Arbitral award review limits: delay attribution was modified, while tax deductions were upheld as impermissible.

Under Section 34 review, the SC reiterated that interference with an arbitral award is limited, but correction is possible where the tribunal draws untenable inferences from proved facts or reaches a conclusion causing miscarriage of justice. Applying that principle, the Court held that the entire delay could not be attributed to one party and modified the award to reflect shared responsibility for the relevant periods. On tax deductions, the Court accepted that the turnkey work was executed outside India and that the claimed deductions were not warranted on the facts or under the contract, so that part of the award was sustained.

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Issues: (i) Whether the arbitral award suffered from patent illegality or conflict with public policy in attributing the entire period of delay to one party. (ii) Whether the deduction made towards taxes was legally permissible.

Issue (i): Whether the arbitral award suffered from patent illegality or conflict with public policy in attributing the entire period of delay to one party.

Analysis: The Court held that interference under Section 34 of the Arbitration and Conciliation Act, 1996 is limited, but an award may still be corrected where the tribunal fails to draw inferences that necessarily follow from proved facts or reaches an untenable conclusion causing miscarriage of justice. On the evidence, the period of delay had been wrongly treated as wholly attributable to one side. The Court separated the relevant intervals and held that part of the delay was attributable to the other side, while the remaining part was rightly counted against the appellant.

Conclusion: The award was liable to be modified on the question of delay, and the challenge succeeded in part in favour of the appellant.

Issue (ii): Whether the deduction made towards taxes was legally permissible.

Analysis: The Court held that the work was executed outside India on a turnkey basis and no part of the work attracted Indian income tax in the manner claimed. The tribunal had correctly found that the tax deductions were not warranted on the facts and under the contract.

Conclusion: The deduction towards taxes was not permissible, and the award was upheld on this issue against the appellant.

Final Conclusion: The appeal succeeded only to the limited extent of reducing the period of delay attributable to the respondent, and the arbitral award stood modified proportionately while the disallowance of tax deductions was maintained.

Ratio Decidendi: An arbitral award may be interfered with under public policy review where the tribunal's inference from proved facts is legally untenable and causes miscarriage of justice, but findings supported by the record on contractual tax liability will not be disturbed.

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