Orissa High Court
Case Details
Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 IN THE HIGH COURT OF ORISSA AT CUTTACK ARBA Nos. 11 of 2014 and 26 of 2015 (From the judgment 21.11.2013 and 21.02.2015 passed by the Learned District Judge, Ganjam, Berhampur, in ARBA 03 of 2010 and ARBA 02 of 2011, respectively, arising out of award dated 04.08.2010 and 11.12.2010 passed by the sole Arbitrator) Union of India (In both the cases) …. Appellant (s) -versus- M/s. Jai Gopal Dhal & Brothers and others …. Respondent (s) Advocates appeared in the cases: For Appellant (s) : Mr. Dipti Ranjan Bhokta, CGC -versus- For Respondent(s) : Mr. Debajyoti Chatterjee, Adv. Mr. A.K. Mishra, Adv. CORAM: DR.JUSTICE S.K. PANIGRAHI DATE OF HEARING:-29.10.2024 DATE OF JUDGMENT:-24.12.2024 Dr. S.K. Panigrahi, J. 1. The present appeals, filed under Section 37(1)(b) of the Arbitration and Conciliation Act, 1996 (“the Act”), challenge the orders dated 21.11.2013 and 21.02.2015 passed by the Learned District Judge, Ganjam, Berhampur, in ARBA 03 of 2010 and ARBA 02 of 2011, pg. 1 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 respectively. By these orders, the Learned District Judge dismissed applications filed under Section 34 of the Act seeking to set aside the arbitral awards dated 04.08.2010 (as amended on 13.09.2010) in CA No.CEJZ/GOS/21 and dated 11.12.2010 in CA No.CEJZ/GOS/40. The appellants contend that the judgments and awards rendered by the Sole Arbitrator are illegal, perverse, vitiated by non- application of mind, and contrary to established principles of law. I. FACTUAL MATRIX OF THE CASE: 2. The first petition pertains to Agreement No. CEJZ/GOS/21 dated 31.08.2005, executed between the Appellant and the Respondent for a construction project. The contract, valued at ₹2,77,24,575.44/-, was entered into by the Chief Engineer, Jabalpur Zone, and M/s. Jai Gopal Dhal & Bros. The scope of work included the construction of a triple-storied Administrative Block, 30 Single Officers’ Accommodation units, and associated facilities. Phase-I of the project was scheduled to be completed within six months, and Phase-II within 18 months, with both phases commencing on 07.09.2005. Phase-I was completed within the stipulated timeframe, while Phase-II was completed on 06.06.2007 after an extension was granted for delays. Both phases were completed and certified without dispute. However, the Respondent initiated arbitration proceedings alleging various financial losses and incomplete payments. pg. 2 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 3. The Appellant has challenged the impugned award, alleging various irregularities in the claims made by the Respondent. Consequently, the claims raised by the Appellant have been presented in a detailed and elaborate manner to facilitate a comprehensive adjudication of the issues: Claim No. 1: The Respondent seeks reimbursement for financial losses and damages suffered due to incomplete measurements and additional items of work executed but not accounted for in the contract’s original scope. The total claim is ₹5,81,312.00/-, which includes: Claim No. 1(A): The Respondent provided non-skid ceramic tiles at specified locations such as clerks’ rooms, classrooms, and corridors in the administrative building, replacing materials like terrazzo flooring and kota stone specified in the contract. Despite measurements being recorded and partial payments being made in the final bill, a balance amount of ₹1,68,795.00/- is claimed. Claim No. 1(B): Granite tile flooring was installed in the administrative building’s entrance hall, stair corridor, and flower box, but incorrect measurements led to underpayment. The Respondent claims ₹55,848.00/- for this work. Claim No. 1(C): An additional interlocking aluminium section grid ceiling with gypsum board was installed in areas outside the contract’s scope. Although ₹40,000.00/- was paid initially, the pg. 3 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 Respondent claims an additional ₹76,610.00/- for work completed but not fully compensated. Claim No. 1(D): Aluminium sliding glass doors were provided between the entrance and corridor, but contractually due payments were not made in the final bill, leading to a claim of ₹40,950.00/-. Claim No. 1(E): The Respondent provided a cement concrete road instead of the specified premixed carpet road in front of the main headquarters building. This alteration resulted in a claim of ₹40,416.00/-. Claim No. 1(F): Earthenware tiles were installed over RCC sloping roofs of various structures such as the porch and sentry post. The Respondent claimed ₹56,067.00/- for this additional work. Claim No. 1(G): Tiles were provided in lieu of white cement
Legal Reasoning
flooring in technical staff and brigadier rooms. Additionally, underpayments were made due to incorrect application of rates, resulting in a claim of ₹87,461.00/-. Claim No. 1(H): The Respondent claims ₹15,404.00/- for excavation and removal of surplus soil for drains, which was not measured or paid in the final bill. Claim No. 1(I): Adjustments in the quantities of surplus soil removal led to incorrect payments. The Respondent claims ₹25,511.00/- for this discrepancy. pg. 4 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 Claim No. 1(J): Stainless steel railings were installed in the entrance hall instead of RCC parapet railings. This change resulted in a claim of ₹14,250.00/-. Claim No. 2: The Respondent installed boxes to cover electric meters in 30 single officers' quarters/ a task outside the contract’s original scope. For this, the Respondent claims ₹9,003.00/-. Claim No. 3: Financial losses were incurred due to uncontractual and incorrect pricing of DO No. 29, involving the provision of thinner khandolite tiles in various blocks instead of the specified thicker tiles. The Respondent claims ₹2,30,541.94/- for these adjustments. Claim No. 4: A security wall with RCC columns, beams, ornamental gates, and grills was provided instead of the specified fencing and gate under the contract. This led to a claim of ₹9,03,024.00/- for financial losses and incorrect pricing. Claim No. 5: Granite strips were installed at door openings, requiring the removal of existing tiles. The Respondent claims ₹5,629.00/- for this additional work. Claim No. 6: The Respondent was not handed over a building for demolition and alleges a wrongful deduction of ₹20,000.00/- from the final bill. A claim of ₹35,000.00/- has been raised, including financial losses. pg. 5 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 Claim No. 7: MS guard bars were provided for wooden windows across all blocks, which were not covered under the contract. The Respondent claims ₹1,62,805.00/- for this additional work. Claim No. 8: Changes were made to plumbing and sanitary items in toilets of officer quarters. The Respondent claims ₹51,534.00/- for these modifications. Claim No. 9: The Respondent alleges financial losses due to delays in payments for RARs and the final bill. The total claim for these losses is ₹3,30,561.00/-. Claim No. 10: Underpayments were made for water supply and electrification works, as the approved rates were incorrectly reduced. The Respondent claims ₹79,000.00/- for these discrepancies. Claim No. 11: The Respondent claims ₹57,046.00/- for financial losses due to incorrect application of escalation components for material, fuel, and labour. This includes: ₹30,717.00/- for underpayment due to incorrect pricing. ₹6,329.00/- for excess recovery of electric charges. ₹20,000.00/- withheld in a suspense account. Claim No. 12: Reimbursement for incorrect pricing of DOs, amounting to ₹66,440.00/-, is claimed by the Respondent. pg. 6 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 Claim No. 13: The Respondent provided additional reinforcement bars in the administrative block’s columns beyond the contractual requirements. For this, the Respondent claims ₹1,18,945/-. Claim No. 14: Escalation costs for material and labour on various claims, as admissible under special conditions of the contract, were not paid. The Respondent claims ₹1,15,449.00 for these costs. Claim No. 15: The Respondent demands interest at 18% per annum on the withheld dues from the date they were due until the date of payment. 