The Delhi High Court has clarified that the scope of judicial interference in an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, is limited to examining whether the court exercising jurisdiction under Section 34 has acted within its prescribed legal limits, and it does not permit a re-appreciation of evidence or merits of the arbitral findings. The Court emphasised that the determination of factual issues, such as the classification of excavated material or the necessity of specific construction methods, and the interpretation of contractual terms are within the exclusive domain of the Arbitral Tribunal.
The Court, therefore, ruled that a contractual prohibition on the payment of interest does not bar the grant of post-award (future) interest, as the entitlement to such interest is statutory under Section 31(7)(b) of the 1996 Act and is not subject to party autonomy. Further, the Court stated that a party that knowingly accepts the benefit of extra work executed by a contractor without raising any objection cannot subsequently refuse payment by citing a lack of formal prior approval, as a party cannot be permitted to profit from its own inaction.
The Division Bench comprising Justice C. Hari Shankar and Justice Om Prakash Shukla observed that its appellate jurisdiction under Section 37 of the 1996 Act is extremely circumscribed and not a plenary appellate power to reappreciate evidence or reassess the merits of arbitral findings. Essentially, the interference is warranted only where the Section 34 court has failed to exercise its jurisdiction or has exceeded its bounds.
On the issue of classifying the excavated material as hard rock, the Bench noted this was a question of fact within the exclusive domain of the Arbitral Tribunal. The Tribunal’s interpretation of the CPWD Specifications was found to be plausible, especially its reasoning that the Appellants’ internal committee report was contradictory when it stated that the rock could not be excavated by manual means but still classified it as ‘ordinary rock’.
The Arbitral Tribunal’s reliance on contemporaneous evidence like Field Book entries and a geological report was deemed appropriate to ascertain facts, not to override the contract, added the Bench, while pointing out that the Appellants, having remained supine and accepted the benefit of the extra work, could not take advantage of their own inaction to deny payment, applying the maxim ‘nullus commodum capere potest de injuria sua propria’.
On the grant of future interest, the Bench observed that the issue was no longer res integra, as the Supreme Court has settled that post-award interest under Section 31(7)(b) of the Act is statutory and cannot be contracted out, unlike pre-award interest. Finally, the Bench concluded that the discretion to award costs lies with the Arbitrator under Section 31A of the Act, and since the majority of claims were allowed, the award of costs was not perverse or arbitrary.
Briefly, the dispute originated from a contract for the construction of railway siding works for a thermal power project in Solapur, Maharashtra. During the execution of the works under Schedule ‘B’ (Corridor Drain), the Respondent encountered hard rock, which it claimed was an extra item not covered in the Bill of Quantities (BOQ) and warranted payment at higher rates. The Appellants’ site representative initially classified the material as hard rock in the Field Book, but the Appellants later, based on an internal committee report, classified it as ‘ordinary rock’ and withheld payments.
A further dispute arose regarding payment for tie bolts used in the shuttering of RCC walls, which the Respondent claimed was a necessary extra item, while the Appellants contended its cost was included in the composite rate for shuttering. After the works were completed, these and other issues concerning statutory levies and the final bill remained unresolved, leading the Respondent to invoke arbitration.
The Arbitral Tribunal allowed the Respondent’s claims for hard rock excavation and tie bolts, and also awarded interest and costs. The Appellants challenged this award under Section 34 of the Arbitration and Conciliation Act, and the Single Judge set aside the award of pre-award interest due to a contractual bar but upheld the award on all other grounds. The appellant, therefore, challenged the said judgment specifically concerning the grant of future interest and costs.
Appearances:
Senior Advocate Puneet Taneja, along with Advocates Manmohan Singh Narula, Amit Yadav and Anil Kumar, for the Appellant
Senior Advocate Simil Purohit, along with Advocates Faran Khan, Sandip Vimadalal, Manish Doshi, Rishit Vimadalal and Bharti Gupta, for the Respondent
