2021 (12) TMI 614 - SC - Indian Laws

Validity of Arbitral Award - it is alleged that award is in excess of claim - Arbitrator exceeded the scope of reference or not - Arbitrator has rewritten the contract with respect to the amount payable which was specified in the contract or not - HELD THAT - That the contractor was awarded the contract for maintenance, etc. The contract amount was for ₹ 5,26,59,688/. The rate of maintenance of the road as accepted was ₹ 12,000/per km per annum or ₹ 1,000/per km per month. The maintenance contract was valid up to 31.07.2010. When the contract was entered into, the contract was meant for only 3364 PCUS per day. However, due to diversion of traffic from Palwal Aligarh Road to the present road, the contractor was required to incur additional expenditure on the maintenance due to increase in the traffic and plying the additional commercial vehicles. When the statement of claim submitted by the contractor is seen, it is specifically stated by the claimant that the amount of ₹ 1,03,50,263/has been worked out up to May, 2007 and the details of expenditure beyond May, 2007 will be submitted during the course of hearing. It is specifically stated that expenditure incurred up to May, 2007 works out to ₹ 1,03,50,263/. Therefore, the amount awarded by the Arbitrator cannot be said to be in excess of the claim - the Arbitrator was justified in awarding the amount beyond the aforesaid periods and till the additional traffic was diverted due to the closure of Palwal Aligarh Road - the Arbitrator was justified in awarding the amount beyond the aforesaid periods and till the additional traffic was diverted due to the closure of Palwal Aligarh Road. The contractor was entitled to the loss on account of the additional expenditure incurred for maintenance of the road due to increase in the traffic because of the closure of the Palwal Aligarh Road and diversion of the traffic to the present road. Therefore, by no stretch of imagination it can be said that there was rewriting the terms of the contract as submitted on behalf of the appellant. The award passed by the Arbitrator awarding the amount/compensation at ₹ 45,000/per km per month up to January, 2008 under claim Nos.1 and 8 is hereby confirmed - Appeal allowed in part.

Summary

Issues Involved:
1. Whether the arbitral award was in excess of the claim.
2. Whether the Arbitrator exceeded the scope of reference.
3. Whether the Arbitrator rewrote the contract with respect to the amount payable specified in the contract.

Detailed Analysis:

1. Excess of Claim:
The appellant contended that the arbitral award was in excess of the claim. The contractor had claimed ?1,03,50,263 under claim Nos. 1 and 8, but the Arbitrator awarded ?1,51,95,400, which was argued to be far in excess of the amount claimed. The appellant cited the decision in ONGC Ltd. v. OffShore Enterprises Inc. to support this contention. However, the respondent argued that the statement of claim specified that the amount of ?1,03,50,263 was worked out up to May 2007, and additional details would be submitted during the hearing. The court agreed with the respondent, noting that the claim was not restricted to ?1,03,50,263 and thus, the award was not in excess of the claim.

2. Scope of Reference:
The appellant argued that the Arbitrator exceeded the scope of reference by awarding an amount for a period beyond the date of entering reference (19.05.2007). They contended that the Arbitrator should have restricted the claim to either 06.03.2006 (date of invoking arbitration) or 23.04.2007 (date of appointing the Arbitrator). The appellant cited cases like Indian Aluminium Cables Ltd. v. Haryana State Electricity Board and MSK Projects India (JV) Ltd. v. State of Rajasthan & Anr. to support their argument. However, the court found that the claim was justified till the traffic was diverted, which was up to January 2008, and thus, the Arbitrator did not exceed the scope of reference.

3. Rewriting the Contract:
The appellant contended that the Arbitrator rewrote the contract by awarding compensation at ?45,000 per km per month instead of the mutually agreed rate of ?1,000 per km per month. They argued that this was beyond the terms of the contract. The respondent countered that the additional expenditure was due to the increased traffic from the diversion, which was not anticipated in the original contract. The court agreed with the respondent, stating that the additional expenditure was justified due to the unforeseen increase in traffic, and thus, it was not a case of rewriting the contract.

Separate Judgments:
The court partially allowed the appeals, confirming the award of ?45,000 per km per month up to January 2008 but quashing the award for the period from February 2008 to 31.05.2010. The amount due was to be recalculated accordingly. There were no separate judgments delivered by the judges in this case.