Gujarat High Court Set Aside ₹25 Crore Arbitral Award As Tribunal Rewrote Contract, Ignored Reciprocal Obligations

The Gujarat High Court has upheld the setting aside of a Rs 25 crore arbitral award in a dispute over a failed industrial project, holding that the tribunal had effectively rewritten the contract by imposing an obligation to provide an approach road that was never agreed upon, while fastening liability despite the claimant not having set up the factory, which was a prerequisite for triggering the respondent's obligations.

Dismissing the appeal, a Division Bench of Chief Justice Sunita Agarwal and Justice Sanjeev J. Thaker held that the award suffered from patent illegality, as it imposed liability despite the claimant failing to perform its own foundational obligation under the 2008 business agreement.

The case arose from a dispute between Accurate Thermal Spray Private Limited and SKF Engineering and Lubrication India Private Limited.

Under their agreement dated October 2008, signed on October 17, 2008, Accurate was to set up a facility near SKF's Bavla plant to coat large industrial bearings, while SKF agreed to supply a minimum quantity between June 2009 and March 2014, failing which it would pay 60% of the average price for any shortfall.

Accurate claimed it had purchased land and taken preparatory steps based on pre-agreement discussions and email exchanges, including an understanding that SKF would facilitate access to the land.

SKF denied any such obligation, maintaining that its duty to supply bearings would arise only after Accurate had established a functional facility in terms of the agreed timeline.

The High Court accepted this position, holding that SKF's obligation to supply bearings was contingent on Accurate first performing its reciprocal promise of setting up the facility. In the absence of such readiness, no contractual liability could arise.

It further found that the arbitral tribunal had travelled beyond the contract by relying on email exchanges and surrounding circumstances to conclude that SKF had agreed to provide access to the claimant's land, even though the written agreement contained no such clause.

“By holding that the respondent had agreed to provide approach road to the claimant and non providing of the same had obstructed / prevented the claimant from setting up the factory, i.e. from performing the contractual obligation of the claimant, the learned Arbitrator has thrust upon a new liability upon the respondent unilaterally as against its intention. That being the case, it is clear that the award had created a new contract for the parties on unilateral intention of the claimant against the intention of the respondent. A fundamental principle of justice has been breached by unilateral addition or alteration of the contract foisted upon an unwilling party,” the Court said.

The tribunal had, in 2024, held SKF in breach for failing to supply bearings and for not providing access to the land, and awarded ₹25 crore along with 10% annual interest from July 18, 2014 and ₹50 lakh as costs. This was set aside by the Commercial Court in October 2025.

Affirming that decision, the High Court held that the tribunal had introduced obligations not contemplated by the contract and had also relied on extraneous considerations which were not part of the agreement.

The B=bench also found the damages award to be unsustainable, noting that Accurate had failed to prove any actual or measurable loss and that claims of lost business opportunity were speculative and contrary to settled principles under the Contract Act.

“Thus, until a proposal is accepted, it will not give rise to an agreement. If there is no agreement, there was no contract between any party. There is no promisor or promisee and the desire expressed remained a proposal only. In such a situation there is no question of breach,” the Court held.

Holding that the tribunal had exceeded its jurisdiction by deciding matters beyond the contract and awarding damages without a legal or evidentiary basis, the Court dismissed the appeal and confirmed that the Rs 25 crore award could not be sustained.

For Appellant (Accurate Thermal Spray Private Limited): Advocates S.N. Soparkar, U.D. Shukla, Aditya C. Yagnik, Jayani B. Shah.

For Respondent (SKF Engineering and Lubrication India Private Limited): Advocates Kamal Trivedi, Devang Nanavati, P.A. Jadeja, Kiran R. Udasi, Rupal Bhatia, Vinay Bairagra, Mangesh Khandelwal.