Karnataka High Court Upholds Award Rejecting ₹1.37 Crore Contractor Claim In Mysuru Zoo Park Project
The Karnataka High Court on 23 September dismissed contractor C. C. Kondaiah's appeal against the Commercial Court's decision not to interfere with an arbitral award rejecting his claims for additional expenditure, price escalation and idling costs against the Mysore City Corporation.
A Division Bench of Justices Anu Sivaraman and T.P. Vivekananda reiterated that an appellate court cannot reappreciate evidence or substitute the reasoning of an arbitral tribunal while exercising jurisdiction under Section 37 of the Arbitration and Conciliation Act. The judges observed:
“We also notice that the grounds raised by the appellant to challenge the order of the Commercial Court are essentially those falling within the realm of findings of fact. The learned Sole Arbitrator had considered the contentions of the parties and had rendered finding on such contentions. It is trite law that reappriciation of the evidence or a substitution of opinion or reasoning is not warranted in an appeal under Section 37 of the Arbitration and Conciliation Act.”
The case concerns a tender floated by the Mysore City Corporation on 6 June 2009 for improving the bund between Karanji Lake and Mysuru Zoo to develop a community park. Kondaiah emerged as the successful bidder and was issued a work order on 31 August 2009. The contract, valued at Rs. 3.59 crore, stipulated a nine-month completion period.
A civil court subsequently restrained the work on 23 March 2010. The injunction was vacated on 22 February 2012 following a compromise. The scope of work was later increased and the government approved a revised project cost of Rs. 4.48 crore on 13 February 2013. Kondaiah completed the original and additional works and submitted his final bill in 2014.
Disputes then arose over the balance payment and his claims for additional expenditure, idling costs and price escalation. Kondaiah claimed that he had incurred Rs. 5.43 crore against Rs. 4.06 crore paid by the Corporation, leaving Rs. 1.37 crore outstanding. He contended that the work had remained stalled for nearly 23 months because of the injunction and that the enlarged scope of work had increased his expenditure.
The Corporation argued that the revised project cost of Rs. 4.48 crore had already accounted for the additional work and site conditions. It also contended that the injunction affected only a limited portion of the site and did not prevent work from being carried out elsewhere.
The sole arbitrator rejected Kondaiah's claims on 8 August 2019 and imposed costs of Rs. 1 lakh. The arbitrator, however, clarified that Kondaiah could receive Rs. 2,74,586 for which a bill had been raised.
Kondaiah challenged the award under Section 34 of the Arbitration and Conciliation Act before the II Additional District and Sessions Judge, Mysuru.
After the Commercial Court dismissed the challenge on 13 December 2022, Kondaiah approached the High Court under Section 13(1A) of the Commercial Courts Act read with Section 37(1)(b) of the Arbitration Act.
He argued that the arbitral award had overlooked the prolonged interruption, increased scope of work and material supporting his claim for additional expenditure. He further alleged that he had not been given an adequate opportunity to present his case.
The Corporation maintained that the arbitrator had considered the evidence and provided Kondaiah sufficient opportunity to present his case.
The Bench found that Kondaiah's grounds essentially sought reconsideration of factual findings already examined by the arbitrator. It reiterated that reappreciation of evidence or substitution of the arbitrator's reasoning is impermissible in an appeal under Section 37.
Accordingly, the High Court found no sustainable ground for interference, dismissed the appeal and disposed of all pending applications.
Appearances for appellant (C. C. Kondaiah): Advocates Vivek Holla, Chandrashekar S.
Appearances for respondent (Mysore City Corporation): Advocates Hemanth P., Geetha Devi M. P.