Arbitral awards cannot create new heads of compensation beyond the reference and pleadings.

An arbitral tribunal cannot grant damages for a head of claim not covered by the submission to arbitration. Where the reference was confined to damage to agricultural land, crops, houses, mango gardens and reclamation of land, compensation for alleged loss of potential of the land had no pleading or authority in the reference. The tribunal also could not justify that head as permissible moulding of relief, because there was no finding that the land was incapable of reclamation. The award of compensation for loss of potential and interest on that amount was therefore beyond the scope of the reference and liable to be set aside.

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Issues: Whether the arbitral award granting compensation for loss of potential of land and interest thereon was beyond the scope of the reference to arbitration, and whether the award could be sustained in part.

Analysis: The dispute referred to arbitration was confined to the grievance raised in the writ petition, namely damage to agricultural lands, crops, houses and mango gardens, together with a claim for reclamation of the land. There was no claim, pleading or reference authorising compensation for alleged loss of potential of the land. The award nevertheless granted a separate head of damages for loss of potential of land and interest thereon. The reasoning in the award did not record any finding that the land could not be reclaimed, nor did the grant of compensation for lost potential amount to permissible moulding of relief within the terms of the reference. The award therefore dealt with matters not contemplated by or falling within the submission to arbitration. On the material before the Court, the award could not be treated as partially sustainable on that basis.

Conclusion: The award of compensation for loss of potential of land and interest thereon was beyond the scope of the reference and liable to be set aside.

Final Conclusion: The challenge to the arbitral award succeeded, the award was annulled, and the matter was left to proceed on the underlying appeal on its merits.

Ratio Decidendi: An arbitral tribunal cannot award damages for a head of claim not covered by the submission to arbitration, and relief cannot be moulded so as to create a new and unclaimed basis of compensation outside the reference.

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