4. In respect of the aforementioned claims, the Sole Arbitrator, vide the award, granted a sum of ₹11,15,957/- with interest against the cumulative claim of ₹27,46,289/-. The Arbitrator allowed amounts in favour of the Respondent for all claims, except for Claim Nos. 1(F), 1(I), 1(J), 2, 4, 10, and 11(B). 5. The second petition concerns Agreement No. CEJZ/GOS/40 of 2005- 06 for the construction of a children’s school at Gopalpur-on-Sea. The contract, valued at ₹5,95,69,351.93/-, was executed between the Chief Engineer, Jabalpur Zone, and the Respondent on 28.02.2006, with a work order issued on 18.03.2006 for commencement. The contract’s scope encompassed the construction of a double-storied children’s school building/ a scooter shed/ a cycle shed/ a car garage, and related services, in accordance with the contract terms and approved drawings. pg. 7 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 6. Here, in response to the claims made by the Respondent, the Sole Arbitrator awarded a sum of ₹5,20,245/- with interest in favour of the Respondent 7. The appellant objected to the claims presented by the respondent/ contractor before the Sole Arbitrator. The appellant argued that several claims made by the respondent were beyond the scope of the original contract and therefore not admissible. Despite these objections, the Sole Arbitrator allegedly failed to duly consider the legal provisions and evidence presented by the appellant. 8. Being aggrieved by the outcome, the Appellant filed a petition under Section 34 of the Act seeking to set aside the award dated 14.08.2010, as amended on 13.09.2010, and 11.12.2010 before the Court of the District Judge, Ganjam in Arbitration Petition No. 03/2010 and Petition No. 02/2011 respectively. These petitions were eventually dismissed. Thus, this appeal. II. APPELLANT’S SUBMISSIONS: 9. The Learned Counsel for the Appellant earnestly made the following submissions in support of his contentions against the judgement dated 21.11.2013 corresponding to ARBA 03 of 2010: (i) The appellant assails the judgments of the District Judge mainly on the ground that the impugned orders of the District Judge suffer from non-appreciation of materials on record and incorrect application of law for he failed to take relevant materials into pg. 8 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 consideration while deciding the matter and based its reasoning on irrelevant considerations. (ii) The objections raised by the appellant against the award dated 04.08.2010 (as amended on 13.09.2010) were unjustly dismissed. Specifically, the Arbitrator’s decision on Claim Nos. 1(A), 1(B), 1(G), and 5 reveals misconduct, as these claims were awarded in favor of the contractor by ignoring material facts on record and failing to verify the factual accuracy on the ground. The award stands in violation of Section 70 of the Indian Contract Act. (iii) There is a glaring error on the face of the award since the contractor had accepted the measurements for additional works without protest before the completion of the work. No letter of objection was written by the contractor until the work was completed. It is fundamental that the onus of proving the claims lies with the contractor, but the contractor neither submitted purchase vouchers for the complete quantities of materials used in the additional work nor was this required by the Arbitrator before awarding the claims in favor of the contractor. As per Section 70 of the Indian Contract Act, the appellant was obligated to compensate the contractor for additional works carried out, even though such works were done without written orders of the General Engineer (GE) as per the contract conditions. The appellant adequately compensated the contractor for these works and submitted the necessary proof and details to the Arbitrator, including exhibits GP-8 to GP-13 and GP- pg. 9 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 16. However, the Arbitrator failed to give due consideration to these submissions and did not verify the claims on the ground, even when doubts could have been easily clarified through such verification. (iv) Regarding Claim No. 1(G), the Arbitrator awarded an amount of ₹24,010/- for the contractor’s claim of incorrect application of rates against DO No. 27, despite the appellant’s clear explanation in its submissions. The Appellant’s letter dated 15.02.2010 and Exhibit GP-23 detailed the factual position, calculating the amount as ₹13,262.98/-. Moreover, the contractor, under Claim No. 12, requested ₹8,348.39/- for the same issue. By ignoring the appellant’s submissions and the contradictory details provided by the contractor, the Arbitrator committed a grave error in passing the award in favor of the contractor. This amounts to misconduct and renders the award liable to be set aside. (v) For Claim No. 1(D), the Arbitrator awarded compensation for sliding aluminium doors, even though the contractor failed to submit purchase vouchers as proof, despite repeated requests from the appellant. The Arbitrator did not insist on this evidence before passing the award. Furthermore, the appellant had already compensated the contractor for this expenditure, as evidenced by Exhibit GP-14. The claim was awarded without verifying the contractor’s statements or ensuring a factual basis/ making the award baseless and liable to be dismissed. pg. 10 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 (vi) In the case of Claim No. 1(E), the Arbitrator ignored photographic evidence submitted by the appellant, which clearly demonstrated the thickness of the concrete road (Exhibits GP-17 to GP-21). Instead, the Arbitrator speculated about the possibility of locations where the thickness might exceed 100 mm, as stated in Para 17.1.5.6 of the award. No further verification or request for details was made by the Arbitrator, and no site visit was conducted to resolve these doubts. The award for this claim lacks any substantive basis and is, therefore, bad in law, necessitating its dismissal. (vii) Regarding Claim No. 1(H), the award passed by the Arbitrator is fundamentally flawed. The appellant had contended that the PCC drain was constructed in an existing “kutcha drain,” eliminating the need for excavation and removal, and no contrary proof was provided by the contractor. The contractor had signed the measurement book without protest and did not raise this claim when signing the final bill or submitting claims via their letter dated 08.02.2008. These critical facts were overlooked by the Arbitrator without justification, further demonstrating the erroneous nature of the award. These lapses underscore the need to set aside the Arbitrator’s award and the District Judge’s judgment upholding it. (viii) The award passed by the Arbitrator in relation to the contractor’s claims, particularly Claim No. 1(G), has been awarded without proper consideration of critical aspects. As per the Arbitrator’s pg. 11 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 arguments in Para 17.1.8.4 on page 31 of the award, there is an assumption of the necessity for excavation to make the “kutcha drain” to the specified width and depth. However, the quantity of earthwork required in this case would be significantly less, resulting in a meager amount. Despite this, the full amount of ₹15,404/- has been awarded in favor of the contractor, rendering the decision baseless and warranting rejection. Similarly, the award of Claim No. 2 by the Arbitrator is not aligned with the provisions of the contract and violates established legal principles, making it liable to be dismissed. (ix) The Arbitrator has further erred in allowing Claim No. 3 in favor of the contractor, which is contrary to the explicit terms of the contract. The conclusion drawn in Para 17.3.7 on page 41 of the award, stating that mere depiction in the elevation may not necessarily indicate stone cladding under the subject contract, directly contradicts the provisions in Schedule ’A’ Part I on Serial Page 15 (RR) of the contract agreement. This explicitly describes the construction of the administrative block and single officers’ accommodation “all as specified and shown on drawings.” The main working drawings clearly detail the location and specifications for the 35 mm thick stone cladding, making any further specification unnecessary. The