J&K and Ladakh High Court Dismisses Union's Challenge to Award In Army Northern Command Accommodation Project Dispute

The Jammu & Kashmir and Ladakh High Court has dismissed the Union of India's appeal against an order refusing to set aside an arbitral award after finding that it had failed to plead, point out or prove any perversity in the award.

A Division Bench of Justice Rajnesh Oswal and Justice Rahul Bharti observed:

"We find ourselves in cordial and in complete agreement with the court of learned Principal District Judge, Udhampur that the appellant failed to plead and point much less prove any perversity and perforation in the arbitral award."

The observations came while the Court dismissed an appeal filed by the Union of India against an order refusing to set aside an arbitral award passed in favour of Sew Engineering Works Pvt. Ltd.

The dispute arose out of Contract Agreement No. CEUZ-03/2000-01 executed between the Union of India and Sew Engineering Works Pvt. Ltd. for the work of "Provision of OTM Accn. For HQ Northern Command (Phase-III) at Udhampur".

Upon disputes arising between the parties, the matter was referred to arbitration. Initially, the disputes were referred to Chief Engineer Baljit Singh. Following his resignation, Satish Chander, Chief Engineer (Contracts), was appointed as the substituted arbitrator.

Before the arbitrator, the Union of India raised four claims. These included claims for extra expenditure incurred in getting the balance work completed through another agency, compensation for delay, costs of arbitration and interest.

Sew Engineering Works raised nine claims. These included claims relating to payment of the final bill, release of bank guarantees, loss of profit, delay-related losses, interest and costs.

By an award dated September 8, 2014, the arbitrator rejected all four claims raised by the Union of India. Of the contractor's nine claims, four were rejected, while five were partly allowed.

Among other reliefs, the arbitrator awarded amounts under claims relating to payment of the final bill, loss of profit and losses due to delay or non-payment of running account receipts. The arbitrator also awarded interest and arbitration costs.

Aggrieved by the award, the Union of India filed a petition under Section 34 of the Arbitration and Conciliation Act seeking to set it aside. It argued that the arbitrator had failed to properly appreciate the evidence and submissions placed before him.

The Union of India further contended that the arbitrator had wrongly rejected its claims despite alleged breaches committed by the contractor. It also contended that the arbitrator had erroneously awarded claims in favour of the contractor.

The Principal District Judge of Udhampur dismissed the challenge. While considering the appeal, the High Court reproduced the District Judge's finding that:

"Nevertheless, a careful perusal of the award passed by the Arbitrator would leave in no manner any doubt that Arbitrator has acted well within the limits of terms of reference and has given sufficient reasons for allowing/disallowing the claims/counter-claims in part or full after taking into consideration the documents produced by both the parties as well as arguments advanced in support of each of the individual claims/counter-claims."

The High Court observed that an arbitral award can be set aside only within the narrow confines of the grounds stipulated under Section 34 of the Act. It further observed that even before the High Court, the appellant had failed to demonstrate any basis that would warrant judicial intervention.

Referring to the Supreme Court's decision in Ramesh Kumar Jain v. Bharat Aluminum Company Ltd. (Balco), 2025, the Court referred to the limited scope of interference under Sections 34 and 37 of the Act.

Finding no ground to interfere with the order passed by the Principal District Judge, Udhampur, the Court held that the order was "well-reasoned and self-sustainable in law". It accordingly dismissed the appeal along with all connected applications.

The court further directed that the amount deposited by the Union of India be released in favour of the contractor. The release would be subject to due verification and compliance with the applicable rules.