Court dismisses Union of India's challenge against the arbitral award, confirming the validity of interest awarded and rejecting claims of expired arbitrator mandate.
In a significant judgment delivered on April 1, 2026, the Delhi High Court dismissed a petition filed by the Union of India challenging the arbitral award granted to M/s Varindera Constructions Ltd. This legal battle stemmed from disputes arising out of a contract for the construction of dwelling units under the Married Accommodation Project at Jodhpur. The petition was filed under Section 34 of the Arbitration and Conciliation Act, 1996.
The Union of India contested the arbitral award on two principal grounds: the alleged expiry of the arbitrator's mandate under Section 29A of the Arbitration and Conciliation Act and the legality of the 12% interest awarded by the tribunal on the sums due to the contractor.
The Delhi High Court, presided over by Justice Harish Vaidyanathan Shankar, upheld the arbitral award, emphasizing the exclusion of the COVID-19 pandemic period from statutory timelines as per the Supreme Court's directions. The court noted that the exclusion of the period from March 15, 2020, to February 28, 2022, ensured that the award was rendered within permissible timelines, negating the claim of expired mandate.
Furthermore, the court examined the conduct of the Union of India, which continued to participate in the arbitration proceedings without timely objections, indicating implicit consent to the tribunal's mandate. This participation further weakened the petitioner's claim of mandate expiry.
On the issue of interest, the court found the arbitral tribunal's decision to award 12% interest to be reasonable and within the statutory framework. The tribunal had exercised its discretion judiciously, considering the compensatory nature of the interest due to delayed payments. The court reiterated that it could not substitute the tribunal's decision on interest unless it was arbitrary or in conflict with public policy, which was not the case here.
In conclusion, the Delhi High Court's judgment reinforces the principles of timely arbitration proceedings and limited judicial intervention, especially concerning interest awards by arbitral tribunals. The decision underscores the importance of adherence to arbitration timelines while recognizing the impact of extraordinary circumstances like the COVID-19 pandemic.
Bottom Line:
Arbitration and Conciliation Act, 1996 - Section 29A - Mandate of arbitrator does not automatically terminate upon expiry of statutory timelines if the period between 15.03.2020 and 28.02.2022 is excluded due to the COVID-19 pandemic as per Supreme Court's directions. Participation by parties post-expiry can imply consent to continuation of proceedings.
Statutory provision(s): Arbitration and Conciliation Act, 1996 - Sections 29A, 31(7), 34
Union of India v. M/s Varindera Constructions Ltd., (Delhi) : Law Finder Doc id # 2878126
