Case Brief
Decided on: 27 April 2009 by Supreme Court.
Bench: CJI S.B. Sinha and Justice S.H. Kapadia
Appellant: D.D. Sharma
Respondent: Union of India
Statutes Referred: Arbitration Act, 1940
Background Facts
- The Chief Engineer, Project Vartak, issued a notice inviting tenders for construction of six bridges in the State of Arunachal Pradesh. The tender provided that the construction site would be handed over to the suitable contractors within one month after accepting the offer and the work must be completed within 36 months.
- The appellant, a contractor, made an offer in response to this tender by two letters. The offers in these letters were conditional offers. The conditions were:
- If the 10% advance is given, the contractor will give rebate of rs. 90,000 per bridge that is 5,40,000 as whole.
- If the 10% advance is proportionately deducted from the bills over the entire period of 36 months and the work is given to them by 31 December, 1983, the contractor are ready to offer rebate of total 46,90,000.
- These offers were accepted and a contract was entered into between the parties which contained an arbitration agreement which provided that any dispute between the parties would be referred to Arbitrator S.B. Joshi.
- But the respondents could not hand over the site to the appellant within specified time, in response to which the appellant approached the Arbitrator with two claims as follow:
- Claim 1a: Refund of rebate amount – Rs. 5,40,000.
- Claim 1b: Refund of rebate amount subject to 10% advance – 46,90,000
- Claim 1c: Escalation cost on the above amounts.
- Claim 2: Loss of profit due to delay in handing over the site to the appellant- Rs 10,00,000.
Decision of Arbitrator:
He allowed Claim no. 1(a) and ordered refund of Rs. 90,000. Claim 1(b) was accepted to the tune of Rs. 6,48,000. Claim 1(c) was rejected and Claim 2 was accepted to the tune of Rs. 5 lakhs.
- Thereafter the appellant approached Assistant District Judge, Tezpur for enforcement of the award so passed. The respondents filed an objection but the same was rejected.
- Aggrieved by it, UOI filed an appeal before Guahati High Court.
Decision of High Court:
The High Court affirmed the order passed in respect of Claim 2. But held that the order passed in respect of Claim 1(a) and 1(b) are not sustainable.
Aggrieved by the Decision of High Court, the appellant filed the present appeal before the Supreme Court.
Legal Issue
Whether the High Court was justified in interfering with the award passed by the Arbitrator?
Contentions of the appellants
- The appellants were represented by K.K. Rastogi.
- They contended that the High Court has committed an error by interfering with the award passed by Arbitrator since it was a nonspeaking order. Moreover, the Arbitrator has considered all the documents.
- The appellant gave two rebate offers. The condition of first was not fulfilled so the appellant is entitled to claim maintenance.
- The respondents deducted 10% advance within 18 months rather than 36 months. So, second claim is also valid.
- The respondents failed to hand over the site to the appellant within the time which caused huge loss to the contractor as he had to keep his machines idle for long time.
Contentions of the respondents
- The respondents were represented by Mrs. Anil Katiyar.
- She contended that the high court could interfere with the award passed by the Arbitrator if he has done any misconduct.
- The appellant has been granted the escalation cost, so no more claim arises.
Cases Referred
In Continental Construction Ltd. vs. State of U.P[1]
It was held in this case that the court is justified to interfere with the award passed by Arbitrator is he has misconducted the proceedings or if the error in the award passed is apparent prima facie.
Rajasthan State Mines & Minerals Ltd. vs. Eastern Engineering Enterprises and Another[2]:
It was opined that if the award is nonspeaking, the jurisdiction of the court to interfere is limited. Court can only interfere if Arbitrator exceeds its power.
Court can’t ask the Arbitrator that what caused him to reach a particular decision if the award is nonspeaking.
H.P. State Electricity Board vs. R.J. Shah and Company[3]:
Here the question of exceeding the jurisdiction was decided. It was held that if the claimant can bring a specific matter before the Arbitrator, it is within the jurisdiction the of the Arbitrator.
Observation of the Court
- The court can interfere with the award passed by the Arbitrator only if he has exceeded his jurisdiction.
- Under Section 30 of Arbitration Act,1940, Court can interfere if the Arbitrator has done some misconduct, or the award is prima facie erroneous.
- The respondents failed to show that the findings of High Court were justified.
- No evidence is produced which can show that the Arbitrator ignored any material document. There is no evidence of misconduct on the part of Arbitrator.
Decision of Supreme Court
The appeal by appellant was allowed and the judgement of the High Court was set aside.
Prepared by Supreet Kaur