The Supreme Court has recently emphasized that an inferior court must gracefully accept and adhere to a binding judicial decision from a superior court, even if the inferior court disagrees with or finds the decision unappealing.

The principle, ex proprio vigore applicable by its own force, is also relevant for an arbitrator or a multi-member arbitral tribunal, especially when confronted with a judicial decision (whether under section 34 or section 37 of the Act) directing a restricted reconsideration. This was stated by a panel of Justices S. Ravindra Bhat and Dipankar Datta.

The court further explained that, "In light of the authority vested in the judicial decisions made by the courts of law, any award issued by an arbitrator or tribunal attempting to circumvent a binding judicial decision, in our view, contradicts fundamental public policy and, as a result, cannot be upheld."

The Supreme Court made these comments while declaring an arbitral award to be evidently unlawful and in violation of the "public policy of India." The court also expressed the opinion that a demand for damages should not automatically lead to an arbitral award without evidence demonstrating that the claimant has indeed incurred harm.

In the current case, M/S Unibros received a contract from the respondent, All India Radio, to undertake the construction of Delhi Doordarshan Bhawan, located at Mandi House, Phase-II, New Delhi.

The project was initially slated to begin on April 12, 1990, with a completion target of April 11, 1991. However, it encountered a delay of approximately 42½ months, ultimately finishing on October 30, 1994. Disagreements and conflicts arose between the involved parties due to this delay, which were later submitted to an arbitrator for resolution. The arbitrator, using Hudson's formula, calculated the ultimate compensation for the loss of profit.

The decision made by the arbitrator was contested and taken to the High Court for review. Subsequently, the High Court instructed the arbitrator to issue a fresh order on the matter.

The Supreme Court observed that following the directive for reconsideration, the arbitrator was cautioned against being influenced by the factors that had influenced his initial decision in the First Award.

The bench remarked, "The Arbitrator was also instructed to base the decision solely on the existing evidence. However, unfortunately, we have found that the Arbitrator blatantly disregarded the High Court's judicial decision."

With this perspective, the Supreme Court proceeded to dismiss the appeal.

Case: M/S Unibros Vs. All India Radio, CIVIL APPEAL NO……/2023 [ARISING OUT OF SLP (CIVIL) NO. 8791/2020].

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