Arbitrator's Award For Compensation For Excess Work And Business Loss Without Sufficient Evidence Is Perverse, Contrary To Fundamental Policy: Calcutta High Court

Brief Facts:

The matter pertained to an arbitral award that granted monetary claims to the claimant. The Petitioner argued that the award lacked any reasoning and that the arbitrator despite framing certain issues failed to decide on any of them. It contended that the monetary amounts awarded were based on no material evidence. The Petitioner argued that the arbitrator's findings were unjustified as they were based solely on the Respondent not presenting independent evidence through oral witnesses or documentary evidence. The claimant, according to the Petitioner, must rely solely on its own evidence and materials to support its case. Therefore, the premise that the award was justified due to the Respondent failure to provide evidence was legally untenable.

The Petitioner further contended that the arbitrator failed to provide any reasons or refer to specific evidence to support the claimant's case. On the other hand, the Respondent argued that the scope of intervention under Section 34 of the Arbitration Act is limited. It argued that the arbitrator relied on several pieces of evidence presented by the Respondent, both orally and through documents.

Observations by the High Court:

Regarding the Petitioner's argument that the issues framed were not adequately addressed by the Arbitrator, the High Court did not accept this contention wholly. It noted that the arbitrator formulated the issues and subsequently decided to take them up collectively for the sake of brevity and convenience. While deciding on each of the claims, the arbitrator did touch upon most of the framed issues. Since the parties addressed their arguments on the issues vis-à-vis the claims, the mere fact that the arbitrator did not systematically attribute reasons under each issue did not vitiate the award as a whole.

Regarding claim no. 1, the High Court noted that the arbitrator carefully considered several pieces of evidence. While the court may not fully align with how the arbitrator appreciated the evidence, the High Court held that it is established that under Section 34 of the Arbitration Act the court's role is not to reassess the evidence as in a regular first appeal but to ensure that the limited grounds for interference under Section 34 are met.

Regarding claim no. 2, the High Court found no irregularity in the Arbitrator directing the refund of the security deposit and holding that the work was completed on February 28, 2004.

However, for claims nos. 4, 5, 6, and 7, where the claimant sought compensation for various reasons, including job prolongation attributed to the department, the High Court held that the arbitrator granted compensation to the claimant without any substantial material basis, despite holding that the delay could not be exclusively attributed to one party. The claimant failed to substantiate the claims for losses or damages under Section 73 of the Contract Act. The High Court held that awarding compensation for excess work and business losses without cogent material was perverse and contrary to the fundamental policy of Indian law.

Claim no. 8 involved the claimant's request for interest. Since the return of pay orders did not involve any investment or blocking of the claimant's funds, the High Court held that the arbitrator's decision to grant interest was unjustified. Although the arbitrator had the authority to grant interest, given that the award mainly consisted of the return of pay orders, the High Court held that there was no basis for awarding interest on this claim.

Therefore, the impugned award was set aside by the High Court, except for the amounts awarded under claim no. 1 amounting to Rs. 7,52,071/-, claim no. 2 amounting to Rs. 1,10,876/-, the costs of arbitration proceedings, and the interest on the amount payable under claim no. 1. The Respondent was directed to return the pay orders in terms of the arbitral award to the claimant within eight weeks.

Case Title: The State Of West Bengal Vs Bijan Behari Chowdhury

Case Number: AP/224/2009

Advocate for the Petitioner: Mr. Priyankar Saha, Adv. Mr. Arindam Mandal, Adv. Mr. Ritoban Sarkar, Adv. Mr. Paritosh Sinha, Adv. …for the petitioner/State

Advocate for the Respondent: Mr. Rabindra Kumar Jaiswal, Adv. Ms. Manjula Paul, Adv. …for the respondent

Date of Judgment: 19th July, 2024

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