to pay any interest on delay. Per contra, the Respondent submitted that there is evidence on record such as the hindrance register based on which the AT has returned its finding that the petitioner was responsible for the delay, and the sufficiency or otherwise of the evidence is not to be looked into in a petition under Section 34 of the Arbitration Act. It was further submitted that a number of decisions have held that the arbitrator is not required to give detailed calculations, particularly when he is an expert in the field and a technical person. It was also contended that petitioner has not pointed out any specific discrepancy in the amount calculated and awarded by AT and AT could devise its own formula based on cost indices for assessing the damages by way of reduced profitability and claim can be awarded, notwithstanding payment under clause l0CC. Observations: The court noted that the Arbitral Tribunal (AT) reviewed the evidence, including the hindrance register, and concluded that the delay was attributable to the petitioner. These are factual findings within the AT's domain, and this Court will not reappreciate the evidence or assess its sufficiency. Based on the above, it held that there is no patent illegality or apparent error in the award. As for the lack of detailed calculations, the AT's reasoning sufficiently explains the partial allowance of the claim and the basis for the awarded amount. The Delhi High Court in DDA v. Bhagat Construction Co. (P) Ltd ., while dealing with the findings arrived at by the Arbitrator based on his expertise held that the Arbitrator, a former Director General of CPWD, relied on his expertise and the material before him to reduce the claimant's demand from Rs. 16,60,000 to Rs. 3,50,000. The Court in the above further observed that he was not required to disclose the precise basis or mental process for this figure, nor provide a detailed judgment like a court. It suffices that he indicated the reasoning and basis for the award. The learned Single Judge thoroughly examined the relevant documents and found no infirmity in the award. Based on the above, the court in the present case held that the Arbitrator was a technical person who could take his experience into account and nothing has been shown to prove any mala fide in his approach. The court relied on the Supreme Court judgment in Hindustan Construction Co. Ltd. v. NHAI ,where it was held that interpretation of the contract is the domain of the AT and the same would not be interfered with in proceedings under Section 34, as long as such interpretation is not ex-facie...

Arbitrator's Decision To Choose Internationally Recognised Formula Based On Expertise For Computing Damages Can't Be Faulted: Delhi High Court

Mohd Malik Chauhan

Tags