The Madras High Court has upheld the arbitral award directing payment of Rs. 2.55 crores to Voltas Limited, after noting that the Arbitrator had adjusted the value of unfinished work completed by the hotel owner through third parties. Although portions of the hotel project were completed by third parties engaged by Appu Hotels Ltd., the Arbitrator’s finding that Voltas Limited had not abandoned the contract was found to be supported by evidence.
While setting aside only the retention money component after concession by Voltas, the Court ruled that findings based on evidence and contractual records cannot be reopened in a challenge to an arbitral award.
Where the Arbitrator’s conclusions are based on contractual documents, oral and documentary evidence, and are neither perverse nor patently illegal, the court must refrain from acting as an appellate forum. The Court also reaffirmed that a severable part of an arbitral award may be set aside independently without disturbing the remaining valid portions of the award.
Briefly, the dispute arose out of a work order dated 11 May 2009 awarded by M/s. Appu Hotels Ltd. to M/s. Voltas Limited for executing HVAC and electrical works for the proposed Le-Meridien Hotel project at Coimbatore, with an original contract value of about Rs. 11.80 crore. During execution, several amendments were made to the work orders.
As the project neared completion, disputes arose regarding alleged delays, incomplete work, abandonment of site, payment of the final bill, release of retention money, expenditure incurred by engaging third parties for completion of pending work, and obtaining approvals from the Chief Electrical Inspector to Government (CEIG).
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Voltas Limited invoked arbitration, claiming approximately Rs. 4.54 crore towards unpaid dues under its final invoice, retention money, interest, and costs. Appu Hotels Ltd. resisted the claim and filed counterclaims seeking refund of alleged excess payments, liquidated damages, and substantial damages for losses allegedly caused by the contractor’s conduct.
The Arbitral Tribunal held that Voltas was entitled to Rs. 2.55 crore towards balance payment and Rs. 1.01 crore towards retention money, while rejecting the counterclaims. It also awarded post-award interest at 18% per annum.
A Single Judge Bench of Justice D. Bharatha Chakravarthy observed that the Arbitrator had carefully examined the conduct of both parties, the amended work orders, documentary evidence, correspondence, and oral testimony before reaching his conclusions. The Court noted that the Arbitrator’s finding that Voltas had not abandoned the project and had not committed a breach disentitling it from payment was based on evidence and could not be characterised as perverse or patently illegal.
The Court further observed that although certain portions of the project remained incomplete and Appu Hotels had engaged third parties to finish those works, that fact alone did not establish abandonment or fundamental breach by Voltas. The Arbitrator had appropriately accounted for the expenditure incurred by Appu Hotels while determining the value of work actually executed by Voltas.
On the challenge relating to the quantum awarded, the Court held that the Arbitrator had relied upon the assessor/surveyor’s valuation and other record evidence to determine the total value of the work and the balance amount payable. Re-examining the evidence or substituting a different factual conclusion would amount to an appellate review, which is impermissible in proceedings under Section 34 of the Act.
The Court also found no infirmity in the Arbitrator’s award of post-award interest at 18% per annum, noting that the Arbitrator had in fact declined the higher pre-reference interest sought by Voltas and had adopted a considered approach while granting interest.
