2009 (9) TMI 1030 - SC - Indian Laws

Summary

Issues Involved:
1. Validity of the arbitral award concerning claim Nos. 1, 4B, 5, and 6.
2. Requirement of reasons in the arbitral award u/s 31(3) of the Arbitration and Conciliation Act, 1996.
3. Remittance of the award to the arbitral tribunal for stating reasons.

Summary:

Issue 1: Validity of the arbitral award concerning claim Nos. 1, 4B, 5, and 6

The State of Kerala awarded a contract to M/s. Som Datt Builders Limited for road work on National Highway-47. The contractor raised claims due to extended stay and additional expenditures. The arbitral tribunal awarded amounts for claim Nos. 1, 4B, 5, and 6. The State of Kerala filed a petition u/s 34 of the Arbitration and Conciliation Act, 1996 to set aside the award, which was dismissed by the 2nd Additional District Judge, Ernakulam. The High Court partially allowed the appeal, setting aside the award for claim Nos. 1 and 4B due to lack of supporting reasons.

Issue 2: Requirement of reasons in the arbitral award u/s 31(3) of the Arbitration and Conciliation Act, 1996

The Supreme Court emphasized that u/s 31(3), the arbitral award must state the reasons upon which it is based unless the parties have agreed otherwise. The Court noted that the arbitral tribunal failed to provide reasons for claim Nos. 1 and 4B. The Court cited precedents emphasizing the necessity of reasons to ensure fair and legitimate consideration of the controversy.

Issue 3: Remittance of the award to the arbitral tribunal for stating reasons

The Supreme Court held that the High Court should have remitted the matter to the arbitral tribunal to provide reasons for the award concerning claim Nos. 1 and 4B, as permitted u/s 34(4) of the Act. The Court directed the 2nd Additional District Judge, Ernakulam to remit the award to the arbitral tribunal for stating reasons and then proceed with the hearing and disposal of objections.

Order:

(i) The judgments of the High Court and the 2nd Additional District Judge, Ernakulam are set aside.

(ii) The petition by the State of Kerala against the award is restored for fresh hearing and consideration of objections in respect of claim Nos. 1, 4B, 5, and 6.

(iii) The 2nd Additional District Judge, Ernakulam shall remit the award to the arbitral tribunal for stating reasons in support of claim Nos. 1 and 4B and proceed with the hearing and disposal of objections thereafter.

(iv) Parties shall bear their own costs.