Contractual waiver and milestone conditions constrain arbitral tribunals; unpleaded grounds and unequal notice treatment can invalidate awards.

Arbitral awards may be set aside where a tribunal departs from express contractual requirements without a valid written waiver, decides an unpleaded waiver or estoppel issue without allowing the affected party to respond, or applies notice conditions unequally to claims and counterclaims. The notes emphasise that tribunals must decide in accordance with contractual milestone prerequisites and cannot treat a Performance Guarantee Test as completed after finding that an essential preceding test failed. Such defects may amount to excess of arbitral authority, denial of equal opportunity and natural justice, and conflict with public policy.

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Issues: (i) Whether the Division Bench was justified under Sections 34 and 37 in setting aside the award for treating contractual notice requirements as waived or overridden by estoppel; (ii) Whether the award was vitiated by unequal treatment of the parties and denial of a full opportunity to present the case; (iii) Whether the award impermissibly rewrote the contractual prerequisites for the Performance Guarantee Test.

Issue (i): Whether the Division Bench was justified under Sections 34 and 37 in setting aside the award for treating contractual notice requirements as waived or overridden by estoppel.

Analysis: The agreement required any waiver, variation or modification to be in writing and signed by both parties. The award rejected the contractor's pleaded case of waiver based on 2010 events, but nevertheless relied on 2012 communications and the Jinan Agreement to find a waiver of contractual notices, although no such case was pleaded and the employer had no opportunity to adduce evidence on it. No unequivocal representation or conduct establishing a valid departure from the written-modification requirement was shown. An arbitral tribunal must decide in accordance with the contract and cannot alter its terms through an unsubstantiated waiver or estoppel.

Conclusion: The award's finding of waiver or estoppel regarding contractual notices was contrary to the contract and exceeded arbitral authority; the Division Bench rightly interfered in favour of the respondent.

Issue (ii): Whether the award was vitiated by unequal treatment of the parties and denial of a full opportunity to present the case.

Analysis: The assumed waiver of notice was applied to sustain the contractor's claims despite non-compliance with notice requirements, while the employer's counterclaims were rejected for absence of equivalent notices. The tribunal also adopted an unpleaded basis for waiver without giving the employer an effective opportunity to address it. Such differential treatment violated the statutory requirement of equality and full opportunity, offended natural justice, and conflicted with the basic notions of justice and public policy.

Conclusion: The award was vitiated by discriminatory treatment and denial of natural justice, warranting its setting aside in favour of the respondent.

Issue (iii): Whether the award impermissibly rewrote the contractual prerequisites for the Performance Guarantee Test.

Analysis: The agreement made successful completion of the Reliability Run and Unit Characteristics Tests prerequisites for the Performance Guarantee Test. Having found that the Unit Characteristics Test for Unit 1 failed, the tribunal could not consistently treat the Performance Guarantee Test as successfully completed and grant the related contractual payment. That approach altered express milestone conditions rather than construing the agreement.

Conclusion: The finding that the Performance Guarantee Test was successfully completed impermissibly rewrote the contract and was liable to be set aside in favour of the respondent.

Final Conclusion: The defects went to the root of the award, rendered it incompatible with the contractual mandate, natural justice and public policy, and could not be severed.

Ratio Decidendi: An arbitral award may be annulled notwithstanding the narrow scope of review where the tribunal rewrites express contractual terms, determines an unpleaded waiver without affording a party an opportunity to meet it, and applies contractual requirements unequally between the parties.

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