Court In Exercise Of Supervisory Jurisdiction Shall Not Interfere With Arbitral Award, Limited Scope Of Interference: Rajasthan High Court

Additionally, the court held that if the view taken by the Arbitrator is logical and acceptable merely because two views are possible the Court in the exercise of its supervisory jurisdiction shall not interfere with the Arbitral award.

Brief Facts:

The present appeal has been filed to challenge the decision of the Commercial Court by which the challenge laid to the Arbitral award has been dismissed. The parties executed an agreement for construction of the Police-line that is to be completed within 2 years. The total value of the contract was Rs.2,88,04,833/-. After some time, certain disputes arose between the parties regarding the admissibility of escalation mentioned in Clause 45 of the Agreement. So, the parties invoked arbitration to resolve the issue, and the High Court constituted the Arbitral Tribunal. The Arbitral Tribunal held that the claimant is entitled for the sum of Rs.31,54,223/- and granted interest @ 15% per annum both for the period between 14th April 2001 to 23rd February 2004 and interest pendente-lite. Also, the Arbitral award made by the Arbitral Tribunal has been affirmed by the Commercial Court. Being aggrieved, the appellant challenged the decision of the Commercial Court.

Observation of the court:

The court held that the Arbitral Tribunal rightly proceeded to accept the claim for escalation as the findings recorded by the Civil Court shall be binding on the Arbitral Tribunal. This is a well settled law that the interpretation of the clause of Agreement by the Arbitrator shall not be open to judicial interference unless it is demonstrated before the Court that the interpretation put by the Arbitral Tribunal was perverse. This is also well settled that if the view taken by the Arbitrator is logical and acceptable merely because two views are possible the Court in the exercise of its supervisory jurisdiction shall not interfere with the Arbitral award.

Moving further, the court rejected the arguments raised by the appellant that the Arbitral award is in conflict with the public policy of India because the Arbitral Tribunal ignored the express terms under Clause 45 of the Agreement.

The court observed that the Arbitral Tribunal has ample powers to grant interest. This power of the Arbitrator to award interest has been recognized under Section 31(7)(a) of the Act which provides that unless otherwise agreed by the parties where and insofar as an Arbitral award is for the payment of money, the Arbitrator may include the sum for which the Arbitral award is made interest at such rate as it deems reasonable, on the whole or any part of the money, or for the whole or any part of the period between the date on which the cause of action arose and the date on which the Arbitral award is made. The expression “cause of action arose” leaves little doubt to the power of the Arbitrator to award interest from the date the arbitration clause was invoked.

The court also relied on the judgment of the Supreme Court in Delhi Airport Metro Express (P) Ltd. v. DMRC (2022) wherein the court held that in the absence of an agreement between the parties the Arbitrator would have a discretion to exercise its powers under Section 31(7)(a) and such discretion is wide enough.

Finally, the court dismissed the appeal.

Case Title: State of Rajasthan v. M/s. Leeladhar Devkinandan

Case Number: D.B. Civil Misc. Appeal No. 761/2024

Counsel for the Appellant: Mr. Ayush Gehlot-AAAG for Mr. Rajesh Panwar, AAG

Counsel for the Respondent: Mr. Sheetal Kumbhat Mr. Naman Maheshwari

Date of Judgment: 16.12.2024

Click Here To Read/Download The Order