Karnataka High Court Refuses To Interfere With ₹1.10 Crore Arbitral Award Against BHEL

The Karnataka High Court has dismissed Bharat Heavy Electricals Limited's (BHEL) appeal challenging an arbitral award directing it to pay ₹1.10 crore, along with 18% annual interest, to Sterling Bio Energy Systems for expenses incurred in connection with a pilot project.

The court held that no grounds for interference under Section 37 of the Arbitration and Conciliation Act, 1996, had been made out.

A Division Bench of Justices Anu Sivaraman and Venkatesh Naik T refused to interfere with the judgment and decree of January 4, 2017 passed by the VI Additional City Civil and Sessions Judge, Bengaluru City which dismissed the suit filed by Bharat Heavy Electricals Limited (BHEL).

"We find no sustainable grounds raised warranting interference under Section 37 of the Arbitration and Conciliation Act. The appeal fails and the same is accordingly dismissed."

The dispute arose from a tripartite Pilot Project Evaluation Agreement dated October 26, 2005, between Bharat Heavy Electricals Limited, Sterling Bio Energy Systems and Semitech Innovations Global Pte. Ltd., Singapore, for evaluating an automatic meter reading system.

After BHEL put the project on hold on July 7, 2006, Sterling sought reimbursement of expenses and invoked arbitration in 2009. The arbitrator awarded ₹1,10,93,642 on July 20, 2013 for foreign engineers' visits, pilot project preparation and payments to technology providers. BHEL challenged the award under Section 34 but the civil court dismissed the challenge on January 4, 2017.

Examining the facts of the case, the High Court noted that the agreement provided for a non exclusive right to evaluate the technology and allocated expenses between the parties through Annexure B, including specified travel and accommodation costs.

It observed that the arbitrator had considered the pleadings and evidence and found the claimed expenses covered by Annexure B. The civil court could not reassess the evidence to reach a different conclusion under Section 34.

Relying also on the judgment in Konkan Railway Corporation Ltd. v. Chenab Bridge Project Undertaking, the Bench held that the possibility of another view on facts or contractual interpretation does not justify interference.

"In Konkan Railway Corporation Limited v. Chenab Bridge Project Undertaking reported in (2023) 9 SCC 85, the Apex Court reiterated that proceedings under Sections 34 and 37 do not involve the exercise of ordinary appellate jurisdiction and that the mere possibility of another view on the facts or interpretation of the contract does not warrant interference."

Holding that no sustainable grounds was present to warrant interference with the lower court's order, the appeal was dismissed.

For Appellant: Advocates A.D. Sangeetha, S.R. Shiva Prakash

For Respondents: Advocate R. Krishnamurthy