Arbitrator’s conclusion that details not mentioned in the particular specifications or schedule of pg. 12 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 finishes take precedence over the main drawings is incorrect and against the express provisions of the contract. (x) Moreover, the contractor did not raise the claim for stone cladding until after the completion of work, nor did they include it in their final bill or letter of claims dated 08.02.2008. The contractor also signed the draft star rate for the provision of the 35 mm thick stone cladding in omission, without reservation, in May 2008, indicating acknowledgment that the cost was included in the lump sum of the building. Thus, this claim appears to be an afterthought and lacks merit. (xi) Against Claim Item No. 6, the Arbitrator’s decision to award anticipated profit for the demolition work, which was not carried out due to the user’s requirements, is similarly against the contract provisions and should be annulled. The award of ₹15,000/- for financial losses or damages, including anticipated profits from sales of old retrieved materials, also contravenes Condition 57 of IAFW 2249, which explicitly bars such claims. This award is therefore contrary to the contract provisions and liable to be set aside. (xii) Then again, against Claim Item No.9, the award of ₹28,391/- for simple interest at 10% per annum on delayed payment of various RARs also contradicts the provisions of the contract agreement, as there is no clause permitting interest on amounts due or paid in RARs. The contractor accepted and signed the RARs without reservations and never served notice for claiming interest on pg. 13 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 delayed payments. This award is therefore against the contract agreement and should be set aside. (xiii) Regarding Claim No. 11(A), the award of ₹30,678.42/- by the Arbitrator is flawed and lacks any factual or legal basis. The Appellant, through Exhibit GP-26, demonstrated that the amount claimed worked out to ₹17,012/-, but the Arbitrator disregarded this evidence without justification. Similarly, the award against DO No. 26 for MS grills to wooden windows, which are part of the lump sum, is erroneous. The conclusion drawn by the Arbitrator in Para 17.12.4(c) on page 78 of the award that there is no rate for aluminium windows in the SSR is incorrect, as evidenced by Item No. SI 1263 of SSR Part II 2004. The Arbitrator’s decision to award the claim based on market rates fixed for another area without considering analogous SSR items or the express contract provisions is a clear instance of misconduct. (xiv) The above submissions highlight the Arbitrator’s failure to adequately evaluate the evidence, making the award illegal and liable to dismissal. The learned District Judge also erred in law by failing to scrutinize the Arbitrator’s findings, merely holding that they are based on facts without examining their foundation. These findings are based on extraneous material that goes beyond the scope of the contract, violating fundamental legal policies and the principles of justice. The infraction of common law in these findings amounts to a breach of public policy. The learned District pg. 14 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 Judge’s failure to set aside these awards reflects illegality and a fundamental misapplication of the rule of law. Consequently, the judgment is bad in law and liable to be set aside. 10. The Learned Counsel for the Appellant earnestly made the following submissions in support of his contentions against the judgement dated 21.02.2015 corresponding to ARBA 02 of 2011: (i) The Appellant submits that no payment was delayed on account of any issue related to the distribution of Do’s/Add. Back Do’s. The claims raised by the Respondent on this ground are baseless and unwarranted. (ii) It is contended that the claims detailed in Paragraphs 6.3, 6.3.1, and 6.3.2 of the Respondent’s submissions were neither raised during the currency of the contract nor was there any objection raised to the recoveries reflected in the various Running Account Receipts (RARs). Consequently, the award made by the Sole Arbitrator on these claims was beyond the scope of the reference and unsustainable in law. (iii) The Respondent accepted the final payment without raising any objections. Therefore, there existed no dispute warranting reference to arbitration. The Learned District Judge failed to apply his judicial mind to the specific objections raised by the Appellant, particularly concerning the lack of any cause of action to refer the matter to arbitration. Furthermore, the award rendered by the Sole pg. 15 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 Arbitrator was not only beyond the terms of the agreement but also without any legal basis. (iv) The Appellant asserts that there was no material evidence before the Learned District Judge to conclude that the final bill was signed by the Respondent “under protest.” The Learned District Judge overlooked the fact that the final payment was accepted by the Respondent without any protest or reservation, which nullifies the existence of any dispute under the contract. (v) The Learned District Judge, while quoting the provisions of Section 34 of the Arbitration and Conciliation Act, 1996, did not provide any reasoning for disregarding the specific objections raised by the Appellant, particularly the contention that the claims were beyond the scope of the contract. (vi) The Appellant reiterates that the Respondent accepted the final payment without lodging any objections, and hence, no dispute existed under the terms of the contract to be adjudicated by the Sole Arbitrator. Consequently, the award rendered is illegal and invalid. The Learned District Judge failed to consider this vital legal point while adjudicating the Petition under Section 34 of the Arbitration and Conciliation Act, 1996. III. RESPONDENT’S SUBMISSIONS: 11. Per contra, learned counsel for the Respondent made the following submissions: pg. 16 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 (i) As far as the first petition is concerned, it is submitted that Clause-7 of the contract agreement addresses the present situation. It stipulates that any deviation in construction by the Contractor requires prior written permission from the Authority. No doubt, the claims of the claimant, specifically claim items No. 1(A) to 1(K), are not stipulated in the contract agreement. The award deviation can be categorized into three kinds: (a) alterations, (b) additions, or (c) omissions. However, the extra works performed by the Contractor (present Respondent) do not fall under any of these three categories. (ii) The claimed items neither fall under omissions nor qualify as alterations or additions. These works were essential and needed to be completed during the construction phase. Despite not being stipulated under Clause-7, no prior permission or approval was sought since the construction work was already progressing at full speed. More importantly, after the construction was completed and handed over to the Authority, it was accepted without objection, including the additional required works undertaken. Under these circumstances, Section-70 of the Indian Contract Act becomes irrelevant. (iii) It is a settled legal principle that when a claim is made by one party against another, it may not necessarily rely on an existing contract between the parties. Instead, it can be based on the fact that one party performed certain work for another, which was voluntarily pg. 17 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 accepted by the latter. In this case, it is undisputed that extra work was carried out to meet the construction requirements, and the Authority neither objected when the work was undertaken nor when the finished project was handed over. (iv) The Authority’s lack of objection indicates their awareness that the construction could not have proceeded without addressing the requirements claimed by the Contractor. Taking these factors into account, the learned Arbitrator awarded the claim to the Respondent, and this decision was further confirmed by the learned District Judge through a detailed legal analysis. (v) The Appellant raised an argument