In an appeal filed by the State of Jharkhand before the Supreme Court against a judgment by the Jharkhand High Court whereby an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, filed by the respondent-claimant was allowed, a Bench comprising Justice Pamidighantam Sri Narasimha and Justice Atul S. Chandurkar directed this order and judgment to be placed before the Chief Justice of India for appropriate orders to reconsider the ratio of Bharat Drilling & Foundation Treatment Pvt. Ltd. v. State of Jharkhand & Ors. (2009) 16 SCC 705.
The appeal by the respondent-claimant was filed against the judgment of the Civil Court, by which an arbitral award was set aside, and the objections filed by the State under Section 34 were allowed. By the arbitral award, the Arbitral Tribunal allowed specific claims, but the Civil Court set aside three claims on the ground that they were specifically prohibited under the contract between the parties.
The State contended that the High Court had erred in allowing the appeal on the ground that the issue was covered by the decision of this Court in Bharat Drilling (supra) and that the same was being used not only regularly but also wrongly to interpret prohibition clauses in all government contracts.
After examining the relevant clauses of the agreement between the parties and perusing the impugned judgment, the Court found that the High Court had relied on Bharat Drilling (supra) without further analysis and had restored the arbitral award. The Court found that the High Court had not examined the contractual clauses and had disposed of the appeal under the impression that the issue was covered by Bharat Drilling (supra).
The Court stated that the contractual clauses at issue in the present matter were not examined in Bharat Drilling (supra). It was said that the applicability of exceptions or prohibition clauses would primarily depend on the agreement, as that is the only guiding principle for the Arbitral Tribunal.
Further, the Court opined that the judgment in Bharat Drilling (supra), which relied on the decision of this Court in Board of Trustees for the Port of Calcutta v. Engineers-De-Space-Age (1996) 1 SCC 516, dealing with the principle of the grant of interest pendente lite, was not appropriate. The Court also opined that the approach adopted in Bharat Drilling (supra) was not in tune with the principles laid down in Cox and Kings Ltd. v. SAP India Pvt. Ltd. 2024 4 SCC 1, Central Organisation for Railway Electrification (CORE) 2024 SCC OnLine SC 3219, and In Re: Interplay Between Arbitration Agreements Under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899 2023 SCC OnLine SC 1666.
Thus, to ensure clarity and consistency, the Court opined that the ratio of Bharat Drilling (supra) had to be reconsidered and directed the registry to place this judgment and order before the Chief Justice of India for appropriate orders or for referring the same to a larger bench of appropriate strength.
Appearances:
For Appellant(s) – Mr. Rajiv Shankar Dwivedi, Ms. Tulika Mukherjee, Mr. Beenu Sharma, Mr. Venkat Narayan
For Respondent(s) – Mr. Manoj C. Mishra, Mr. Vishesh Jain, Mr. Chandan Kumar, Mr. Rajesh Gupta
