TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1191
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....appellant, affirmed by the Commercial Court by judgement and order dated 02.01.2017 in MJC No. 33/16 while exercising jurisdiction under section 34 Arbitration and Conciliation Act, 1996 (hereinafter "A&C Act") has been set aside by the High Court in exercise of its limited appellate jurisdiction under section 37 of the A&C Act. 3. The facts shorn of unnecessary details are set forth herein under: 3.1. The respondent-Bharat Aluminum Company Limited (in short "BALCO") invited a tender for the purpose of mining and transporting 3,70,000 Metric Tons (MTs) of Bauxite from Mainpat mines to respondent's Korba Alumina plant. The appellant submitted his bid at Rs. 697/- per metric ton which happened to be the lowest among all the bids received. Therefore, the respondent, after negotiation, entered into an agreement with the appellant for mining and transporting of 2,22,000 MTs of Bauxite from the Mainpat Mines to Alumina plant at rate of Rs. 634.20 per MT on 11.12.1999. The said work had to be completed within a period of 18 months i.e., by May 2001 but it was extended up to September 2001. After the appellant had completed supplying the agreed quantity of bauxite, the respondent by ....
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....ed by the arbitral award, the respondent preferred an objection petition under section 34 of the A&C Act bearing no. MJC No. 33/16 before the Commercial court. On meticulous consideration the civil court came to the conclusion that the sole arbitrator had given a well-reasoned findings on each claim after considering the oral and documentary evidence which could not be regarded as arbitrary or capricious especially in the light of section 34(2)(b)(ii) of A&C Act and therefore, refused to interfere and affirmed the arbitral award dated 15.07.2002 by way of judgement and order dated 02.01.2017. 3.5. The respondent being not satisfied with the findings of civil court invoked the limited appellate jurisdiction of the High Court under Section 37 of A&C Act by preferring ARBA No. 05 of 2017 against judgement and order dated 02.01.2017. The said appeal came to be allowed by the impugned judgement and the arbitral award dated 15.07.2012 affirmed by civil court by order dated 02.01.2017 has been set aside. 3.6. Aggrieved by the same, the appellant, the original claimant, is in appeal before us. REASONING ASSIGNED UNDER THE IMPUGNED JUDGEMENT 4. At the outset, before examining th....
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....asis of rate and calculation on which the loss was determined. Hence, it was of the opinion that claim of appellant was not based on the evidence and facts relied upon. Therefore, in the absence of any documentary evidence on record to show that appellant was restricted to carry only 10.2 MT, the award on the basis of alleged loss was only a guess work. In this regard, the High Court placed reliance on the decisions of this court rendered in Kailash Nath Associates v. Delhi Development Authority and Anr. (2015) 4 SCC 136 to hold that Arbitrator cannot rewrite the award and the part of findings of the arbitrator which is without any evidence and beyond the terms of contract would be a patent illegality. 7. The High court further concluded that the tribunal in respect of idle machinery and idle manpower merely relied upon the tabular chart tendered by the appellant which was only a self-declaratory opinion and not based on evidence of facts. SUBMISSIONS ON BEHALF OF THE PARTIES 8. Learned Senior Counsel Shri Mukul Rohatgi appearing on behalf of the appellant submitted that the High Court exceeded its jurisdiction in reappraising the factual matrix and arriving at a different....
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....court was sitting in appeal. 13. He further submitted that as long as there is material available before the arbitrator to show damages have been suffered, but such material does not give him an insight into the granular details, the arbitrator is permitted the leeway to employ honest guesswork and/or a rough and ready method for quantifying the damages. To buttress the said contention, the learned senior counsel relied upon Construction and Design Services v. Delhi Development Authority (2015) 14 SCC 263. 14. He also submitted that High court with respect to extra work from July 2001 to March 2002, was factually not correct in stating that earlier rate was agreed between the parties. For the subsequent period from July 2001 onwards, the respondent had taken out fresh tenders which were later withdrawn despite the petitioner being the lowest bidder. Nonetheless the respondent requested the petitioner to continue the work but the rates were never agreed between the parties which is an admitted fact as evident from the letters dated 15.08.2001 and 05.01.2002. 15. He also submitted that the tribunal considered the fact that the strike at respondent's plant was an issue betwee....