that the extra works claimed by the Respondent were executed not by the claimant but through other agencies. However, the Authority failed to substantiate this allegation with clear, cogent, and acceptable evidence. This implies that the Authority’s challenge of the award is an attempt to evade responsibility without any factual basis. (vi) It is submitted that the scope for challenging an arbitral award is limited under Section 34 of the Act/ 1996. The Authority’s challenge does not fall within the purview of Section-34 and has been vaguely brought under Section-34(2)(b)(ii) of the Act, claiming the award conflicts with the public policy of India. However, it must be examined whether the award truly conflicts with the objectives of “public policy of India.” pg. 18 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 (vii) In the present case, the Authority has failed to establish how the award violates public policy or involves any patent illegality by the Arbitrator. On the contrary, the award does not infringe upon public policy and is consistent with established principles of justice. Therefore, the ground for challenge under Section-34(2)(b)(ii) is legally unsustainable. (viii) The conditions for challenging an award under Section-34(2)(b)(ii) include the following: (a) if the award is induced or affected by fraud or corruption, (b) if it contravenes the fundamental policy of Indian law, or (c) if it conflicts with the most basic notions of morality or justice. Indian Contract Act does not define “public policy,” but it generally refers to matters concerning public good and interest. (ix) Section 37 of the Act further outlines the supervisory role of courts in reviewing arbitral awards to ensure fairness, which is confined to cases involving fraud, bias by the Arbitral Tribunal, or violation of natural justice. Judicial rulings from the High Courts and the Supreme Court establish that under Section-37, courts cannot reassess evidence or second-guess the Arbitrator’s reasoning. (x) It is evident that the learned Arbitrator considered all available materials and issued a reasoned award addressing the claims. Reappreciation of these findings is not permissible under Section- 37, nor can the Court act as an appellate body, except within the pg. 19 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 limited scope of its powers. In conclusion, the present appeal lacks merit, and interference by this Court is unwarranted. IV. COURT’S ANALYSIS AND REASONING: 12. This court has thoroughly heard the arguments presented by the counsels for both parties and carefully examined the material available on record. The matter before me hinges on a singular issue for adjudication: Does the order of the District Judge warrant interference/ considering the limitations imposed on this court’s powers under Section 37 of the Arbitration and Conciliation Act? 13. It is well recognized in Arbitration jurisprudence that the scope of interference by the Courts in arbitration proceedings and arbitral awards is narrow and that the Courts ought to be cautious and circumspect in interfering with any award which is passed by an arbitral tribunal which has been appointed pursuant to an agreement between the parties to the dispute. The exceptions of the aforementioned rule finds place in Section 34 and Section 37 of the Act wherein certain instances have been outlined where the Courts can interfere with any award passed by arbitral tribunals and set it aside. This court would also examine the award with the aforesaid restrictive mandate of law. 14. Furthermore, this Court is cognizant that Section 37 of the Arbitration and Conciliation Act provides a statutory forum for appeal, inter alia, against an order either setting aside or refusing to set aside an arbitral award under Section 34 of the Act. The scope of pg. 20 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 such an appeal is inherently limited to the grounds enumerated under Section 34, thereby ensuring that the appellate process remains confined to the specific parameters established by the statute. In Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking,1 it was held that jurisdiction of the Court under Section 37 of the Act is akin to that under Section 34 of the Act. The Courts ought not to interfere with arbitral award in a casual and cavalier manner. Mere possibility of an alternative view on facts or interpretation of contract does not entitle Courts to reverse findings of the Arbitral Tribunal. Relevant paragraphs from the decision are as follows:- “19. Therefore, the scope of jurisdiction under Section 34 and Section 37 of the Act is not akin to normal appellate jurisdiction.9 It is well-settled that courts ought not to interfere with the arbitral award in a casual and cavalier manner. The mere possibility of an alternative view on facts or interpretation of the contract does not entitle courts to reverse the findings of the Arbitral Tribunal. In Dyna Technologies Private Limited v. Crompton Greaves Limited, this Court held: “24. There is no dispute that Section 34 of the Arbitration Act limits a challenge to an award only on the grounds provided therein or as interpreted by various courts. We need to be cognizant of the fact that arbitral awards should not be interfered with in a casual and cavalier manner, unless the court comes to a conclusion that the perversity of the award goes to the root of the matter without there being a possibility of alternative interpretation 1 2023(9) SCC 85 pg. 21 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 which may sustain the arbitral award. Section 34 is different in its approach and cannot be equated with a normal appellate jurisdiction. The mandate under Section 34 is to respect the finality of the arbitral award and the party autonomy to get their dispute adjudicated by an alternative forum as provided under the law. If the courts were to interfere with the arbitral award in the usual course on factual aspects, then the commercial wisdom behind opting for alternate dispute resolution would stand frustrated. 25. Moreover, umpteen number of judgments of this Court have categorically held that the courts should not interfere with an award merely because an alternative view on facts and interpretation of contract exists. The courts need to be cautious and should defer to the view taken by the Arbitral Tribunal even if the reasoning provided in the award is implied unless such award portrays perversity unpardonable under Section 34 of the Arbitration Act.” 15. In Bombay Slum Redevelopment Corporation Pvt. Ltd. v. Samir Barain Bhojwani,2 the Supreme Court reemphasized that supervisory role of Courts is very restricted in dealing with appeals under Section 37 of the Act. Scope of interference in a petition under Section 34 of the Act is very narrow. Jurisdiction under Section 37 of the Act is narrower. By their own volition, the parties choose to go before the Arbitral Tribunal instead of availing remedy before the traditional Civil Courts. Therefore, Courts must be very 2 (2024) 7 SCC 218 pg. 22 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 conservative while dealing with arbitral awards and confine themselves to the grounds strictly available under Section 34 of the Act. 16. Thus, the contention raised by the counsel for the Appellant, alleging that the District Judge failed to recognize that the arbitral award is vitiated by ’patent illegality’ and that the Arbitrator’s interpretation of the contract was entirely perverse and unlawful, cannot be accepted in a straitjacket manner. 17. The proviso to Section 34(2A) makes it aptly clear that awards cannot be set aside merely on the ground of an erroneous application of the law or by re-appreciation of evidence. Further, Explanation 2 of Section 34(2)(b) makes it clear that “for the avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on the merits of the dispute.” 