HC reiterates Section 34 is concerned the Court in case of appeal may interfere on merits on the limited ground provided under Section 34(2) [Read Judgment]

On 31^st August, a bench of Delhi High Court consisting of Justices Siddharth Mridul and Anup Jairam while hearing an appeal against an arbitral award reiterated the Supreme Court in PSA SICAL Terminals Pvt Ltd vs. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin & Ors. where it was held that 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).

Facts of the case:

The Railways had filed a petition under section 34 of the A&C Act challenging arbitral award dated 08.02.2011; in which award the learned Sole Arbitrator had directed the Railways to refund to Annavaram the sum of Rs. 1,22,38,125/-, which had been deducted/withheld by the Railways as ‘liquidated damages’ imposed upon Annavaram for alleged breach of the terms and conditions of a tender bearing No. CS 160/2007, pursuant to which a Letter of Acceptance dated 15.09.2008 (‘1st LoA’) was issued by the Railways to Annavaram for supply of 10000 Pre-Stressed Concrete Sleepers (‘sleepers’) by 14.01.2009.

Contention of the petitioner:

Ms. Geetanjali Mohan, learned counsel appearing on behalf of the Railways, submitted the following:

1. It was submitted that the learned single Judge has erred in failing to appreciate that under clause 1.1 aforesaid, Annavaram was obligated to complete the supply of the originally ordered 10000 sleepers by 14.07.2009; which it failed to do.
2. It was also submitted that due to the failure the Railways were entitled to impose liquidated damages in accordance with the contractual terms.
3. Accordingly, it is counsel’s contention that the impugned judgment as also the arbitral award require to be set-aside.

Contention of the respondent:

On the other hand, Mr. R. K. Sanghi, learned senior counsel appearing for Annavaram contended the following:

1. It was submitted that by inserting clause 1.2, a new condition came into effect whereby the parties agreed that the quantity of sleepers ordered under the original tender stood “ ... reduced to the number of sleepers manufactured till the date of issue of LoA for the new contract ...”; and it is contended, that as a result there was no obligation on Annavaram to supply 10000 sleepers by 14.07.2009.
2. It was also argued that the Railways were not justified in imposing any liquidated damages upon Annavaram.

Observation and judgment of the court:

The following observation has been made by the hon’ble bench of the court:

1. So long as the view taken by an arbitrator, which in this case has also been upheld by the learned single Judge, is a possible view based on facts, it is irrelevant whether this court would or would not have taken the same view on the merits of the matter; and the arbitral award is required to be upheld.
2. The court was of the opinion that the view taken by the learned Sole Arbitrator, as upheld by the learned single Judge, is certainly a possible view based on facts in relation to the merits of the disputes, it was found that no ground to interfere in the arbitral award or the impugned judgment.

Based on the above, it was held that the Annavaram shall be entitled to receive from the Railways the amount directed to be refunded in the arbitral award, namely Rs. 1,22,38,125/- along with simple interest at 6% per annum calculated from 08.05.2011 till the date of payment as per the impugned judgment, within 04 weeks of this judgment.

The appeal was thus dismissed.

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