2003 (3) TMI 532 - HC - Companies Law

Summary

Issues Involved:

1. Entitlement to additional cost due to foreign exchange rate fluctuation.
2. Alleged non-disclosure of material documents by the respondent.
3. Grounds for remitting the award under Section 16 of the Arbitration Act, 1940.
4. Grounds for setting aside the award under Section 30 of the Arbitration Act, 1940.

Detailed Analysis:

1. Entitlement to Additional Cost Due to Foreign Exchange Rate Fluctuation:

The appellant, a construction company, contested the rejection of its claim for additional costs due to foreign exchange rate fluctuations. The claim was based on clauses IT 18 and 75 of the contract. The learned Arbitrator concluded that the provisions of IT 18(1) required unit rates and prices to be quoted entirely in Indian Rupees by domestic tenderers, and that foreign exchange risks were only applicable to foreign bidders. The Arbitrator stated, "It is quite difficult to appreciate how an Indian bidder can express the need to be paid either in US Dollars or in any other currency." Thus, the claim made by the appellant under this head was rejected, as reflected in the Arbitrator's conclusion: "To sum up, the provisions contained in IT 18(2) and clause 75 of the special Conditions of contract do not support the claim made by the claimant under this head."

2. Alleged Non-Disclosure of Material Documents by the Respondent:

Post-award, the appellant's advocate informed the Arbitrator of newly discovered documents, which were allegedly withheld by the respondent. These documents included a letter from the World Bank advising that contractors should not bear foreign exchange risks, guidelines for World Bank-financed projects, and evidence of similar reimbursements in other projects. The appellant argued that these documents were crucial and could have led to a different conclusion by the Arbitrator. The appellant cited the Supreme Court's decision in K.P. Poulose v. State of Kerala, which held that non-disclosure of material documents could constitute legal misconduct.

3. Grounds for Remitting the Award under Section 16 of the Arbitration Act, 1940:

The court analyzed whether the award should be remitted for reconsideration due to omissions or defects. The Supreme Court's decision in Ramachandra Reddy & Co. v. AP was referenced, which stated that remission is discretionary and should be judicially exercised. The court concluded that the documents in question were opinions and not part of the contract, and thus, their non-disclosure did not warrant remitting the award. The court emphasized that the documents were not material enough to unsettle the Arbitrator's interpretation of the contract clauses.

4. Grounds for Setting Aside the Award under Section 30 of the Arbitration Act, 1940:

The appellant argued that the award should be set aside due to the respondent's deliberate withholding of documents, which constituted legal misconduct. The court, however, held that the Arbitrator's interpretation of the contract clauses was within permissible limits and did not exhibit any error on the face of the award. The court cited Hindustan Construction Co. Ltd. v. State of J&K, which held that erroneous interpretation by an Arbitrator does not justify setting aside the award unless it is outside the scope of the contract. The court found no misuse of discretion by the learned Single Judge in refusing to set aside the award.

Conclusion:

The appeal was dismissed, upholding the Arbitrator's decision and the learned Single Judge's discretion. The court found no grounds for remitting or setting aside the award, as the non-disclosed documents were not deemed material enough to affect the Arbitrator's interpretation of the contract. The decision emphasized the limited scope of judicial interference in arbitration awards, reinforcing the principle that Arbitrators' interpretations within the contract's scope are binding.