18. To elucidate upon the aforesaid terms and concepts as contained in Section 34, one must refer to the judgment of the Supreme Court in MMTC Ltd. v. Vedanta Ltd., the reasons for vesting such a limited jurisdiction on the Appellate Court in exercise of powers under Section 34 of the Arbitration Act have been explained in the following words : “11. As far as Section 34 is concerned, the position is well-settled by now that the Court does not sit in appeal over the arbitral award and may interfere on merits on the limited ground provided under Section 34(2)(b)(ii) i.e. if the award is against the public policy of India. As per pg. 23 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 the concept of the legal position clarified through decisions of this Court prior to the amendments to the 1996 Act in 2015, a violation of Indian public policy, in turn, includes a violation of the fundamental policy of Indian law, a violation of the interest of India, conflict with justice or morality, and the existence of patent illegality in the arbitral award. Additionally, the law” would cover “fundamental policy of Indian compliance with statutes and judicial precedents, adopting a judicial approach, compliance with the principles of natural justice, and Wednesbury [Associated Provincial Picture Houses Ltd. v. Wednesbury Corpn., (1948) 1 KB 223 (CA)] reasonableness. Furthermore, to mean “patent contravention of India, contravention of the 1996 Act, and contravention of the terms of the contract.” itself has been held the substantive illegality” law of 19. For a better understanding of the role ascribed to Courts in reviewing arbitral awards while considering applications filed under Section 34 of the 1996 Act, it would be relevant to refer to a judgment of the Supreme Court in Ssangyong Engg. & Construction Co. Ltd. v. NHAI,3 wherein R.F. Nariman, J. has in clear terms delineated the limited area for judicial interference, taking into account the amendments brought about by the 2015 Amendment Act: “34. What is clear, therefore, is that the expression “public policy of India”, whether contained in Section 34 or in Section 48, would now mean the “fundamental policy of Indian law” as explained in paragraphs 18 and 27 of Associate Builders (supra), i.e., the fundamental 3 (2019) 15 SCC 131 pg. 24 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 policy of Indian law would be relegated to the “Renusagar” understanding of this expression. This would necessarily mean that the Western Geco (supra) expansion has been done away with. In short, Western Geco (supra), as explained in paragraphs 28 and 29 of Associate Builders (supra), would no longer obtain, as under the guise of interfering with an award on the ground that the Arbitrator has not adopted a judicial approach, the Court’s intervention would be on the merits of the award, which cannot be permitted post amendment. However, insofar as principles of natural justice are concerned, as contained in Sections 18 and 34(2)(a)(iii) of the 1996 Act, these continue to be grounds of challenge of an award, as is contained in paragraph 30 of Associate Builders (supra). 35. It is important to notice that the ground for interference insofar as it concerns “interest of India” has since been deleted, and therefore, no longer obtains. Equally, the ground for interference on the basis that the award is in conflict with justice or morality is now to be understood as a conflict with the “most basic notions of morality or justice”. This again would be in line with paragraphs 36 to 39 of Associate Builders (supra), as it is only such arbitral awards that shock the conscience of the court that can be set aside on this ground. 36. Thus, it is clear that public policy of India is now constricted to mean firstly, that a domestic award is contrary to the fundamental policy of Indian law, as understood in paragraphs 18 and 27 of Associate Builders (supra), or secondly, that such award is against basic notions of in paragraphs 36 to 39 of Associate Builders (supra). Explanation 2 to Section 34(2)(b)(ii) and Explanation 2 to Section 48(2)(b)(ii) was added by the Amendment Act justice or morality as understood pg. 25 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 only so that Western Geco (supra), as understood in Associate Builders (supra), and paragraphs 28 and 29 in particular, is now done away with. 37. Insofar as domestic awards made in India are concerned, an additional ground is now available under sub-section (2A), added by the Amendment Act, 2015, to Section 34. Here, there must be patent illegality appearing on the face of the award, which refers to such illegality as goes to the root of the matter but which does not amount to mere erroneous application of the law. In short, what is not subsumed within “the fundamental policy of Indian law”, namely, the contravention of a statute not linked to public policy or public interest, cannot be brought in by the backdoor when it comes to setting aside an award on the ground of patent illegality. 38. Secondly, it is also made clear that re-appreciation of evidence, which is what an appellate court is permitted to do, cannot be permitted under the ground of patent illegality appearing on the face of the award. 39. To elucidate, paragraph 42.1 of Associate Builders (supra), namely, a mere contravention of the substantive law of India, by itself, is no longer a ground available to set aside an arbitral award. Paragraph 42.2 of Associate Builders (supra), however, would remain, for if an Arbitrator gives no reasons for an award and contravenes Section 31(3) of the 1996 Act, that would certainly amount to a patent illegality on the face of the award. 40. The change made in Section 28(3) by the Amendment Act really follows what is stated in paragraphs 42.3 to 45 that the in Associate Builders (supra), namely, pg. 26 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 construction of the terms of a contract is primarily for an Arbitrator to decide, unless the Arbitrator construes the contract in a manner that no fair- minded or reasonable person would; in short, that the Arbitrator’s view is not even a possible view to take. Also, if the Arbitrator wanders outside the contract and deals with matters not allotted to him, he commits an error of jurisdiction. This ground of challenge will now fall within the new ground added under Section 34(2A). 41. What is important to note is that a decision which is perverse, as understood in paragraphs 31 and 32 of Associate Builders (supra), while no longer being a ground for challenge under “public policy of India”, would certainly amount to a patent illegality appearing on the face of the award. Thus, a finding based on no evidence at all or an award which ignores vital evidence in arriving at its decision would be perverse and liable to be set aside on the ground of patent illegality. Additionally, a finding based on documents taken behind the back of the parties by the Arbitrator would also qualify as a decision based on no evidence inasmuch as such decision is not based on evidence led by the parties, and therefore, would also have to be characterised as perverse.” (Emphasis supplied) 20. A similar view, as stated above, has been taken by the Delhi High Court in K. Sugumar v. Hindustan Petroleum Corpn. Ltd., wherein it has been observed as follows: “2. The contours of the power of the Court under Section 34 of the Act are too well established to require any reiteration. Even a bare reading of Section 34 of the Act indicates the highly constricted power of the civil court to pg. 27 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 interfere with an arbitral award. The reason for this is obvious. When parties have chosen to avail an alternate mechanism for dispute resolution, they must be left to reconcile themselves to the wisdom of the decision of the Arbitrator and the role of the court should be restricted to the bare minimum. Interference will be justified only in cases of commission of misconduct by the Arbitrator which can find manifestation in different forms including exercise of legal perversity by the Arbitrator.” 21. In short, the court must scrutinize three questions: first, the Arbitrator had to adopt a judicial approach; second, the principles of natural justice had to be upheld; third, the decision must not have been egregious, or rather, perverse. 22. In view of the foregoing, this Court shall carefully examine the arguments advanced by the counsel for the Appellant, wherein it is asserted that the claims upheld by the Arbitrator are inconsistent with the terms of the contract or that the impugned Award lacks any supporting material or evidence. 