In a significant legal development, a civil appeal was filed in the Supreme Court of India, challenging a judgment and order issued by the High Court of Karnataka (Dharwad Bench) in a matter related to arbitration proceedings under the Arbitration and Conciliation Act, 1996. The case, questions the validity of the High Court's confirmation of an order dated 22nd April 2010, issued by the Senior Civil Judge, Sirsi.
The bench of Justice Abhay S. Oka and Justice Sanjay Karol, while deciding in the case, emphasized that a court's power to interfere with arbitral awards is limited, specifically citing Section 34(4) of the Arbitration and Conciliation Act. The Court reiterated that attempting to modify an award under Section 34 would amount to "crossing the Lakshman Rekha."
The genesis of the dispute lies in a contract awarded to Mr. S.V. Samudram, a registered Class II Civil Engineering Contractor, by the Karnataka State Public Works Department. The contract, dated 29th January 1990, was for the construction of the office and residence of the Chief Conservator of Forests at Sirsi, with a stipulated completion date of 6th May 1992.
Allegations surfaced when the project faced delays, leading Mr. Samudram to attribute the setbacks to the State authorities. Subsequently, the parties opted for arbitration to settle their disputes, and Mr. S.K Angadi, Chief Engineer (Retd.), was appointed as the Arbitrator in May 2002.
The Arbitrator, after due consideration of evidence, found the State authorities liable for various issues, and awards were granted against nine out of eleven claims made by Mr. Samudram. Dissatisfied with the arbitration outcome, the State filed a petition under Section 34 of the Arbitration and Conciliation Act, 1996, challenging the award.
The Senior Civil Judge, Sirsi, modified the award on 22nd April 2010, reducing the amount awarded and altering the interest rate. This decision prompted the Claimant-Appellant, Mr. Samudram, to file an appeal before the High Court of Karnataka.
The High Court, in its judgment dated 7th February 2017, upheld the modifications made by the Senior Civil Judge, citing issues related to the grant of revised rates and alleged breaches of the contract. The primary focus of contention was claim No. 7, involving the escalated cost of work.
However, the present civil appeal questions the justification of the High Court in confirming the modifications and examines whether the court overstepped its jurisdiction by delving into the merits of the arbitral award.
The judgment further highlighted established principles in adjudicating challenges to arbitration proceedings. It emphasized the binding nature of arbitral proceedings, the need for a fair and just reading of the award, and the requirement for plausible grounds for interference.
In conclusion, the Supreme Court set aside the judgments of the lower courts, restoring the original arbitral award dated 18th February 2003. The State of Karnataka was directed to expedite the payment of the awarded amount.
Case: S.V. SAMUDRAM vs STATE OF KARNATAKA & ANR,
CIVIL APPEAL NO. 8067 OF 2019.
Click to read/download judgment.
