Section 34 courts cannot disturb a plausible arbitral interpretation allowing damages for employer-caused contractual delay.

The J&K Lakes and Waterways Development Authority awarded the respondent-contractor a ₹90.05 lakh contract for construction of a sewer line along the Nigeen fringe, incorporating departmental materials and requiring completion within 180 days.

Disputes arose when LAWDA allegedly failed to supply the required RCC spun pipes, resulting in stoppage of work between March and October 2008; work was subsequently obstructed after March 2009 when landowners demanded compensation for land affected by the alignment.

The contractor claimed compensation for dewatering, idle labour and machinery, escalation, watch and ward, fire and theft losses, unused materials, and outstanding payment.

Upon the contractor’s application, the High Court appointed a sole arbitrator.

The arbitrator awarded ₹21,19,439 with simple interest at the prevailing rate in case of non-payment within two months of the award dated 14 June 2014.

LAWDA challenged the award under Section 34 of the J&K Arbitration and Conciliation Act, 1997.

Whether the arbitral award was liable to be set aside under Section 34 on the ground that the arbitrator exceeded the contract and the scope of submission by awarding compensation for dewatering, idle charges, escalation, and related losses despite Clauses 21, 23 and 34 of the contract.

Whether the arbitrator’s findings that LAWDA caused delay by failing to supply RCC pipes and by failing to ensure availability of the site were based on evidence and could be interfered with under Section 34.

Whether escalation could be awarded in the absence of an express price-escalation clause where the delay was attributable to the employer.

Whether the direction awarding interest after expiry of two months from the date of the award was without jurisdiction.

Section 34 of the J&K Arbitration and Conciliation Act, 1997 permits setting aside an arbitral award only on specified grounds, including invalidity of the arbitration process, decisions beyond the scope of submission, procedural irregularity, patent illegality, or conflict with public policy.

The court applied the principle that an arbitrator is bound by the contract but has jurisdiction to interpret its terms; a plausible contractual interpretation cannot be substituted merely because another interpretation is possible.

Associate Builders v. Delhi Development Authority, (2015) 3 SCC 49, and Consolidated Construction Consortium Ltd. v. Software Technology Parks of India, (2025) 7 SCC 757, establish that Section 34 is supervisory and not appellate, and that reappreciation of evidence is impermissible where the award reflects a possible view.

Under Assam State Electricity Board v. Buildworth Pvt. Ltd., (2017) 8 SCC 146, idling charges and escalation may be awarded where employer-caused delay is established.

K.N. Sathyapalan v. State of Kerala, (2007) 13 SCC 43, recognizes an arbitrator’s authority to compensate a contractor for additional costs caused by the other party’s failure to perform contractual obligations, even absent an escalation clause.

Under Dhenkanal Minor Irrigation Division v. N.C. Budharaj, (2001) 2 SCC 721, an arbitrator may award interest on amounts found due, subject to contractual restrictions.

The court held that the arbitrator had considered Clauses 21, 23 and 34 and had not ignored or rewritten them.

Clause 21 was reasonably construed as applying to suspension or abandonment directed by LAWDA; since the stoppage resulted from non-supply of pipes and landowners’ objections rather than a departmental suspension order, the clause did not conclusively bar idle charges.

Clause 23 was interpreted as covering ordinary dewatering priced into the contractor’s rates, not exceptional dewatering allegedly caused by LAWDA’s seven-month delay in supplying pipes; this was at least a tenable contractual interpretation.

Clause 34 dealt with loss or pilferage of departmental materials and did not operate as a general immunity against claims for the contractor’s own materials, fire losses, watch and ward, or idle establishment.

The arbitrator’s findings of departmental default were supported by the evidence, including the AEE’s recommendation of 4% escalation and the parties’ evidence regarding the delayed pipe supply and site obstruction.

The escalation award was conservatively restricted to 4%, rather than the contractor’s larger claim, and was therefore consistent with the principles in Buildworth and Sathyapalan.

The court declined to reassess the evidence or revisit the arbitrator’s factual findings, and held that the delay in passing the award beyond the High Court’s three-month administrative direction did not, by itself, invalidate the award.

It held that the arbitrator’s interpretation of Clauses 21, 23 and 34 was a possible and reasonable view, that the findings of employer-caused delay were evidence-based, that escalation was legally awardable despite the absence of an express escalation clause, and that the limited post-award interest direction was valid.

No ground of patent illegality, excess of jurisdiction, or conflict with public policy under Section 34 was established.

The petition challenging the award was dismissed, and any subsisting interim directions were vacated; pending applications were also disposed of.