23. A perusal of the impugned judgments and Awards unequivocally demonstrates that the Arbitrator relied upon written submissions, documentary evidence, and the statements of the parties involved in the transaction to determine and quantify the claims. 24. In the order dated 04.08.2011, the Learned District Judge, Ganjam, Berhampur, held that there exists no scope for judicial interference with the findings of the sole Arbitrator or the reasoning provided in support thereof. pg. 28 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 25. This Court shall now examine the challenge posed in ARBA No. 11 of 2014 and the aforementioned judgment to ascertain whether any grounds exist that would justify judicial interference in the present matter. 26. Now, in regards to the first claim of the Appellant, against the award vis-a-vis Claim Item No. 1(D), it is submitted by the Appellant that the Arbitrator awarded compensation for sliding aluminium doors, even though the contractor failed to submit purchase vouchers as proof. It is also submitted that the Appellant had already compensated the contractor for this expenditure, as evidenced by Exhibit GP-14. The claim was awarded without verifying the contractor’s statements or ensuring a factual basis/ making the award baseless and liable to be dismissed. 27. The Claimant asserted that the Respondent instructed the installation of an aluminium sliding glass door at the entrance- corridor opening due to site requirements, though this work was outside the contract’s scope. The Claimant argued the additional work, completed during the contract term, was neither accounted for in interim payments nor included in the final bill. The Appellant denied the claim, stating payments for extra works were already made under separate arrangements and that no written orders or proof from the Engineer-in-Charge exist to substantiate the Claimant’s allegations. During arbitration, Appellant’s evidence failed to justify the door’s provision at the claimed location, with pg. 29 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 discrepancies in door dimensions noted. Based on the findings and lack of specific justification by Appellant, the Arbitrator upheld the Claimant’s claim and awarded Rs.40,950/- in compensation. 28. It might seem that the evidence is not sufficient however this court cannot help the cause of the Appellants. It is beyond the domain of this Court to examine the reasonableness of the said award and the reasons therein by reappreciating the evidence to arrive at a different conclusion. The Arbitrator is the final arbiter of the disputes between the parties and it is not open to a party to challenge the Award on the ground that he has drawn his own conclusions or has failed to appreciate certain facts. It is beyond the jurisdiction of this Court to assign to itself, the task of construing the terms of the contract and the evidence submitted to take a view on certain amounts awarded in favour of a party. 29. In the present claim, the evidence presented by the Appellant before the sole Arbitrator was dismissed, reinforcing the Respondent’s claim. Therefore, I believe the Arbitrator’s conclusion was reasonable, and no interference is warranted regarding the amount awarded under Claim Item No. 1(D). 30. In regards to the claim of the Appellant, against the award vis-a-vis Claim No. 1(E), the Claimant had argued that sections of the road were constructed as cement concrete (PCC) roads instead of premixed carpet roads per the User’s requirements and at the Respondent’s direction, incurring additional costs that were not pg. 30 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 reflected in the final bill but measured under Schedule ’A’ Part VII. They claimed this modification warranted separate payment, highlighting a 22.70% increase in premixed carpet road quantity executed, amounting to Rs.9,78,418/- against the scheduled Rs.6,95,817/-. In contrast, the Appellant maintained that the Contractor agreed to the change without extra cost, benefited financially from the substitution, and raised no objections during payment or measurement. 31. It is submitted that the Arbitrator ignored photographic evidence submitted by the appellant, which clearly demonstrated the thickness of the concrete road. Instead, the Arbitrator speculated about the possibility of locations where the thickness might exceed 100 mm. 32. Upon reviewing the arguments and evidence, the Arbitrator noted that the Appellant failed to produce convincing evidence to substantiate their claim that the PCC was paid as premixed carpet or that it adhered to the specified contract provisions. Based on the evidence presented, the Arbitrator determined that the Claimant’s claim was valid. The work executed could not be dismissed, and the lack of proper verification and justification from the Appellant rendered their defense insufficient. 33. However, in my opinion, the amount awarded against this claim cannot be sustained because the findings on Para 17.1.5.6 of the arbitral award is based on speculation and assumptions and not pg. 31 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 based on any evidence. In the award against Claim Item No.1(E), the Arbitrator has based his findings over mere assumptions which are bad in law. The relevant paragraphs are produced herein: “17.1.5.6 I have heard the arguments and counter arguments of both the parties and examined the documents produced before me. I could not find any evidence to hold the argument of UOI that PCC 1:3:6 type CI has been provided and not PCC 1:2:4 as claimed by Claimant. The thickness provided is stated by UOI to be 60 mm average based on the photographs enclosed as exhibits. However the possibility of location where the thickness is more than 100 mm cannot be ruled out. The photograph does show that work has been carried out. Moreover, it is necessary that UOI should verify the work executed and make remark on record about the thickness provided. UOI failed to produce any such record. UOI also could not justify that the work was measured and paid as premix carpet as brought out by them. In view of this I do not find any reason to reject the claim and therefore Claimants claim is sustainable. I award Rs.40,416.00 (Rupees Forty thousand four hundred sixteen only) to the Claimant against this claim.” (Emphasis supplied) 34. Herein, I am reluctant to approve the amount awarded by the sole Arbitrator against Claim Item No. 1(E) for it is based on unexplained/ unjustified assumptions without any material evidence or even palpable justification and nearly in digression to the contractual clauses. pg. 32 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 35. Regarding Claim No. 1(G), the Claimant had alleged that during execution, the Respondent directed the use of 10 mm vitrified tiles instead of terrazzo flooring in specific areas, presumably based on user requirements. Although the work was completed, the measurements and payments were not accurately recorded or reflected in the final bill. The Claimant repeatedly requested corrections, citing incomplete measurements and incorrect rates in the DO No. 27, which they signed “under protest.” They maintained that these discrepancies resulted in significant underpayment and requested reimbursement based on proper calculations and on-site verification if necessary. 36. The Appellant submitted that all additional work had been paid for and measurements were signed without reservation. They argued that additional work was executed separately and had no connection to the contract in question. The Respondent also questioned the validity of the Claimant’s calculations/ claiming they were baseless and lacked supporting documentation. By ignoring the appellant’s submissions and the contradictory details provided by the contractor, the Arbitrator committed a grave error in passing the award in favour of the contractor. 37. However, the sole Arbitrator, in my opinion, has sufficiently dealt with the issue concerning the aforesaid claim. Upon review, the Arbitrator found that the Respondent failed to justify the discrepancies in measurements, quantities, and pricing. They could pg. 33 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 not substantiate the use of materials or provide evidence of dismantling and labour costs. The Arbitrator concluded that the Claimant’s pricing method was appropriate and that the Appellant’s rates excluded essential elements. 