Madras High Court Quashes ₹1.10 Crore Award Against Annai Builders For "Unintelligible" Findings

The Madras High Court on 17 February set aside a Rs. 1.10 crore arbitral award passed against Annai Builders Real Estate Pvt. Ltd., holding that the arbitrator's findings were unintelligible as two disputed running bills were allowed without examining objections of duplicate claims and excess payment, and by ignoring a detailed 242-page expert report assessing actual construction progress.

A Single Bench of Justice N. Anand Venkatesh held that the award suffered from perversity and patent illegality and set it aside in entirety. The Court observed:

“on an overall reading of the award passed by the Sole Arbitrator, this Court finds that the findings rendered for the main issues are unintelligible and it was given in complete disregard to the evidence available on record and the findings are also mutually contradictory. Hence, this Court is inclined to interfere with the entire award on the ground of perversity and patent illegality”.

The dispute arose from a building contract dated 2 February 2011 between Annai Builders and contractor G.B. Sarath Kumar for construction of 92 residential plots at Anagaputhur. The provisional estimate was Rs. 12,58,55,050, calculated at Rs. 950 per sq. ft.

The payment schedule was milestone-based, and 3% retention money was to be deducted from each running bill and released three months after issuance of the completion certificate. During execution, the contractor raised 30 running bills. While Bills 1 to 28 were certified and paid subject to 3% retention, disputes arose over Bills 29 and 30.

G.B. Sarath Kumar invoked arbitration seeking more than Rs. 1.75 crore towards unpaid bills, retention money and extra work.

By an award dated 30 November 2020, Sole Arbitrator G.M. Akbar Ali (Retd.) directed Annai Builders to pay Rs. 1,10,07,441.80 within three months, failing which interest at 18% per annum would apply from the date of award. This led Annai Builders to approach the High Court under Section 34 of the Arbitration and Conciliation Act, 1996.

Before the High Court, Annai Builders argued that though Bills 29 and 30 were not certified, the arbitrator allowed them without addressing objections of duplication and excess payment.

It further submitted that Rs. 10.83 crore, constituting 86% of the Rs. 12.58 crore contract value, had already been paid even though only about 60% of the work was completed, and that this core issue along with a 242-page expert report had been disregarded.

The High Court agreed with Annai Builders and found a “glaring contradiction” in the award. It observed that while the arbitrator rejected certain other claims because the bills were uncertified, he nevertheless allowed RA Bills 29 and 30 despite acknowledging that they too had not been certified.

On the expert report, the Court held that its non-consideration amounted to ignoring material evidence. It stated:

“It is true that the report of the expert may not be a conclusive proof. But, however, it is a very relevant fact which will have a bearing while dealing with the issue of the alleged excess payments."

The Court found the arbitral findings to be “bereft of any reasons and unintelligible” and “equivalent to not providing any reasons at all.”

Holding that it was not possible to sever the valid portion of the award from the invalid portion, the Court set aside the entire award and left it open to the parties to refer the dispute afresh to a new arbitrator.

For Petitioner: K. Satheesh Kannan (Party-in-person)

For Respondent: Mr. Avinash Wadhwani