Arbitral award interference for breach of contract terms, excess of reference, and unsupported claims; interest reduced to statutory limits

An arbitral award may be set aside where the arbitrator ignores binding contractual terms, grants relief beyond the scope of the reference, or awards amounts unsupported by evidence or legal basis; on that reasoning, the awards on claim No. 1 and claim No. 37A were set aside. Interest on the contractor's claims was permissible in the absence of an express bar, but it had to conform to the statutory ceiling under the Interest Act, 1978, so the rate was reduced from 18% to 9% per annum. The remaining contractor claims and the upheld counter-claim were sustained because no jurisdictional error, legal misconduct, or patent error was shown.

---

---

Issues: (i) whether the arbitral awards on claim No. 1 and claim No. 37A were liable to be set aside for legal misconduct and error apparent on the face of the award; (ii) whether the award of interest under claims 12 and 13 required modification; and (iii) whether the awards on the remaining contractor claims and the employer's counter-claims called for interference.

Issue (i): whether the arbitral awards on claim No. 1 and claim No. 37A were liable to be set aside for legal misconduct and error apparent on the face of the award.

Analysis: The contractual documents, including the work order, its amendment, and the later agreement, had to be read together. On that construction, mobilisation advance was governed by the contractual scheme requiring release against bank guarantee and related conditions. The finding that the employer had delayed release in breach of contract was unsustainable because the arbitrator ignored binding contractual terms. As to claim No. 37A, the award of daily damages was founded on a future contingency not pleaded as the subject of the reference, and it was unsupported by evidence or legal basis. The award therefore suffered from patent legal error and was beyond jurisdiction.

Conclusion: The awards on claim No. 1 and claim No. 37A were set aside.

Issue (ii): whether the award of interest under claims 12 and 13 required modification.

Analysis: In the absence of an express contractual bar, interest could be awarded for the relevant periods. However, the rate had to conform to the statutory ceiling under the Interest Act, 1978 for the pre-reference period, and the same rate was made appropriate for pendente lite and future interest on the facts of the case. The original award of 18% per annum was excessive in the context of the governing statutory framework.

Conclusion: The award of interest was modified to 9% per annum.

Issue (iii): whether the awards on the remaining contractor claims and the employer's counter-claims called for interference.

Analysis: The remaining contractor claims concerned payment for work done, refund of withheld amounts, escalation, and related contractual entitlements. The arbitrator considered the material and the contract terms and gave reasons for the conclusions reached. No jurisdictional error, legal misconduct, or error apparent on the face of the award was shown. The rejected contractor claims and the rejected counter-claims were also not shown to suffer from any infirmity warranting interference. The award on counter-claim No. 3 was upheld, along with the direction for adjustment and release of title deeds.

Conclusion: The awards on the remaining contractor claims and on counter-claim No. 3 were upheld, and the rejected claims and counter-claims were not interfered with.

Final Conclusion: The appeals succeeded only in part: the awards on claim No. 1 and claim No. 37A were set aside, interest was reduced, and the balance of the award, including the allowed counter-claim and consequential directions, was maintained.

Ratio Decidendi: An arbitral award under the Arbitration Act, 1940 is liable to be interfered with where the arbitrator ignores binding contractual terms, grants relief beyond the scope of the reference, or awards sums unsupported by evidence or by the legal basis of the claim; interest must also conform to the governing statutory limits in the absence of a contrary contractual stipulation.

---