Court Emphasizes Arbitrator as Sole Judge of Facts; Interference Should Be Avoided Unless Error of Law Is Shown – Supreme Court Restores Award in Road Construction Contract Dispute

In a significant ruling, the Supreme Court of India has restored an arbitration award in favor of the appellant concerning a road construction contract. The judgment, delivered by the bench of J. [S. RAVINDRA BHAT] and J. [DIPANKAR DATTA] on AUGUST 22, 2023, set aside the decisions of both the trial court and the High Court, which had earlier nullified the award.

The court emphasized the role of the arbitrator, stating, "It is axiomatic that courts, while adjudging whether an arbitration award calls for interference, have to be conscious that the arbitrator is the sole judge of facts; unless an error of law is shown, interference with the award should be avoided” [Para 23].

The dispute arose from a road construction contract awarded to the appellant by the Government of Maharashtra’s Irrigation Department. Following disagreements, the matter was referred to arbitration, resulting in a substantial award in favor of the appellant. The respondent state challenged the award, leading to its nullification by the lower courts.

In its observations, the Supreme Court rejected the argument that the claims were not within the contracted period, considering the inordinate delay and extensions of time by mutual consent [Para 19]. The court also found no error in the award of damages for disruption in work due to water releases in the canal [Para 20-22].

The decision has been hailed as a strong affirmation of the principles of arbitration, reinforcing the autonomy of the arbitrator in adjudicating disputes. The court’s ruling underscores the importance of limiting judicial interference in arbitration awards, except in cases where a clear error of law is evident.

The respondents have been directed to ensure full payment in terms of the award to the appellant within eight weeks, and the appeals were allowed with the appellant entitled to costs throughout [Para 25].

 Date of Decision: AUGUST 22, 2023

 M/S S.D. SHINDE TR. PARTNER  vs GOVT. OF MAHARASHTRA & ORS.          

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