Arbitral award computation must match the reference; reimbursement based on calendar years was held unsustainable.

An arbitral award based on repairs and maintenance reimbursement was found unsustainable where the computation used calendar years instead of the vessels' years of actual operation. The Court construed the committee reports and held that the proper benchmark was the relevant operational period, not calendar years, and that the reimbursement formula had to be applied on that basis for the extended charter period. It further noted that interference was justified because the award rested on an erroneous foundation and did not conform to the reference, and the fact that two views were possible did not save it. The award, as affirmed below, was set aside to the extent indicated.

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Issues: Whether the arbitral award, as upheld by the courts below, could stand when the computation of repairs and maintenance expenses was based on calendar years instead of the years of actual operation and when the award was alleged to have travelled beyond the reference.

Analysis: The dispute turned on the proper construction of the committee reports and the manner in which the reimbursement formula for repairs and maintenance was to be implemented for the extended charter period. The Court found that the reports did not require the use of calendar years and that the relevant benchmark was the year of operation of the respective vessels. It further held that the concept of reimbursement made the year of operation immaterial only in the sense that the benchmark had to be fixed by reference to the comparable operational period, and that the arbitrator and the courts below had erred in sustaining a calculation that did not reflect that basis. The Court also held that interference was justified where the award rested on an erroneous foundation and could not be sustained merely because two views were possible.

Conclusion: The challenge to the award succeeded, and the award as affirmed by the High Court was set aside to the extent indicated.

Ratio Decidendi: An arbitral award may be interfered with when it is founded on an erroneous construction of the governing material and adopts a basis that is inconsistent with the reference and the intended method of computation.

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