The Madras High Court has upheld an arbitral award directing Appu Hotels Limited to pay ₹2.55 crore to Voltas Limited for electrical and air-conditioning works at the Le-Meridien Hotel in Coimbatore. However, it set aside a separate award of ₹1.01 crore towards retention money after Voltas agreed not to press that claim.
A single judge bench of Justice D. Bharatha Chakravarthy also upheld the 18% post-award interest on the ₹2.55 crore amount. It held that the retention-money component could be removed independently without affecting the remaining award
“I am satisfied that the award in respect thereof is severable, as it can be identified and removed independently, and even in its absence, the remaining award would remain coherent,” the court observed.
The dispute arose from a May 11, 2009 work order engaging Voltas to supply, install, test and commission heating, ventilation, air-conditioning and electrical systems for Appu Hotels' proposed Le-Meridien Hotel in Coimbatore.
The ₹11.80 crore contract required completion within eight months. However, the work orders were subsequently amended as the project progressed.
As the project neared completion, the companies disagreed over whether Voltas had completed or abandoned the work. They also disputed how much remained payable against its final invoice dated July 20, 2011.
Their differences extended to the retention money and expenditure incurred by Appu Hotels in engaging third parties to complete pending work.
Voltas invoked arbitration on September 18, 2013. In an award dated March 1, 2019, the sole arbitrator granted it ₹2,55,51,052 towards outstanding dues and ₹1,01,53,833 towards retention money.
Appu Hotels challenged the award, arguing that allowing Voltas' payment claim contradicted the finding that third parties had completed some portions of the project.
It alleged that Voltas had failed to fulfil its contractual obligations and that the arbitrator had overlooked material evidence. Appu Hotels also questioned the rejection of its counterclaim as time-barred.
Voltas maintained that the valuation was supported by evidence. It argued that Appu Hotels had neither terminated the contract nor prevented it from carrying out the work until June 2011. However, it expressly told the court that it was no longer pressing its claim to the retention money.
The court found no contradiction in the arbitrator's findings.
The fact that some portions of the project remained unfinished did not automatically disentitle Voltas from receiving payment for the work executed. The arbitrator had considered variations to the original work order, the parties' conduct and the circumstances in which the project remained incomplete.
The arbitrator concluded that Voltas had neither breached the agreement nor abandoned the work in a manner that disentitled it from receiving its dues.
The arbitrator had also accounted for Appu Hotels' expenditure on completing the pending work.
The total assessed project value was ₹11,28,20,374. From this, the arbitrator deducted ₹1,12,82,037 towards work completed through third parties. After accounting for the ₹7,59,87,285 already paid, the balance payable to Voltas came to ₹2,55,51,052.
Finding no error in this calculation, the court observed that Appu Hotels' objections essentially sought a fresh assessment of the evidence. Replacing the arbitrator's findings with another possible view would amount to exercising appellate powers, which was impermissible while examining a challenge to an arbitral award.
The court nevertheless held that the retention-money component could be severed from the remaining award. Recording Voltas' concession, it set aside the ₹1,01,53,833 awarded towards retention money, along with the interest on that amount.
The remaining award of ₹2,55,51,052, carrying 18% interest from March 1, 2019 until realisation, was left undisturbed. Both companies were directed to bear their own costs.
For Petitioner (Appu Hotels Limited): Advocates Om Prakash, Senior Counsel, for T. Ravichandran.
for Respondent (Voltas Limited): Advocate Vinod Kumar.