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Issues: Whether the arbitral award granting escalation, damages and interest could be interfered with under Section 34 of the Arbitration and Conciliation Act, 1996 on the ground that it was patently illegal, perverse and opposed to public policy.
Analysis: The claim for escalation and associated damages was found to be unsupported by satisfactory material evidence. The delay in completion was held to be attributable substantially to the contractor, since the change of site related only to the residential quarters and the contractor could have proceeded with the office building. The award granting damages almost equal to the tender amount, and the higher rate of interest, was found to rest on assumptions and guesswork rather than evidence. Applying the principles governing interference under Section 34, the award was treated as suffering from patent illegality and perversity falling within the scope of public policy review.
Conclusion: The arbitral award was not sustainable and the court below was justified in modifying it.
Final Conclusion: The reduced award of damages and interest was upheld, and the appeal was dismissed.
Ratio Decidendi: An arbitral award may be interfered with under Section 34 where the quantification is unsupported by evidence and is so unreasonable or perverse as to amount to patent illegality and a violation of public policy.
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