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....e entire contract irrespective of the route which the contractor choses for transportation. 19. He further submits that the Learned sole arbitrator without appreciating the specific bar under clause 6 and without giving a simple meaning to the terms therein, went beyond the terms of the contract to allow the claim for idle machinery. The arbitrator adopted a hyper-technical approach which is not permissible while interpreting the terms of the contract. 20. He has also submitted that the arbitrator after holding that the petitioner had not submitted any documentary evidence on record in respect of the claim for alleged loss due to idle machinery and manpower, however erroneously granted 75% of the alleged amount claimed. The High Court rightly held that there is no evidence to show that the mining process came to stand still and there is no document to show the expenses incurred by the petitioner. 21. He submitted that petitioner continued to work and execute a quantity of 1,95,000 MT from 16.06.2001 to 31.03.2002 and respondent was paying the petitioner at the existing rate plus Rs. 23/- as diesel escalation. The respondent paid the petitioner Rs. 657/- inclusive of diesel....
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....of patent illegality is sustainable when once the award has been affirmed under section 34 of the Arbitration and Conciliation Act, 1996? DISCUSSION & OUR ANALYSIS 27. The Arbitration and Conciliation Act, 1996 avows to provide a speedy, cost- effective & efficacious mode of alternative dispute resolution with a policy of minimal judicial intervention. The same is apparent from the legislative intent explicitly mandated under section 5 of A&C Act which envisages an embargo upon the judiciary to interfere in arbitral proceedings save in circumstance expressly stipulated under Part I of the Act. Hence, it is clear that judicial interference is circumscribed with only exception being the statutorily mandated remedies which we find under section(s) 34 and 37 of the A&C Act. 28. The bare perusal of section 34 mandates a narrow lens of supervisory jurisdiction to set aside the arbitral award strictly on the grounds and parameters enumerated in sub-section (2) & (3) thereof. The interference is permitted where the award is found to be in contravention to public policy of India; is contrary to the fundamental policy of Indian Law; or offends the most basic notions of morality or j....
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....s even narrower to review the findings of the awards, if it has been upheld or substantially upheld under section 34. Hence, it is very well settled that arbitral awards are not liable to be set aside merely on the ground of erroneous in law or alleged misappreciation of evidence and there is a threshold that the party seeking for the award to be set aside has to satisfy, before the judicial body could enter into the realm of exercising its power under section(s) 34 & 37. It is also apt and appropriate to note that re-assessment or re-appreciation of evidence lies outside the contours of judicial review under section(s) 34 and 37. This court in Punjab State Civil Supplies Corporation Limited & Anr. v. M/s. Sanman Rice Mills & Ors. 2024 INSC 742, at Paragraph 12 observed that even when the arbitral awards may appear to be unreasonable and non-speaking that by itself would not warrant the courts to interfere with the award unless that unreasonableness has harmed the public policy or fundamental policy of Indian law. It might be a possibility that on re-appreciation of evidence, the courts may take another view which may be even more plausible but that also does not leave scope for th....
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.... Tribunal shall decide in accordance with the terms of the contract". Further, where there is a specific usage of the trade that if the payment is made beyond a period of one month, then the party would be required to pay the said amount with interest at the rate of 15 per cent. Despite the evidence being produced on record for such usage, if the arbitrator refuses to grant such interest on the ground of equity, such award would also be in violation of sub-sections (2) and (3) of Section 28. Section 28(2) specifically provides that the arbitrator shall decide ex aequo et bono (according to what is just and good) only if the parties have expressly authorised him to do so. Similarly, if the award is patently against the statutory provisions of substantive law which is in force in India or is passed without giving an opportunity of hearing to the parties as provided under Section 24 or without giving any reason in a case where parties have not agreed that no reasons are to be recorded, it would be against the statutory provisions. In all such cases, the award is required to be set aside on the ground of "patent illegality"." 32. In Associate Builders v. Delhi Development Authority ....