38. It is, thus, clear from the aforesaid that the Arbitrator has neither been negligent in the consideration of relevant facts of the case nor ignorant of the clauses of the agreement. Ergo, the amount awarded against Claim Item No. 1(G) is approved. 39. Regarding Claim No. 1(H), the Claimant had argued that the RR masonry drain at the 30 Single Officers’ Accommodation was completed and paid for under DO No. 9, the associated excavation and earthwork, essential for constructing the drain, were omitted from payment under DO No. 6. The Claimant had contended that these works were carried out and required reimbursement. 40. The Appellant denied the claim, asserting that no excavation was needed as the drain was constructed in an existing “kutcha drain”. They further argued that the Claimant signed the Measurement Book without objection and raised this issue only after the final bill was issued. It is submitted that the award passed by the Arbitrator is fundamentally flawed. The Appellant had contended that the PCC drain was constructed in an existing “kutcha drain,” eliminating the need for excavation and removal, and no contrary proof was provided by the contractor. These critical facts were pg. 34 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 overlooked by the Arbitrator without justification, further demonstrating the erroneous nature of the award. 41. Now, it is trite in law that acceptance of a final bill, even “under protest,” does not preclude a party from claiming additional compensation or damages for extra work performed beyond the scope of the original contract, provided the party can substantiate the claim with credible evidence and demonstrate that the work was executed as directed under the terms of the agreement. In R.L. Kalathia & Co v. State Of Gujarat,4 the Supreme Court held as following: “It is true that when the final bill was submitted, the plaintiff had accepted the amount as mentioned in the final bill but “under protest”. It is also the specific claim of the plaintiff that on the direction of the Department, it had performed additional work and hence entitled for terms of additional amount/damages as per agreement. Merely because the plaintiff had accepted the final bill, it cannot be deprived of its right to claim damages if it had incurred additional amount and able to prove the same by acceptable materials.” the 42. The appellant’s contention that the claimant’s acceptance of the final bill precludes them from seeking damages in arbitration is untenable. The Arbitrator thoroughly addressed the concerns of both parties, concluding that excavation was indispensable for constructing the RR Masonry Drain. The Arbitrator held that even if a “kutcha drain” preexisted, the appellant’s argument was found 4 2011 (2) SCC 400 pg. 35 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 lacking merit, as excavation would still be necessary to meet the required dimensions. The Arbitrator’s reasoning and the awarded amount against the claim are justified and reflect a balanced and reasonable assessment of the matter. 43. With regards to Claim Item No.3, the Appellant argues that the Arbitrator’s conclusion, suggesting elevation depictions do not imply stone cladding, directly contradicts the contract, which clearly requires construction as detailed in the drawings, including 35 mm thick stone cladding. The contractor did not dispute this during the contract period or in the final bill dated 08.02.2008 and later signed the omission of stone cladding without reservation, acknowledging its inclusion in the lump sum. This suggests the claim is an afterthought without merit. 44. Nonetheless, in my opinion, the Arbitrator’s award reflects a well- reasoned conclusion based on the evidence and arguments presented. It was determined that the Claimant undertook additional work not explicitly included in the contract but also not in violation of its terms. Accordingly, the Arbitrator exercised the discretion to award the claimed amount in favour of the Claimant. 45. In assessing the dispute, the Arbitrator highlighted the importance of the “Schedule of Finishes” in defining the scope of work under the contract. The sole Arbitrator held that schedule should have clearly specified any additional finishes, including their locations and specifications. The lack of explicit provisions for Khandolite pg. 36 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 stone cladding in the specifications or schedule weakened the defense of the Appellant. Elevation drawings alone were deemed insufficient to indicate the necessity of such cladding. It was also held that following the precedence established by Condition 6A of 2249, specific provisions in the schedule take priority over general representations in drawings. As such, the Arbitrator concluded that the Claimant’s interpretation was reasonable and upheld the claim. I am satisfied with the justification of the Arbitrator; there is no evidence of arbitrariness or unreasonableness in the award, leaving no basis for judicial interference. 46. Regarding Claim Item No. 6, the Claimants were to receive an old building for demolition under the accepted contract conditions, with ₹20,000/- credited for retrieved materials as assessed by the Respondent. This amount was deducted, and the contract was accepted after adjustment, however, after the omission of this provision via DO No. 2 dated 18.10.2005, the Respondent neither ordered nor handed over the building for demolition. The Claimants argued that the Respondent’s actions were uncontractual and unjustified, leading to financial losses, including the improper recovery of ₹20,000/- and the loss of potential earnings from selling retrieved materials. 47. In rebuttal, the Appellant asserted that the Arbitrator’s award of anticipated profit for demolition work not performed, due to user requirements, violates the contract and should be annulled. The pg. 37 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 ₹15,000/- awarded for financial losses or anticipated profits from retrieved materials contravenes Condition 57 of IAFW 2249, which elucidates that contractors cannot claim compensation or profit for work not required. Therefore, the award is contrary to the contract and must be set aside. 48. From the foregoing, it is equitable and proper to conclude that the sole Arbitrator correctly determined that the contractual provision precluding claims for profit or loss related to the state and quality of demolition materials is inapplicable in circumstances where one party fails to fulfill its obligation to hand over the buildings as stipulated under the agreement. The Respondent’s failure to perform this obligation deprived the Claimant of the opportunity to recover value from the demolition materials, thereby frustrating the core purpose of the contract. Recognizing the resulting financial losses and the opportunity cost associated with utilizing or selling the materials, the Arbitrator awarded reasonable compensation, duly accounting for the partial payment already made. 49. To allow a contractual clause to defeat the fundamental objectives of the agreement would give rise to serious legal and equitable concerns. In view of the established facts and the applicable provisions of the contract, the Arbitrator’s award is clearly justified. The award is consistent with the intent and purpose of the contract and, as such, warrants no interference by this court. pg. 38 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 50. Now we come to Claim Item No.9, wherein it is submitted that the award of ₹28,391/- for simple interest at 10% per annum on delayed payment of various RARs also contradicts the provisions of the contract agreement, as there is no clause permitting interest on amounts due or paid in RARs. The contractor accepted and signed the RARs without reservations and never served notice for claiming interest on delayed payments. 51. Here, it is pertinent to refer Section 31(7)(a) of the A&C Act which reads as under: “31.