Arbitral award review is limited to jurisdictional error or apparent legal mistake, not a court's preferred contract interpretation.
Under the Arbitration Act, 1940, judicial interference with an arbitral award is confined to misconduct, jurisdictional excess, or an error of law apparent on the face of the award, and a court cannot replace a reasonably possible contractual construction with its own view. An award may be sustained where the arbitrator acts within the reference and the contract permits the interpretation adopted, including claims for extra cost on procurement from distant sources where the dispute covers the relevant quantities. By contrast, relief granted in disregard of express contractual clauses, such as claims barred by specific provisions on rock classification or site restrictions, is vulnerable as beyond jurisdiction.
Issues: (i) Whether the High Court could interfere with the arbitral award under the Arbitration Act, 1940 on the ground that the arbitrator had misconstrued the contract or exceeded jurisdiction; (ii) whether the award granting reimbursement for procurement of stone aggregate from distant sources, including the future period, was within the reference and contract; (iii) whether the awards on excavation in laterite rock and on restricted-area compensation were liable to be set aside as beyond the contract terms.
Issue (i): Whether the High Court could interfere with the arbitral award under the Arbitration Act, 1940 on the ground that the arbitrator had misconstrued the contract or exceeded jurisdiction.
Analysis: Interference with an award under the old Act is limited. An award can be set aside for misconduct, jurisdictional excess, or an error of law apparent on the face of the award, but not merely because another view of the contract is possible. If the arbitrator acts within the reference and adopts a reasonably possible construction of the contract, the court cannot substitute its own view. Where, however, the award is plainly contrary to a prohibitory contractual term, the court may treat it as a jurisdictional error.
Conclusion: The High Court was not entitled to interfere merely on a reappraisal of contractual interpretation, but it could interfere where the award plainly ignored binding contractual stipulations.
Issue (ii): Whether the award granting reimbursement for procurement of stone aggregate from distant sources, including the future period, was within the reference and contract.
Analysis: The arbitrator accepted that the contractor had to procure stone aggregate from places other than local sources and treated the resulting extra cost as compensable. That view was held to be a reasonably possible one for quantities actually brought up to the relevant cut-off date. The future component was also treated as part of the same dispute because the reference covered all disputes arising under the contract, and there was no legal basis to exclude future quantities merely because the claim was estimated. The award, however, was to operate only where the material was in fact procured from distant sources and not from local sources.
Conclusion: The award on claim for stone aggregate, including the future period, was sustained in substance and the contractor succeeded on this issue.
Issue (iii): Whether the awards on excavation in laterite rock and on restricted-area compensation were liable to be set aside as beyond the contract terms.
Analysis: The arbitrator, while granting relief for excavation and for working in a restricted area, ignored material contractual clauses that governed the classification of rock and expressly negatived extra compensation for the site restrictions. The High Court found that these awards were not supported by a reasonably possible reading of the contract and amounted to disregard of the agreed terms.
Conclusion: The awards on claims for excavation in laterite rock and for restricted-area compensation were rightly set aside and the contractor failed on these issues.
Final Conclusion: The appeals by the contractor succeeded only to the extent of restoring the award on the stone-aggregate claim, while the remaining claims were rejected and the award of the High Court was otherwise upheld.
Ratio Decidendi: Under the Arbitration Act, 1940, a court may interfere with an award only for jurisdictional error, misconduct, or an error of law apparent on the face of the award, and may not substitute its own interpretation where the arbitrator has adopted a reasonably possible view; but an award that plainly disregards an express contractual prohibition travels beyond jurisdiction and can be set aside.
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