2023 (8) TMI 1226 - SC - Indian Laws

Supreme Court Upholds Arbitration Award, Limits Court Intervention

MY CONSTRUCTION CO. Versus ONGC CORP. LTD.

The Supreme Court overturned the High Court's decision to set aside the arbitration award in favor of the contractor. The Court held that the High Court's ... Award rendered by the Arbitrator in favor of the appellant set aside - rejection of its counterclaim - relevant date from which the escalation claim was calculable - HELD THAT:- The impugned judgment, on the face of the record, in this Court’s opinion, is plainly erroneous. It is far too well established that the scope of interference by a court in the context of a challenge to an arbitration award is narrow. In the case of an appeal by a party is aggrieved by rejection of its objections, the Appellate Court’s review power (especially to substitute its findings in the facts and the interpretation of contract and interpretation of law) are far narrower. This court has in line of authorities previously held that such jurisdiction should be invoked rarely and in cases where it is apparent that the Arbitrator had “misconducted” the proceedings in terms of Section 30 of the Arbitration Act. In the present case, this court is persuaded to hold that the High Court in proceeding to interpret the terms of the contract and applying them to the fact situation in the present case substituted its findings hereby entering the zone which was not permitted to it – in regard to upsetting the award as far as it found in favor of the appellant – contractor and also in allowing the counterclaim of ONGC. For these reasons, the impugned order is hereby set aside. Appeal allowed. Issues:The judgment involves the interpretation of the relevant stipulation in the contract, determination of the date for escalation claim calculation, and the validity of the award and counterclaim rejection under the Arbitration Act, 1940.Interpretation of Contract Stipulation:The High Court set aside the award in favor of the contractor based on its interpretation of Clause 10C(i) in the contract. It considered the contractor's revision of the offer on 27th January, 1992, as insufficient reason to determine the relevant date for escalation claim calculation. The Court's reasoning was found erroneous as it exceeded the permissible scope of interference with an arbitration award.Date for Escalation Claim Calculation:The dispute centered around the date from which the escalation claim was calculable. ONGC argued for 14.03.1991, the date of bid acceptance, while the contractor asserted 27.1.1992 as the determinative date based on a revised price list submission. The Arbitrator ruled in favor of the contractor, awarding interest on the sums payable by ONGC from 14.03.1991, and further interest for a specific period. The High Court's decision on this matter was influenced by the parties' agreement regarding the demolition of hutments and site restoration costs.Validity of Award and Counterclaim Rejection:The Arbitrator's award, justifying the contractor's claim and rejecting ONGC's counterclaim, was challenged by ONGC under sections 30/33 of the Arbitration Act, 1940. The Learned Single Judge initially rejected ONGC's objections but later reduced the interest rate payable to the contractor. However, the High Court allowed ONGC's appeal, leading to the setting aside of the award. The Supreme Court found the High Court's interference unjustified, emphasizing the limited scope for court intervention in arbitration matters. The impugned order was overturned, directing the release of the awarded amount with accrued interest to the appellant within four weeks.