(7)(a) Unless otherwise agreed by the parties, where and insofar as an arbitral award is for the payment of money, the Arbitral Tribunal may include in the sum for which the award is made interest, at such rate as it deems reasonable, on the whole or any part of the money, 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 award is made.” 52. The above mentioned section lucidly mentions that the contract between the parties has been given the deciding factor and is to be looked at carefully to discern the powers of the Arbitrator. If there is any bar contained in the arbitration clause of the contract on awarding of interest, it operates accordingly. However, in the present case there is no mention of such bar on interest in the purported contract. pg. 39 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 53. A division bench of the Supreme Court in Oriental Structural Engineers Pvt. Ltd. v. State of Kerala5 held an Arbitrator’s power to award interest on delayed payments is well-established, provided the contract does not explicitly exclude such an award. Furthermore, the contention that a contractor forfeits the right to claim interest after failing to raise the demand during final payment has already been settled in precedent, affirming that the contractor can legitimately make such a claim during arbitration. 54. In the case of Jaiprakash Associates Ltd. v. Tehri Hydro Development Corporation India Ltd,6 the Supreme Court reaffirmed the contractual bar on the Arbitrator to award interest but also observed: “…As a sequitur, the Arbitrator would be within his jurisdiction to award pre-reference or pendente lite interest even if agreement between the parties was silent as to whether interest is to be awarded or not. … This proposition is predicated on the principle that an Arbitrator is the creature of an agreement and he is supposed to act and make his award in accordance with the general law of the land and the agreement.” (Emphasis supplied) 55. In the absence of any contractual provision to the contrary, the Arbitrator’s decision to award interest is justified and beyond reproach. Acting within the scope of its authority, the Arbitrator granted interest on delayed payments to ensure fairness and 5 AIR 2021 SC 2031 6 2019 SCC OnLine SC 143 pg. 40 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 uphold the contractual obligations between the parties. Accordingly, the amount awarded for Claim Item No. 9 is affirmed. 56. Now, regarding Claim No. 11(A), the Claimant argued that errors in calculating reimbursement for price variations in the final bill, including incorrect consideration of component values, price indices, and labor wages for certain quarters, led to an underpayment of ₹30,725.74/-. The Claimant asserted that subsequent increases in the value of work rendered the reduction of the admissible amount to ₹5,69,738.31/- unjustified and requested re-verification of details for proper reimbursement. 57. In response/ the Appellant contended that the Arbitrator’s award of ₹30,678.42/- was flawed, arguing that the actual amount should have been ₹17,012/- which was allegedly disregarded without justification. The Appellant also challenged the award for MS grills and aluminium windows, claiming that the Arbitrator erroneously relied on market rates rather than analogous SSR items or contractual provisions, constituting misconduct. 58. The Arbitrator clarified that the correct amount due was indeed ₹30,716.80/-. Following a thorough reconciliation and re-verification of the Claimant’s details during the hearing, the Appellant’s representative confirmed the underpayment. Despite this agreement, the Appellant had later presented contradictory arguments, which the Arbitrator deemed misleading and unsupported by contractual provisions. The Arbitrator emphasized pg. 41 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 that the Claimant’s calculations were validated during the hearing, with documented evidence corroborating the underpayment. Therefore, the Arbitrator correctly upheld the Claimant’s entitlement and directed that the claim be corrected as per contractual terms. 59. At this juncture, it is pertinent to emphasize that the interpretation of the terms of a contract primarily falls within the purview of the Arbitrator. Judicial intervention is warranted only if the Arbitrator’s interpretation is so unreasonable or irrational that no fair-minded or reasonable person could have arrived at such a conclusion. In essence/ the Arbitrator’s view must at least qualify as a possible and plausible interpretation of the contract.7 Then again, the Delhi High Court in Raghunath Builders Pvt. Ltd. v. Anant Raj Limited,8 has held that: “…interpretation of a contract is a matter for the Arbitrator to determine, even if it gives rise to determination of a question of law.” 60. In light of the above discussion, it is evident that the arbitral award is largely well-reasoned and requires no interference, except with respect to the payment awarded under Claim Item No. 1(E). The Arbitrator has thoroughly addressed all other Claim Items challenged in this petition, and these findings are both well- founded and adequately justified, warranting no further scrutiny or modification. 7 Ssangyong Engineering and Construction Co. Ltd. v. NHAI, 2019 SCC OnLine SC 67 8 2017 SCC OnLine Del 11257 pg. 42 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 61. This Court shall now examine the challenge posed in ARBA No. 26 of 2014 and the judgment dated 21.02.2015 to ascertain whether any grounds exist that would justify judicial interference in the present matter. 62. The Appellant argued that no payments were delayed due to issues related to the distribution of Do’s/Add. Back Do’s and that the Respondent’s claims on this basis are baseless. It was further contended that the claims of the Respondent’s submissions were neither raised during the contract period nor were any objections made to the recoveries noted in the RARs. As such, the Sole Arbitrator’s award on these claims exceeds the scope of reference and is legally unsustainable. 63. This issue has already been addressed earlier in this judgment. The Supreme Court in R.K. Kalathia (supra) held that a contractor may raise claims even after receiving final bill payment, provided the payment was accepted under protest. In the present case, the final bill included the claims, and payment was explicitly received under protest, as noted by both the Arbitrator and the District Court. Furthermore, the judgment in Ambica Construction v. Union of India9 supports the position that there is no absolute bar on a contractor raising genuine claims. It is evident that the payment released pertained only to the undisputed portion of the final bill and did not settle the contractor’s entire final bill. 9 AIRONLINE 2006 SC 210 pg. 43 Signature Not Verified Digitally Signed Signed by: BHABAGRAHI JHANKAR Designation: AR-CUM-SR. SECRETARY Reason: Authentication Location: ORISSA HIGH COURT, CUTTACK Date: 20-Jan-2025 15:14:34 64. Now, no objection regarding the arbitrability of claims was raised during the initial proceedings; such objections were raised belatedly, only as an afterthought, well after the submission of the statement of defense. Section 16(2) of the Arbitration and Conciliation Act mandates that objections to the arbitral tribunal’s jurisdiction must be raised no later than the submission of the defense. The Appellant has failed to provide any specific or justifiable reason for raising these objections at such a delayed stage. 65. A perusal of the arbitral award would elucidate that the sole Arbitrator has considered the facts of the case, the contentions of both the parties and other documentary and oral evidence on record to take a decision. Now, one might feel that the evidence could be clearer and its quality could be higher to buttress the award, however, the Supreme Court in Parsa Kente Collieries Limited v. Rajasthan Rajya Vidyut Utpadan Nigam Limited,10 adverting to the previous decisions of the Apex Court in McDermott International Inc. v. Burn Standard Co. Ltd.11 and Rashtriya Ispat Nigam Ltd. v. Dewan Chand Ram Saran12 has dictated that: 9.1... It is further observed by this Court in the aforesaid decision in paragraph 33 that when a court is applying the “public policy” test to an arbitration award, it does