Arbitral Award Can't Be Challenged On Ground That Arbitrator Has Failed To Appreciate Facts : Supreme Court

On Tuesday, the Supreme Court reiterated that the Appellate Court exercising power under Section 30 and 33 of the Arbitration Act, 1940 ought not to reassess or re appreciate evidence or examine the sufficiency of the evidence. The Apex Court also held that the arbitral award ought not to be challenged on the ground that the arbitrator had drawn his own conclusion or had failed to appreciate facts. A Bench comprising Chief Justice of India, N.V. Ramana and Justices A.S. Bopanna and Hima Kohli allowed an appeal assailing the order passed by the Division Bench of the Madras High Court, which had set aside the order and decree of the Single Judge upholding the arbitral award to the extent that it granted money for idle hire charges and value of tools and machineries. Factual Background On 16.11.1988, a construction company, Atlanta Limited ("Atlanta") entered into a contract with the Union of India (UoI) to construct a runway and for allied work at the Naval Air Station, Arakonam for a consideration of Rs. 19,58,94,190. The term for completion was stipulated in the contract to be 21 months from the date of commencement. As per the UoI, the site was handed over on 24.11.1988 and therefore the date of completion ought to be 23.08.1990, whereas Atlanta claimed that due to water-logging the work could commence only on 01.01.1989. Extension was sought and granted by the UoI thrice, first till 31.12.1990, then till 30.06.1991 and finally till 31.03.1992. Atlanta claimed that by mid-March it had completed substantial construction of the runway and the taxi track. For inauguration purposes on 11.03.1992, the site was handed over to the UoI. Later, Atlanta's request for passes for entry of the staff, operators and labourers were not granted. And on 02.04.1992, it was intimated that the contract was terminated. Atlanta invoked the arbitration clause and a Sole Arbitrator was appointed. Upon consideration of the claims and counterclaims the Arbitrator awarded Rs. 25,96,87,442.89 to Atlanta including interest upto 31.03.1999. Directions were also passed against the UoI to pay future interest at the rate of 18% p.a. on the principal amount. The Union of India was awarded Rs. 1,42,255 along with future interest. Dissatisfied with the award, UoI filed a petition under Section 30 read with Section 33 of the 1940 Act, which was rejected by the Single Judge and a decree was passed. On appeal, the Division Bench set aside the amount awarded in favour of Atlanta towards idle hire charges and the value of the tools and machineries. Contentions raised by the appellant Senior Advocate, Ms. Meenakshi Arora appearing on behalf of Atlanta submitted that the Division Bench had erred in re-appreciating evidence, which was extensively examined by the Arbitrator and the Single Judge considering that the scope of inference is limited under the Arbitration Act, 1940 as held by the Supreme Court in NTPC Ltd. v. Deconar Services Pvt. Ltd. (2021) SCC OnLine SC 498. Arguing that the award is not patently perverse, she submitted that the Division Bench had exceeded its jurisdiction in supplanting the conclusions reached by the Arbitrator with its own opinion. Contentions raised by the respondent Additional Solicitor General, Mr. Sanjay Jain appearing on behalf of the Union of India argued that Clauses 7, 11, 54 and 70 of the contract, which pertain to reasonableness of extension of time and validity of termination of contract were "excepted matters". It was contented that the Arbitration had gone beyond the reference to allow claim for idling cost of plant and machinery in favour of Atlanta which were covered under "excepted matters" by virtue of Clauses 54 and 70. It was pointed out that in a separate proceeding before the High Court, Atlanta was permitted to lift its material from the site, but it chose not to do so. Therefore, it was contended that the award was patently perverse. Relying on Food Corporation of India v. Sreekanth Transport (1999) 4 SCC 491, Grid Corporation of Orissa Ltd. And Anr. v. Balasore Technical School (2000) 9 SCC 552 and General Manager, Northern Railways And Anr. v. Sarvesh Chopra (2002) 4 SCC 45, Mr. Jain argued that the Arbitrator could not have adjudicated the "excepted matters". Analysis by the Supreme Court Scope of Section 30 and 33 of the Arbitration Act, 1940Citing Kwality Manufacturing Corporation v. Central Warehousing Corporation (2009) 5 SCC 142, Arosan Enterprises Ltd. v. Union of India And Anr. (1999) 9 SCC 449 and Municipal Corporation of Delhi v. Jagan Nath Ashok Kumar and Anr. (1987) 4 SCC 497, the Court noted that the scope of the provisions are indeed limited and the Court ought not to reassess or appreciate evidence or examine sufficiency of evidence in the exercise of the same. Only a patent error or misconduct of the Arbitrator or the proceedings could justify the Court's interference. The Court ...

Arbitral Award Can't Be Challenged On Ground That Arbitrator Has Failed To Appreciate Facts : Supreme Court

Sohini Chowdhury

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