Arbitral Tribunal’s reasonable interpretation of contractual exclusion clauses and evidentiary standards for prolongation claims precludes judicial interference.

The Petitioner challenged two Arbitral Awards dated 20.07.2024 arising from contractual agreements dated 21.12.2011 and 07.03.2012.

The Arbitral Tribunal had partially allowed the Petitioner’s claims but rejected Claim No. 2 (interest on bank guarantee extension charges) and Claim No. 7 (loss of profit) based on an interpretation of Clause 26 of the General Conditions of Contract (GCC).

The Petitioner contended that the Tribunal’s interpretation was restrictive and that it improperly conflated distinct claims regarding interest and margin money.

The Petitioner approached the High Court under Section 34 of the Arbitration and Conciliation Act, 1996, seeking to set aside these specific portions of the awards.

1. Whether the Arbitral Tribunal’s interpretation of Clause 26 of the GCC, excluding "loss of profits" and "interest costs" as independent categories of liability, was perverse or patently illegal.

2. Whether the denial of interest on bank guarantee extension charges (Claim No. 2) lacked evidentiary foundation or violated principles of compensatory relief.

3. Whether the rejection of the claim for loss of profit (Claim No. 7) for want of actual proof of loss was contrary to settled law regarding prolongation claims.

The court primarily applied Section 34 of the Arbitration and Conciliation Act, 1996, which limits judicial interference to grounds of "patent illegality" and "fundamental policy of Indian law," as interpreted in OPG Power Generation (P) Ltd. v. Enexio Power Cooling Solutions.

The court relied on Ssangyong Engg. & Construction Co. Ltd. v. NHAI to establish that a "possible view" of the arbitrator on contract interpretation or evidence is beyond judicial review.

For interest, it considered Vedanta Limited v. Shenzhen Shandong Nuclear Power regarding arbitral discretion.

Regarding loss of profit, it applied the standards set in Unibros v. All India Radio and Batliboi Environmental Engineers v. HPCL, which require proof of actual loss for prolongation claims.

The Court held that the interpretation of Clause 26 of the GCC was a "plausible view" arrived at through a reasoned analysis of grammar and syntax.

It found the Tribunal was entitled to read "loss of profits" and "interest costs" as distinct excluded categories rather than mere illustrations of indirect loss.

Regarding Claim No. 2, the Court affirmed the Tribunal's finding that the Petitioner failed to produce evidence of actual interest outflow or borrowing to fund extension charges, noting that interest is not an automatic corollary to an allowed expenditure.

On Claim No. 7, the Court reasoned that in cases of contract prolongation (as opposed to termination), the Petitioner could not rely solely on Hudson’s formula without contemporaneous evidence of lost opportunities or reduced margins.

The Court concluded that the Petitioner was essentially seeking an impermissible merit-based review and re-appreciation of evidence.

The Court dismissed both Petitions (O.M.P. (COMM) 552/2024 and 553/2024), holding that the Arbitral Awards did not suffer from perversity, patent illegality, or conflict with public policy.

No order as to costs.