1987 (9) TMI 420 - SC - Indian Laws

Supreme Court affirms arbitrator's award in construction dispute, emphasizing deference to arbitration.

The Supreme Court upheld the High Court's decision in a contractual dispute over construction of staff quarters. The arbitrator's award, rescinding the ... - Issues involved: Contractual dispute regarding construction of staff quarters, arbitration clause interpretation, reasonableness of arbitrator's award, principles of natural justice in arbitration proceedings.Contractual Dispute and Arbitration Clause Interpretation:The petitioner, a Municipal Corporation, awarded a construction contract to the respondent. Due to alleged delays in work completion, the petitioner sought arbitration u/s 20 of the Arbitration Act, 1940. An arbitrator was appointed, who issued an award in 1984 resolving various claims and counter-claims between the parties. The arbitrator found that time was not the essence of the contract due to delays caused by the petitioner and rescinded the contract, awarding compensation to the respondent. The High Court upheld the award, which was challenged by the petitioner in the Supreme Court.Reasonableness of Arbitrator's Award:The Supreme Court held that the reasonableness of an arbitrator's award, including the interpretation of contractual terms, is not justiciable u/s Article 136 of the Constitution. The Court examined the arbitrator's reasoning behind each claim and counter-claim resolution, finding them to be reasonable and based on relevant factors. The Court emphasized that the arbitrator's discretion and expertise in evaluating evidence should be respected, and the award should not be set aside unless there is a violation of natural justice principles.Principles of Natural Justice in Arbitration:The Court reiterated that arbitrators have the authority to appraise evidence and make decisions based on their expertise, without strict adherence to formal evidence rules like in court proceedings. The Court cited previous judgments emphasizing the deference to arbitrators' decisions, especially in commercial disputes. It was concluded that the arbitrator in this case acted reasonably and rationally in issuing the award, dismissing the challenge on trivial grounds.Conclusion:The Supreme Court dismissed the petition challenging the arbitrator's award, upholding the High Court's decision. The respondent was awarded costs for the challenge up to the High Court level, while each party was directed to bear their respective costs for the Supreme Court proceedings. The petition for leave to appeal was refused, affirming the validity of the arbitrator's award in resolving the contractual dispute.