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....rived by the arbitrator as that would be the true import of the legislative intent inherent in the Amendment Act. 34. Thereafter, this court elucidated the meaning of the expression 'patent illegality' in Ssangyong Engg. & Construction Co. Ltd. v. NHAI (2019) 15 SCC 13 while taking into consideration the amendment act of 2015 and held it as a glaring, evident illegality that goes to the root of the award. This includes: (a) an award deciding matters outside the scope of the arbitration (beyond the contract or submission); (b) an award contradicting the substantive law of India or the Arbitration Act itself; (c) an award against the terms of the contract; and (d) an award so unreasoned or irrational that it manifests an error on its face. 35. Considering the aforesaid precedents, in our considered view, the said terminology of 'patent illegality' indicates more than one scenario such as the findings of the arbitrator must shock the judicial conscience or the arbitrator took into account matters he shouldn't have, or he must have failed to take into account vital matters, leading to an unjust result; or the decision is so irrational that no f....
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.... The thin line is whether an express prohibition or restrictions in the contract is breached by the award? If the answer is in affirmative, the award is liable to struck down. However, where the contract is simply silent on a legitimate claim which is inherently linked to the natural corollary of contractual obligation of the parties the arbitrator will be well within his powers to interpret the contract in the light of principles of the contractual jurisprudence and apply the equity to that situation. A contrary interpretation would lead to opening a floodgate whereby a party who may have dominant position would intentionally not ink down the natural obligation flowing from the contract and subsequently; after obtaining the benefit the party would agitate absence of express terms to sway away from even discharging his alternative obligation of compensating the party at loss. Hence the question which arises in such situations is, can the party who bears the brunt and suffers the loss due to silence under the contract regarding the natural contractual obligation which arises in usual course of business be left in limbo? In our view, that is the very purpose why section 70 of the Con....
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.... of affidavits and correspondence letters to arrive at individual findings of each claim. The sheer application of mind at the behest of the arbitrator is apparent from the very fact that the claims asserted by the appellant were not accepted by the arbitrator as a gospel truth but were put on pedestal of evidentiary proof. The respondent has argued that the arbitrator has based its findings based on the calculation sheets and guesswork. We would have agreed with the respondent had there been no evidence available before the arbitrator to arrive at such findings but the same is not true since the arbitrator after considering the evidence on record has given its finding. For instance, the claim under Para 19.2 to the tune of Rs. 1,96,11,000 towards extra transportation cost incurred by the appellant on the premise of restricting the capacity of the truck was proved by the fact that after the District Transport Officer order was stayed by the High Court, the respondent did not allow the appellant to deliver at the weight of 11 MT which was not controverted by the respondent. Also, the arbitrator was conscious to draw adverse conclusions against the appellant, where he failed to suffi....
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.... Rs. 10/- PMT i.e., from Rs. 634.20/- PMT to Rs. 644.20/- PMT represents an assessment of reasonable value for the extra work performed and does not amount to substitution of any agreed contractual rate as no such sum was mutually inked down by both the parties. Therefore, we disagree with said view of the High court as the arbitral award did not rewrite the contract but merely enforced a restitutionary obligation arising from admitted extra work directed and accepted by the respondent, where the aspect of consideration was consciously left open and later misused by the respondent to sway away from discharge of its usual contractual obligation. Hence, the High Court, in exercise of limited jurisdiction under Section 37, impermissibly re-appreciated facts and substituted its own interpretation, contrary to settled law under Associate Builders, Ssangyong Engineering and MMTC (referred to supra). 41. Further, we have no hesitation to hold that claims in the nature of quantum meruit or unjust enrichment can be decided by the arbitrator provided they fall within the scope of disputes referred either explicitly or by necessary implication. For instance, in a situation like the present....