Chhattisgarh High Court Allows Gilcon Project's Claims, Rejects State's Appeal In Arbitration Dispute

The Chhattisgarh High Court on 25 March dismissed the State of Chhattisgarh's appeals and upheld the Commercial Court's order partly setting aside the arbitral award while granting limited relief to Gilcon Project Service Ltd. JV Scapes Associates.

A Bench of Justice Rajani Dubey and Justice Radhakishan Agrawal reiterated that courts exercising jurisdiction under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996 cannot reassess evidence or substitute the arbitrator's findings unless the award suffers from patent illegality or violates public policy.

The Court observed:

“The learned Commercial Court minutely appreciated all grounds of application filed by the State and Gilcon Project and rightly passed the order and rightly rejected the applications of the State sans merit and rightly allowed the claim No.1 of the Gilcon Project, which is in respect of admitted amount withheld by the State. Thus, we do not find any illegality or irregularity in the order passed by the learned Commercial Court”.

The dispute arose from two contract agreements dated 23 October 2007 between the State of Chhattisgarh, acting through the Chhattisgarh Rural Road Development Agency and the Department of Panchayat and Rural Development, and the contractor Gilcon Project Service Ltd for road development works.

The parties later faced disagreements over payments, recoveries and escalation claims under the contracts. They referred the disputes to a sole arbitrator pursuant to an order of the Chhattisgarh High Court.

The arbitrator issued a common award on 31 August 2018. While allowing some of the contractor's claims, the arbitrator rejected certain monetary claims, including Rs. 44,06,000 towards the final bill, Rs. 64,99,051 towards escalation dues and Rs. 4,08,441 towards withheld payments.

Both parties challenged the award before the Commercial Court under Section 34 of the Arbitration and Conciliation Act, 1996.

On 29 February 2020, the Commercial Court partly allowed Gilcon's challenge and set aside the rejection of certain admitted claims but did not grant full relief or direct immediate payment.

Both parties then filed appeals before the High Court under Section 37 of the Arbitration and Conciliation Act, 1996. The State challenged the order insofar as it granted relief to the contractor, while Gilcon sought interest on the revived claims.

The High Court held that the State failed to establish any ground for interference with the arbitral award. It found that the arbitrator had properly examined the contract and the evidence.

The Court upheld the Commercial Court's decision setting aside the rejection of the contractor's admitted claims, thereby reviving claims of Rs. 44.06 lakh, Rs. 64.99 lakh and Rs. 4.08 lakh payable by the State.

On Gilcon's appeals, the Court granted interest at 6% per annum from the date of completion of the contract until realisation on the revived amounts.

Accordingly, the Court dismissed the State's appeals and allowed the contractor's appeals to the limited extent of granting interest.

Appearances for petitioner (State of Chhattisgarh): Advocate Avinash Singh.

Appearances for respondent (Gilcon Project Service Ltd. JV Scapes Associates): Advocate Ankit Pandey.