No Duplication Of Interest: Calcutta High Court Upholds Arbitral Award In Construction Dispute In Contractor's Favour

The Calcutta High Court has rejected the West Bengal Government's challenge to an arbitral award in favour of a contractor, holding that there was no duplication of interest on the same amounts.

A Division Bench of Justice Debangsu Basak and Justice Aryak Dutt observed, “There is no duplication of interest, no contravention of Section 31(7) of the Act, and no ground to interfere with the award of interest which is within the domain of the Arbitrators.”

The dispute arose from a contract awarded to Rajpath Contractors and Engineers Limited for designing and constructing a high-level bridge over the River Hogol at Sonakhali in South 24-Parganas. The project was completed 2,191 days after its scheduled completion date.

A three-member arbitral tribunal attributed 1,994 days of the delay to the State and the remaining 197 days to the contractor.

The tribunal awarded the contractor ₹3.65 crore towards its claims, along with ₹2.38 crore as pendente lite interest for the period between April 24, 2009, and September 29, 2014. It also awarded costs of ₹5.41 lakh.

The State argued that the tribunal had awarded interest multiple times on the same amounts, contrary to the contract and the Arbitration Act.

Rejecting the objection, the court clarified that the award compensated the contractor for the State withholding admitted amounts under its bills beyond their due dates. This was not an interest on the sums awarded by the tribunal.

The court noted that the State had not pointed to any contractual clause prohibiting compensation for delayed payments. In the absence of such an agreement, the statute empowered the tribunal to award interest.

The State also argued that the contract did not permit a separate claim for loss of profits and that the contractor had already received escalation payments.

The court noted that the contractor's men, machinery, and capital remained tied up in the project for six years beyond the contractual period. It held that loss of profit-earning capacity during such prolonged engagement, when caused by the employer, is a recognised head of damages. The court relied on the Supreme Court's decision in McDermott International Inc. v. Burn Standard Co. Ltd.

Relying on the Supreme Court's decisions in MMTC Ltd. v. Vedanta Ltd. and Jan De Nul Dredging India (P) Ltd. v. Tuticorin Port Trust, the bench reiterated that an arbitral award which does not warrant interference under Section 34 should not be disturbed in an appeal under Section 37.

The High Court dismissed the State's appeal and upheld the arbitral award.