The Hon’ble Supreme Court in the case of NTPC Ltd vs. M/s Deconar Services Pvt. Ltd.[1] held that unless an error is apparent on the face of the record, the court must exercise minimal interference in an arbitral award. It reiterated a settled proposition that where the arbitrator has taken a possible view, although a different view may be possible on the same evidence, the court would not interfere with the said award. A summary of the judgment is given below:
Background and Facts
· The appellant in the matter issued two tenders for the construction of certain quarters in which the respondent had participated. After few rounds of negotiations between both the parties, the appellant decided to award both contracts to the respondent on the basis of an offer by the respondent of 16% rebate on the prices for completing the first project, in the event he was awarded both contracts.
· Both letters of award were issued on June 29, 1988, however there was an alleged delay in the handing over of sites by the appellant leading to a delay in the completion of the construction of quarters in both projects. In view of such delay, the respondent sought arbitration under the dispute resolution clause in view of disputes between the parties regarding the final payment due to the respondent-contractor.
· The Ld. Arbitrator granted relied to the respondent and thereafter, the appellant filed objections against both the awards before the Delhi High Court under Sections 30 and 33 of the Arbitration Act, 1940 (“the Act”).
· The Delhi High Court while modifying the interest rate granted by the Arbitrator, dismissed the objections of the appellant. The appellant challenged the orders which were dismissed as well. Thus, the appellant finally approached the Supreme Court by a Special Leave Petition against the said judgement.
· Thereafter, the appellant submitted that the Arbitrator erred in granting escalation of prices when the contract expressly indicated that the “quoted price shall remain firm during the execution of the contract”.
· While the respondent submitted that there are concurrent findings against the appellant, who has been allegedly prolonging the litigation. Further, it was submitted that the scope of interference in an arbitral award was limited, as the court did not sit in appeal over an award.
Hon’ble Supreme Court’s Observations
The Court noted the following observations on the basis of precedents:
· Kwality Manufacturing Corporation v. Central Warehousing Corporation[2] -
“Scope of interference by courts in regard to arbitral awards is limited. A court considering an application under section 30 or 33 of the Act, does not sit in appeal over the findings and decision of the arbitrator. Nor can it reassess or reappreciate evidence or examine the sufficiency or otherwise of the evidence. The only question being, whether there was any error apparent on the face of the award and whether the arbitrator misconducted himself or the proceedings.”
· Arosan Enterprises Ltd. v. Union of India[3]
“It is a settled proposition that where the arbitrator has taken a possible view, although a different view may be possible on the same evidence, the court would not interfere with the award.”
It is clear that for the appellant in order to succeed in their challenge against an arbitral award, they must show that the award of the arbitrator suffered from perversity or an error of law or that the arbitrator has otherwise misconducted himself. Merely showing that there is another reasonable interpretation or possible view on the basis of the material on the record is insufficient to allow for the interference by the court.[4]
There was substantial delay attributable to the appellant in handing over the sites to the respondent. The court observed that it does not sit as an appellate Court over the decision of an Arbitrator as long as the Arbitrator had taken a possible view of the matter. It is the opinion of the court that the Arbitrator has given clear reasoning for the possible view taken by him on the interpretation of the contract between the parties.
On the issue of escalation charges, the court observed that the Arbitrator in the present case has constructed the present contract, and the fixed price clause, in the same manner. This construction was on the basis of the evidence on record and the submissions of the counsel before him. Further, the Arbitrator has carefully delineated the period of delay attributable to the appellant and has granted the claim of the respondent only to that limited extent.
The Appellant has neither been able to point out any error apparent on the face of the record, nor otherwise made out a case for interference with the award by the Arbitrator with the issue of question of law.
The court refused to interfere with the decision of imposition of costs on the appellant by the earlier forums in view of the fact that the counsel for the appellant has not pressed the same and looking to the quantum involved. Thus, the court refrained from interfering with the impugned judgment of the High Court.
Conclusion
Once again the Court has upheld the practice of minimum interference with the award of the Arbitrator in its endeavour to establish India as an arbitration-friendly country. Further, in this case, the court highlights that even if there is an alternate interpretation possible in a given matter, the same will not be sufficient for interfering with the award of the Arbitrator.
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