Painting Contractor Keeps Rs 71-Lakh Awards As Bombay HC Upholds Finding NPCIL Unlawfully Terminated Contracts And Failed To Prove Replacement Costs

NPCIL challenged two arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996, arising from contracts for painting work at the Anusri and Anuvikas townships.

The arbitrator found that delays were not solely attributable to Standard Corrosion, held NPCIL’s termination unlawful, rejected NPCIL’s risk-and-cost recovery, and awarded sums including compensation for loss of profit.

The arbitration had been invoked before the 2015 amendments to the Act, but the Section 34 petitions were filed after those amendments took effect.

Section 34 of the Arbitration and Conciliation Act, 1996 limits judicial review to the statutory grounds for setting aside an award; it does not confer appellate jurisdiction to reassess evidence or substitute a court’s view for a plausible arbitral finding.

The post-amendment standard applied because the petitions were filed after the 2015 amendments took effect.

Under Associate Builders v. Delhi Development Authority, an award is not invalid merely because it rests on limited evidence or a court might reach a different factual conclusion; interference is warranted where the tribunal’s approach is arbitrary, capricious, or perverse.

Dyna Technologies Pvt. Ltd. v. Crompton Greaves Ltd. similarly cautions against interference unless perversity goes to the root of the matter and no alternative interpretation can sustain the award.

For loss-of-profit claims following wrongful termination, A.T. Brij Paul Singh and MSK Projects India (JV) Ltd. v. State of Rajasthan recognise that expected profits may be recoverable upon proof of breach, with damages assessed by reasonable estimation rather than minute calculation.

The Court distinguished Unibros v. All India Radio, which concerned loss of opportunity to earn profits from other work, rather than profits expected under the terminated contract.

The Court found that the arbitrator’s assessment of the project timeline, paint approvals and testing, labour arrangements, and parties’ conduct was a plausible evaluation of the documentary record; NPCIL’s challenges would require impermissible reappreciation of evidence.

The arbitrator’s view that NPCIL’s conduct—including allowing work to continue after earlier notices and recording further commitments—made termination unlawful was not shown to be perverse; the Court also found no basis to displace the conclusion that time was not of the essence.

Separately, NPCIL had not established the expenditure incurred in completing the works through a replacement contractor, supporting the rejection of its risk-and-cost recovery.

The loss-of-profit award concerned profits expected from the contracts themselves, not profits from alternative opportunities; the arbitrator’s reduction of the claimed margin from 15% to 10% was a permissible reasonable estimate in the circumstances.

It dismissed both petitions and upheld the awards.

Any security furnished by Standard Corrosion for withdrawal of deposited sums was to be discharged, and the amounts held by the Registry, together with their earnings, were to be released within four weeks of upload of the order.