Karnataka HC Upholds ₹4.54-Crore Award To Road Contractor, Citing Delayed Site Handover And Unsettled PWD Accounts

In brief

The question

1. Whether the sole arbitrator’s appointment and rejection of the appellant’s jurisdictional objection disclosed a ground for interference under Sections 34 and 37

The court held

The High Court held that the appellant had not established any ground under Section 34, including patent illegality under Section 34(2-A), and that the Commercial Court’s decision disclosed no error warranting interference under Section 37.

It also directed

The appeal was dismissed, and pending interlocutory applications were disposed of.

01Facts

The appellant awarded respondent No. 1 a contract in 2011 for construction of an approach road to a railway overbridge.

¶ 3–5

The work was completed on 5 February 2014 after delays and changes to the design and specifications; the parties later executed a Supplementary Agreement.

¶ 3–5

Disputes over the contractor’s claims were referred to a sole arbitrator appointed by the High Court under Section 11 of the Arbitration and Conciliation Act, 1996.

¶ 5

The award dated 23 November 2021 allowed six claims, awarding an aggregate of Rs. 4,54,89,696 with interest.

¶ 5

The appellant’s application under Section 34 was dismissed by the Commercial Court, and the appellant appealed under Section 37.

¶ 1, 5–7

02Issues

i.1. Whether the sole arbitrator’s appointment and rejection of the appellant’s jurisdictional objection disclosed a ground for interference under Sections 34 and 37

¶ 9, 23–31

ii.2. Whether the contractor’s claims were barred by limitation

¶ 10, 32–34

iii.3. Whether the award on the final bill, price adjustment, idling charges, overheads, legal expenses and interest was liable to be set aside for patent illegality, perversity, breach of natural justice, or another ground under Section 34

¶ 10–14, 35–38

iv.4. Whether the Commercial Court exceeded the permissible scope of review under Section 34, warranting interference in an appeal under Section 37

¶ 8, 37–45

03Law Applied

Section 37 of the Arbitration and Conciliation Act, 1996 does not confer a broader review power than Section 34; an appellate court must not independently reassess the merits or evidence and may interfere only within the statutory grounds available under Section 34, including patent illegality under Section 34(2-A).

¶ 39–44

The court relied on MMTC Ltd. v. Vedanta Ltd., (2019) 4 SCC 163, and Konkan Railway Corpn. Ltd. v. Chenab Bridge Project, (2023) 9 SCC 85, among other authorities, for the restricted scope of review under Sections 34 and 37.

¶ 39–41

A plausible arbitral view cannot be displaced merely because another view is possible or because the court might assess the evidence differently.

¶ 42–44

Under Section 16, a jurisdictional objection must be raised within the statutory time; the court also considered the contractual arbitration clause and the High Court’s appointment under Section 11.

¶ 23–26

Provisions in the judgment · 5 · Linked ones open on LawLens

Commercial Courts Act, 2015 Section 13

Arbitration and Conciliation Act, 1996 Section 11 Section 16 Section 34 Section 37

04Reasoning

The appellant raised its Section 16 objection with its statement of defence, but the High Court found that the arbitrator had considered and rejected it by a reasoned order.

¶ 23–31

The arbitrator’s appointment followed the contractual mechanism after the appellant did not respond to the proposed appointment, and the appellant had participated in the proceedings; no basis for interference was established.

¶ 23–31

On limitation, the court relied on the completion and defect-liability dates, the extension of time without penalty, the subsequent price-adjustment bill and reminders, and the unsettled final accounts. It held that the arbitral finding that the claims were in time was not patently illegal.

¶ 32–34

The remaining objections concerned contractual interpretation and assessment of evidence. The arbitrator had allowed only part of the claims, and the court found no perversity, patent illegality, jurisdictional error, or violation of natural justice warranting intervention. The Commercial Court had not exceeded its review powers.

¶ 35–38