Arbitrator’s interpretation of contract and discretionary award of interest remains final absent patent jurisdictional error.

The appellant (NBCC) was awarded a main contract by the State of Gujarat for bridge construction on the Ahmedabad-Vadodara Expressway

NBCC sub-contracted the Mahi River bridge portion to the respondent (UPSBC) via an agreement dated 28.09.1989

On 06.09.1991, the State of Gujarat terminated the main contract, leading to the automatic termination of the sub-contract under Clause 16

Following termination, NBCC encashed UPSBC’s performance bank guarantee worth ₹123 lakhs

UPSBC invoked arbitration in 1995.

The Sole Arbitrator, via award dated 30.11.2000, directed NBCC to refund the bank guarantee amount plus interest, finding the encashment unjustified as there was no default by UPSBC

NBCC challenged the award under Sections 30 and 33 of the Arbitration Act, 1940.

The Trial Court dismissed the objections and made the award the 'Rule of Court' on 22.04.2009

NBCC appealed this decree under Section 39(vi) of the 1940 Act.

1. Whether the Arbitrator committed a jurisdictional error or misconduct by holding the bank guarantee encashment illegal despite the "back-to-back" nature of the contract?

2. Whether the Arbitrator erred in rejecting NBCC’s counter-claim as time-barred?

3. Whether the award of pre-suit, pendente lite, and future interest at rates up to 14.79% was excessive or beyond the Arbitrator's power?

The court applied Sections 17, 30, and 33 of the Arbitration Act, 1940 regarding the grounds for setting aside awards, limited to misconduct or invalidity

It relied on Rajasthan State Mines & Minerals Ltd. v. Eastern Engg. Enterprises, establishing that an arbitrator is a creature of the contract and cannot travel beyond its four corners

It further applied State of Rajasthan v. Puri Construction Co. Ltd., which cautions that courts should not reappreciate evidence or substitute their own view for that of the "final arbiter" unless there is a patent error of law

Regarding interest, the court followed the Five-Judge Bench decisions in Irrigation Deptt., Govt. of Orissa v. G.C. Roy and Executive Engineer, Dhenkanal v. N.C. Budharaj, affirming the arbitrator's power to award pre-reference and pendente lite interest unless expressly barred by contract

The High Court observed that while the sub-contract was "back-to-back," Clause 17 specifically allowed liquidated damages (and by extension guarantee invocation) only if the default was attributable to the Associate (UPSBC)

The Arbitrator found as a fact that the termination was due to the State’s action against NBCC, not UPSBC's default, and that NBCC failed to issue a mandatory show-cause notice before encashment

The Court held that the Arbitrator’s interpretation of the contract was a possible view and did not constitute a jurisdictional error or "legal misconduct" under Section 30

Regarding the counter-claim, the Court upheld the Arbitrator's finding that a 6-year delay from the date of termination (1991) to the filing of the counter-claim (1997/2000) rendered it time-barred, as the dispute was independent of NBCC's separate litigation with the State

On interest, the Court found the Arbitrator had judiciously applied the Prime Lending Rate (PLR) from bank evidence and noted that interest is compensatory for the deprivation of funds

It held that the Arbitrator acted within his jurisdiction and the award did not suffer from patent illegality or perversity

The Arbitrator properly awarded ₹1.23 Crores for the bank guarantee refund, ₹1,42,45,000 as pre-suit/pendente lite interest, and future interest @ 14.50% p.a. until decree/payment

All pending applications were disposed of