Arbitration and Conciliation Act, 1996 – s.34 and 37 – Jurisdiction under – Exercise of – Interference with the decision of the arbitrator – Execution of contract awarded by National Highways Authority of India-NHAI to the appellant regarding construction of lanes on National Highway – Dispute as regards geogrid/geotextile material exceeded the Bill of Quantities-BOQ quantities in the contract, and the power of the Engineer to revise the rates given in the BOQ in the event of increase in actual quantities – Appellant’s case that the Engineer/Employer intending wrongful application of the Conditions of Particular Application for downward revision of rates for BOQ item of geogrid for quantity in excess of BOQ quantity – Recommendation by Dispute Review Board-DRB that quantities of geogrid required limited to facia area provided in the BOQ to be paid as per the BOQ rates – Invocation of arbitration clause by NHAI – Arbitral tribunal holding that the quantity of geogrid given at the tender stage by NHAI was wrong, there was no change in the design but mere increase in the quantity beyond the BOQ quantity, directed NHAI to pay the appellant for the actual quantity of geogrid required to be executed to complete the work as per the approved design at the BOQ rate – Application by NHAI u/s.34 – Single Judge of the High Court upheld the arbitral award – However, the Division Bench set aside the same – Sustainability: Held: Not sustainable – Great deal of restraint is required to be shown by the Courts while examining the validity of an arbitral award when such an award has been upheld, wholly or substantially, u/s.34 – Court cannot undertake an independent assessment of the merits of the award and must only ascertain that the exercise of power by the court u/s. 34 has not exceeded the scope of the provision – View taken by DRB and arbitral tribunal, both comprising of technical experts, that there is no variation either in the form or quality or quantity of the works is the correct one which was acknowledged by the Single Judge – At the time of execution of the contract, the geogrid required turned out to be much more than the estimated figure given in the contract – As such both the fact finding authorities held that there was no variation in terms of Clause 51.1 and the Engineer did not have the competence to renegotiate the price or rate of the geogrid for the excess quantity of geogrid required – This is clearly a plausible view – It is the correct interpretation of Clause 51 made by the DRB and the arbitral tribunal, in a reasonable manner based on the evidence on record – As such, the Single Judge rightly declined to interfere with the award of the arbitral tribunal u/s.34, affirming the decision of the DRB – Division Bench of the High Court not at all justified in setting aside the arbitral award exercising extremely limited jurisdiction u/s.37 by merely using expressions like ‘opposed to the public policy of India’, ‘patent illegality’ and ‘shocking the conscience of the court’ – Thus, the judgment and order passed by the Division Bench of the High Court is set aside and the arbitral award is restored. [Paras 27.3, 28, 33, 34, 36, 42, 43]
Arbitration and Conciliation Act, 1996 – Arbitral award – Public policy in India – Explanation:
Held: Public policy in India means the fundamental policy of Indian law – Violation of Indian statutes linked to public policy or public interest and disregarding orders of superior courts in India would be regarded as being contrary to the fundamental policy of Indian law – It would also mean that the arbitral award is against basic notions of justice or morality – Arbitral award can be set aside on the ground of patent illegality, where the illegality goes to the root of the matter but reappreciation of evidence cannot be permitted under the ground of patent illegality. [Para 37]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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