Minority Opinion Awarding Lesser Amounts Does Not Invalidate Majority Arbitral Award: Madras High Court

The Madras High Court has held that a majority arbitral award does not become invalid merely because a dissenting arbitrator awarded lesser amounts.

The court dismissed a challenge by the Chennai Metropolitan Water Supply and Sewerage Board to an award in favour of SPML Infra Limited arising out of a Chennai sewerage pipeline project.

A division bench of Justices P. Velmurugan and K. Govindarajan Thilakavadi observed:

"The Tribunal consisted of three Arbitrators and the impugned Award is a majority Award. Section 29 of the Arbitration and Conciliation Act, 1996 expressly recognises decision-making by majority. Therefore, the mere fact that one Arbitrator rendered a minority opinion granting lesser amounts does not render the majority Award invalid."

The dispute arose from a contract awarded by the Chennai Metropolitan Water Supply and Sewerage Board for construction of a permeate conveyance pipeline under the Chennai Sewerage Renovation and Functional Improvement Project. The project was funded by the Overseas Economic Co-operation Fund of Japan.

SPML Infra Limited claimed that substantial post-contractual changes were made to the alignment and scope of work during execution of the project. It contended that the changes resulted in a drastic reduction in pipeline quantities, increased excavation requirements and additional costs. The company also complained of delays in site handover, revised drawings and approvals.

The Board disputed the claims. It contended that the contract was a lump-sum contract and that the contractor was not entitled to additional compensation on account of underground obstructions or variations in site conditions.

An arbitral tribunal allowed several claims in favour of SPML Infra Limited. These included compensation arising from reduction in the scope of work, additional excavation, certain unpaid amounts and interest. The tribunal rejected several other claims as well as the Board's counterclaims. One arbitrator rendered a separate minority award granting substantially lesser amounts.

The Board challenged the award before a Single Judge. By a judgment dated August 14, 2019, the Single Judge set aside the award only in respect of Claim No.6 relating to prolongation costs and loss of profit. The award was confirmed in all other respects.

The Board then filed the present appeal. It contended, among other things, that the majority award was invalid because one arbitrator had rendered a separate minority award.

Rejecting the contention, the Division Bench held that the existence of a minority opinion did not affect the validity of the majority award.

On the tribunal's findings regarding the revised pipeline alignments, the Bench noted:

"The Arbitral Tribunal, consisting of members possessing technical expertise in engineering and infrastructure projects, examined the pleadings, documentary evidence, contractual provisions, pipe-laying cards, job records, and other contemporaneous records maintained during execution of the work"

The Court found no ground to interfere with the tribunal's findings regarding additional excavation and increased execution costs. Referring to the tribunal's conclusions, the Bench observed:

"Upon appreciation of the materials placed before it, the Tribunal recorded findings that the revised alignment resulted in additional excavation, additional manpower deployment, and increased execution costs. The Tribunal further found that, because of the revised alignment and the existence of underground utility structures and other obstructions, excavation had to be undertaken manually in several stretches, thereby resulting in additional expenditure. These findings were arrived at on the basis of technical records and contemporaneous documents maintained during execution of the work."

Finding no patent illegality, perversity, or conflict with public policy in the award as upheld by the Single Judge, the Court dismissed the appeal.

For Appellant (Chennai Metropolitan Water Supply and Sewerage Board): Advocate D. Balaraman.

For Respondent (SPML Infra Limited): Advocate K. Ashok Kumar.