Interpretation Of Clause Of Agreement By Arbitrator Can't Be Interfered With By Courts Unless Its Perverse: Rajasthan HC

The Rajasthan High Court has reiterated that the interpretation of the clause of Agreement by the Arbitrator shall not be open to judicial interference unless it is perverse.

The Court was considering an Appeal against a Commercial Court Order whereby the challenge laid to the Arbitral award was dismissed.

The Justice Shree Chandrashekhar and Dr. Justice Nupur Bhati observed, "....we are of the opinion that the Arbitral Tribunal rightly proceeded to accept the claim form escalation as the findings recorded by the Civil Court shall be  binding on the Arbitral Tribunal. This is a well settled law that the  interpretation of the clause of Agreement by the Arbitrator shall not be open to judicial interference unless it is demonstrated before the Court that the interpretation put by the Arbitral Tribunal was perverse."

The Petitioner was represented by Assistant to Additional Advocate General Ayush Gehlot while the Respondent was represented by Advocate Sheetal Kumbhat.

The Counsel for the Appellant referred to Clause 45 of the Agreement and the decisions rendered in Batliboi Environmental Engineers Ltd. v. Hindustan Petroleum Corporation Limited & Anr.: 2023 INSC 850, Food Corporation of India v. Chandu Construction & Anr.: (2007) 4 SCC 697, Indian Oil Corporation Limited v. M/s. Shree Ganesh Petroleum Rajgurunagar: Special Leave Petition (Civil) Nos.35970-71 of 2016, decided on 1st February 2022 to submit that the Arbitral award made by the Arbitral Tribunal was against the express stipulation under the Agreement and therefore is liable to be set aside under Section 34 of the AC Act of 1996. He further submitted that on a plain reading of Clause 45 of the Agreement it becomes more than clear that the stipulation for escalation was not at all applicable in the present case but the Arbitrator misinterpreted the said provision and proceeded to allow the claim for escalation on a wrong premise.

The Court was of the view that that the Arbitral Tribunal proceeded in the matter on a premise that the Contractor can be entitled for escalation if the cause of delay was not attributable on his part.

"In our opinion, the interpretation of Clause 45 by the Arbitral Tribunal is a plausible view of the provision under Clause 45. As we have noticed, there were sufficient materials laid before the Arbitral Tribunal to demonstrate that there was representation by the claimant seeking extension of time and there was a decision of the Civil Court before the Arbitral Tribunal that imposition of compensation/penalty @ ½% of the work value was not justified. In this state of affairs, we are of the opinion that the Arbitral Tribunal rightly proceeded to accept the claim for escalation as the findings recorded by the Civil Court shall be binding on the Arbitral Tribunal," the Court observed.

"This is a well settled law that the interpretation of the clause of Agreement by the Arbitrator shall not be open to judicial interference unless it is demonstrated before the Court that the interpretation put by the Arbitral Tribunal was perverse. This is also well settled that if the view taken by the Arbitrator is logical and acceptable merely because two views are possible the Court in exercise of its supervisory jurisdiction shall not interfere with the Arbitral award. In “U.P. SEB v. Searsole Chemicals Ltd.” (2001) 3 SCC 397, the Hon'ble Supreme Court held that the Court will refrain itself from interfering with an Arbitral award if it is demonstrated that the view of the Arbitrator is a plausible one," it further observed.

The Appeal was accordingly dismissed.

Cause Title: State of Rajasthan vs. M/s. Leeladhar Devkinandan (2024:RJ-JD:51797-DB)

Appearances:

Appellant- Assistant to Additional Advocate General Ayush Gehlot, Advocate General Rajesh Panwar

Respondent- Advocate Sheetal Kumbhat, Advocate Naman Maheshwar

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