Court dismisses Sterlite's challenge to arbitration award, reinforcing limited judicial interference in arbitral decisions
In a recent judgment, the Delhi High Court dismissed the petition filed by Sterlite Technologies Ltd challenging an arbitral award favoring Bharat Sanchar Nigam Limited (BSNL). The case revolved around the payment terms related to the laying of optical fiber cables through multiple ducts within a common trench, a project initially tendered by BSNL for the defense network.
The petitioner, Sterlite Technologies, had contested the arbitral tribunal's interpretation of contract clauses, specifically regarding the payment for cables laid in existing ducts. Sterlite argued that the arbitrator's conclusion of awarding only 25% of the quoted rate for services in cases of multiple ducting was perverse and contrary to the contract's terms.
The court, presided over by Justice Avneesh Jhingan, emphasized the narrow scope of judicial interference under Section 34 of the Arbitration and Conciliation Act, 1996. The judgment reiterated that courts cannot re-evaluate evidence or substitute the arbitrator's plausible interpretations unless they are perverse or contravene the fundamental policy of Indian law.
Justice Jhingan noted that the arbitrator's interpretation of "existing duct" was reasonable, as it considered the clarification provided by BSNL during the pre-bid stage, stating that 25% of the quoted rate would apply to services when cables were laid through existing ducts with BSNL's permission.
Sterlite Technologies had contended that the clarification related to government ducts was not applicable to their case, as no government ducts were used. However, the arbitrator concluded that after the initial cable was blown through one duct, subsequent cables laid through remaining empty ducts in the same trench would fall under the "existing duct" category.
The court pointed out that Sterlite's initial acceptance of 25% payment for multiple duct cases, as evidenced by their invoices, corroborated the arbitrator's interpretation. The judgment further highlighted that any possible alternate view cannot justify interference under Section 34 of the Act.
The ruling reinforces the principle that arbitral tribunals hold the authority to interpret contractual clauses, and such interpretations should not be disturbed unless they are patently illegal or oppose the fundamental policy of Indian law.
The decision stands as a significant affirmation of arbitration as an effective dispute resolution mechanism, with minimal judicial intervention, thus preserving the integrity and finality of arbitral awards.
Bottom line:-
Arbitration and Conciliation Act, 1996 - Scope of interference under Section 34 is narrow and limited to grounds enumerated in the Act. Interpretation of contractual clauses by the arbitrator is not to be interfered with unless it is perverse or beyond the terms of the contract.
Statutory provision(s): Arbitration and Conciliation Act, 1996, Section 34
Sterlite Technologies Ltd v. Bharat Sanchar Nigam Limited, (Delhi) : Law Finder Doc id # 2895895
