Bombay High Court Says Arbitrator Right To Decide Claim on Work Performed, Not Alleged Admission

The Bombay High Court has refused to interfere with an arbitral award after finding that the contractor itself chose to press a claim based on the value of work carried out, and could not later ask the court to enforce a higher amount on the basis of an alleged admission of liability.

Dismissing a petition filed by Kanti Builders Pvt Ltd, the Court said the arbitral tribunal was justified in deciding the dispute on evidence of work executed rather than on letters or a dishonoured cheque relied upon later.

Justice Sandeep V. Marne upheld the approach of the sole arbitrator, noting that the tribunal had undertaken a detailed factual exercise to assess what was actually payable under the construction contract.

The Court observed that “the Tribunal rightly not got swayed by alleged admissions contained in the letter dated 12 August 2021 and undated letter.” It said the arbitrator had examined the exact liability under the contract instead of mechanically accepting claimed figures.

The dispute concerned the construction of a school building in Mumbai. Kanti Builders carried out the work for Witty Enterprises and claimed that substantial amounts remained unpaid even after completion. The builder relied on a letter dated August 12, 2021, and another undated letter, which recorded that payments under the conveyance deed had been fully settled and that Rs 7.75 crore was payable towards construction. Part of this amount was paid, but a cheque for Rs 4.36 crore was later dishonoured.

When Kanti Builders invoked arbitration, it did not limit its claim to the cheque amount. Instead, it claimed Rs 7.96 crore, working out the figure based on the value of the work it said it had carried out under the construction contract, after factoring in payments already received and applicable deductions.

Witty Enterprises disputed the claim and filed counterclaims, including for reimbursement of development charges and cess.

Before the High Court, Kanti Builders argued that the arbitral award suffered from patent illegality. It said the tribunal had ignored a clear admission of liability reflected in the letters and the dishonoured cheque, and ought to have awarded at least that amount as an admitted debt.

It also challenged the tribunal's decision allowing Witty Enterprises' counterclaim, contending that under the contract, development charges were not its responsibility.

Rejecting these submissions, the Court said the petitioner could not change its stand after having chosen how to present its case before the arbitrator. “The Petitioner was required to make a conscious choice in respect of its claim,” the judge observed.

He noted that Kanti Builders had pressed a valuation-based claim before the tribunal and could not fault the arbitrator for deciding it on that basis.

The court also declined to interfere with the tribunal's interpretation of the contract on development charges. It said that interpretation of contractual stipulations lies within the exclusive domain of the arbitral tribunal, and even if an error were assumed, that by itself would not justify interference.

“It is well settled position that interpretation of contractual stipulations is in the exclusive domain of the Arbitral Tribunal,” the Court said.

Finding no perversity or patent illegality in the award, the High Court dismissed the petition and allowed the arbitral award to stand.

For Kanti Builders: Advocate Vishal Kanade with Advocate Apurva Gupte, Advocate Amogh Singh and Advocate Krishnakant P. Deshmukh, instructed by Advocate Dhirendra Pratap Singh

For Witty Enterprises: Advocate Vikhil Dhoka with Advocate Abhijit Mukherjee, instructed by GM Legal