Calcutta High Court Restores Arbitral Award In Bhubaneswar Airport Terminal Construction Dispute

The Calcutta High Court on Thursday set aside a Single Judge's order that had interfered with an arbitral award in a dispute over construction of a terminal and allied buildings at Bhubaneswar Airport.

The court held that the court exercising jurisdiction under Section 34 cannot substitute the arbitrator's plausible view with its own.

A Division Bench of Justices Debangsu Basak and Md. Shabbar Rashidi was hearing appeals filed by NBCC India Limited against the July 1, 2024 order by which the Single Judge had allowed the contractor's challenge, set aside the counterclaims awarded to NBCC, and dismissed NBCC's own challenge to the arbitral award.

Setting aside that order, the Bench held that the Single Judge had exceeded the limited scope of interference under Section 34 of the Arbitration and Conciliation Act, 1996. It said the arbitral award was based on evidence and reflected a possible view, which could not have been disturbed.

The court noted that the Single Judge had reasoned that since termination of the contract by NBCC in 1996 was unlawful, the counterclaims allowed by the arbitrator were unsustainable.

Rejecting this approach, the bench observed,

“Learned Single Judge was of the view that, learned arbitrator while deciding the issue had come to the conclusion that the since termination of the contract by the appellant/NBCC in 1996 was held to be unlawful, the counter claims allowed by the learned arbitrator were not sustainable. Accordingly, all the counter claims allowed by the learned arbitrator in favor of the NBCC were set aside and quashed. Such finding of learned Single Judge is patently against the evidence considered by learned arbitrator.”

The dispute arose from a tender issued in December 1993 for construction works at Bhubaneswar Airport, pursuant to which NBCC, acting as project management consultant, awarded a contract worth about ₹5.71 crore to J.G. Engineers Pvt. Ltd.. The work was to be completed by October 31, 1994, but delays led to multiple extensions being granted till December 15, 1995.

NBCC issued a show cause notice in November 1995 and terminated the contract on March 20, 1996. The contractor invoked arbitration, resulting in an award dated December 17, 2013.

The arbitral tribunal allowed certain claims of the contractor and several counterclaims of NBCC. Both sides challenged the award under Section 34. The Single Judge upheld the contractor's claims but set aside the counterclaims granted to NBCC, holding that they were in the nature of damages and could not survive once termination was found unlawful.

Disagreeing, the Division Bench held that the counterclaims could not be rejected on that basis alone. It noted that several counterclaims related to recovery of advances, electricity dues and other amounts supported by evidence. The court said:

“With all due respect, we are unable to subscribe to such findings of learned Single Judge. We are not in a position to accept the findings arrived at by learned Single Judge in respect of counter claims allowed by the arbitrator to be in the nature of damages.”

The bench also underscored that the arbitrator had examined each claim and counterclaim in detail and assigned reasons that were plausible and borne out from the record. It reiterated that courts under Section 34 are not appellate forums and cannot reappreciate evidence or replace the arbitrator's view merely because another view is possible.

Finding that the Single Judge had effectively re-evaluated the evidence and substituted the arbitrator's conclusions, the court held that such interference was impermissible.

Accordingly, the appeals were allowed, the impugned order was set aside, and the arbitral award dated December 17, 2013 was restored in its entirety.