Arbitral award on liquidated damages upheld, but excessive interest on the refund was reduced under Section 34 review.

An arbitral award on liquidated damages was sustained because the tribunal took a plausible view of the integrated pipeline contract, the delayed completion context, and the absence of proved loss, and Section 34 review did not permit reappreciation of evidence or interference merely because another view was possible. The Court also noted that the time stipulation had not operated rigidly throughout performance in light of extensions and surrounding circumstances, so no patent illegality or breach of Section 74 was made out. The interest component was, however, modified because the awarded rates were found excessive having regard to the absence of a contractual interest clause and prevailing market rates, and the refund amount was reduced to 12% per annum from 1 January 1998 until payment.

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Issues: (i) Whether the arbitral award imposing and directing refund of liquidated damages suffered from patent illegality or contravention of the contract and Section 74 of the Indian Contract Act, 1872. (ii) Whether the rate of interest awarded on the refund amount was liable to be interfered with.

Issue (i): Whether the arbitral award imposing and directing refund of liquidated damages suffered from patent illegality or contravention of the contract and Section 74 of the Indian Contract Act, 1872.

Analysis: The contract was part of an integrated pipeline project, and the completion period for the terminal was fixed with reference to the expected arrival of the pipeline. The delay was found to be attributable partly to each side. The extension of time and the surrounding circumstances supported the conclusion that, although time was initially intended to be important, it did not continue to operate rigidly in the same manner throughout execution. On the damages issue, the award proceeded on the finding that the terminal could not have been put to commercial use before the pipeline reached Jodhpur and that no loss was shown to have been suffered by the owner by reason of the delay. In proceedings under Section 34 of the Arbitration and Conciliation Act, 1996, interference is not warranted merely because another view is possible, and reappreciation of evidence is impermissible where the arbitrator has taken a plausible view.

Conclusion: The award on liquidated damages was upheld and no interference was called for on that ground.

Issue (ii): Whether the rate of interest awarded on the refund amount was liable to be interfered with.

Analysis: The arbitral award granted interest at relatively high rates for different periods. Having regard to the facts, the absence of a contractual stipulation for interest, and the prevailing market rate, the Court found the awarded rates excessive and considered modification appropriate under the governing principles relating to interest.

Conclusion: The interest component was reduced to 12% per annum from 1 January 1998 till payment.

Final Conclusion: The award was substantially sustained on merits, but the interest component was modified downward, resulting in only partial interference.

Ratio Decidendi: An arbitral award on liquidated damages will not be set aside under Section 34 where the arbitrator has taken a plausible view on delay, contractual context, and absence of loss, but the court may intervene to correct an excessive interest award where it is not supported by the contract or prevailing norms.

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