Arbitrator's 3% loss claim using Hudson's formula upheld, HC interference under Section 34 rejected

SC upheld arbitral award against HC's interference under Section 34 of Arbitration Act, 1996. Arbitrator's acceptance of 3% loss claim for on-site establishment expenses using Hudson's formula was found reasonable. HC's conclusion that bills were paid promptly, negating interest claims, did not justify interference under Section 37. SC restored award regarding claim, upholding District Court's decision. On interest claims, SC distinguished between pendente lite interest (procedural) and pre-reference interest (substantive law), ruling HC had no grounds to interfere with pre-reference interest grant since contract didn't prohibit it.

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Issues Involved:
1. Loss of business
2. Uneconomic utilization of plant and machinery
3. Labour charges for uneconomical stoppage of work
4. Interest on delayed payment of running account bills and escalation bills
5. Escalation bill
6. Interest
7. Costs

Detailed Analysis:

1. Loss of Business:
The Arbitrator awarded Rs. 3,87,530 for loss of business. The District Judge set aside this award, stating it was beyond the Arbitrator's jurisdiction as it was never claimed by the appellant. The High Court affirmed the District Judge's decision. The Supreme Court upheld the High Court's decision, confirming that the claim was not permissible under the contract.

2. Uneconomic Utilization of Plant and Machinery:
The Arbitrator awarded Rs. 61,22,000 for uneconomic utilization of plant and machinery. The District Judge set aside this award, noting the Arbitrator did not account for the appellant's own delay of 135 days. The High Court reversed the District Judge's decision and restored the award. The Supreme Court upheld the High Court's decision, confirming the award for uneconomic utilization of plant and machinery.

3. Labour Charges for Uneconomical Stoppage of Work:
The Arbitrator awarded Rs. 5,80,500 using the Hudson's formula. The District Judge upheld this award, stating the Arbitrator's findings were not irrational or in conflict with public policy. However, the High Court set aside this award, citing that it was contrary to the Special Terms and Conditions of the Contract, which prohibited claims for idle labour. The Supreme Court upheld the High Court's decision, confirming the claim was impermissible under the contract.

4. Interest on Delayed Payment of Running Account Bills and Escalation Bills:
The Arbitrator awarded Rs. 54,84,024 for interest on delayed payments. The District Judge upheld this award, agreeing with the Arbitrator's reasoning. The High Court set aside this award, stating that the bills were paid promptly and no interest claim could arise. The Supreme Court found the High Court's reasoning insufficient and restored the Arbitrator's award and the District Judge's decision, confirming the entitlement to interest on delayed payments.

5. Escalation Bill:
The Arbitrator awarded Rs. 11,51,198 for escalation, which was upheld by the District Judge. The High Court affirmed this decision. The Supreme Court did not find any reason to interfere with these findings, thus confirming the award for the escalation bill.

6. Interest:
The Arbitrator awarded interest at 12% per annum from 12.04.2016 to 30.01.2018 and 9.25% per annum post-award. The District Judge upheld this award. The High Court modified the award, disallowing pre-reference interest. The Supreme Court reinstated the Arbitrator's award, stating the contract did not prohibit pre-reference interest and confirmed the award of interest as per the Arbitrator's decision.

7. Costs:
The Arbitrator awarded Rs. 4 lakhs towards legal and administrative expenses. There were no challenges to this award, and it was upheld throughout the judicial process.

Conclusion:
The Supreme Court upheld the High Court's decision to set aside the award for claim no. 3 (Labour Charges for Uneconomical Stoppage of Work). It restored the Arbitrator's award and the District Judge's decision for claim no. 4 (Interest on Delayed Payment of Running Account Bills and Escalation Bills) and claim no. 6 (Interest), including pre-reference interest. The Civil Appeal was allowed in part, and the parties were directed to bear their own costs.

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