Courts Can't Sit in Appeal Over Arbitrator’s Plausible View on Contractual Rates: Madras High Court Refuses to Interfere in Contractor's Challenge to Arbitral Award

"When the Arbitrator Adopts a View That Is Plausible and Contractually Justifiable, Courts Must Refrain from Intervening Under Section 34" — In a decisive reaffirmation of the limited scope of judicial review under Section 34 of the Arbitration and Conciliation Act, the Madras High Court dismissed a challenge by a road contractor to an arbitral award that rejected a major portion of its monetary claims for non-BoQ (non-Bill of Quantities) variation items. Justice N. Anand Venkatesh, speaking for the Court in M/s. Ramky Infrastructure Ltd. v. I.T. Expressway Ltd. & Ors., held that the arbitral award was based on a reasonable and contractually sustainable interpretation of the terms and did not warrant interference.

The core legal issue revolved around the proper clause to be applied for determining rates for variation items not originally part of the contract's BoQ — whether Clause 37.1, requiring a quotation with supporting documentation from the contractor, or Clause 37.2, enabling the employer to fix rates based on comparable schedule rates.

"Failure to Submit Required Rate Analysis Under Clause 37.1 Justifies Invoking Clause 37.2"

Justice Venkatesh noted at the outset that “the arbitral award is based on a possible view of the terms of the contract and supported by evidence on record. This Court cannot reappreciate that finding merely because a different view is possible. Interference under Section 34 is warranted only when the award is perverse, patently illegal, or in conflict with public policy — none of which is demonstrated in the present case.”

The dispute arose from a road improvement contract relating to the ECR Link Road in Chennai, which was originally part of a larger infrastructure contract but was later separated via a supplemental agreement. During execution, the contractor submitted IPC-5 (Interim Payment Certificate) claiming dues of approximately ₹3.57 Crores, largely arising from 14 variation (non-BoQ) items. However, the employer, I.T. Expressway Limited (ITEL), paid only ₹77.98 lakhs based on rates unilaterally fixed by a variation committee using Clause 37.2.

Challenging the award, Ramky Infrastructure Ltd. argued that the arbitral tribunal erred in accepting Clause 37.2 as the basis for rate fixation, when the nature of the variation items required a new rate determination under Clause 37.1, which mandates the contractor to submit rate quotations with full supporting data.

But the Court found this challenge unfounded. “The petitioner failed to provide the required rate analysis with invoice and billing support as required under Clause 37.1,” the Court observed. “The engineer, therefore, was justified in rejecting the unsupported quotation and relying on Clause 37.2 by adopting the Schedule of Rates (SoR) of Chennai National Highways Circle for the relevant year.”

The Court further noted that the rates fixed by the committee were communicated to the contractor via letter dated 09.07.2010, and the contractor had not objected to the same at the time. “It is futile for the petitioner to now claim that it was unaware of this letter when it had itself enclosed the same with its own witness affidavit,” the Court added, underscoring the belated nature of the objection.

Arbitral Reasoning Not Perversely Unreasonable — No Judicial Review Permissible

The arbitral tribunal had accepted the employer’s stand that the petitioner was non-compliant with its contractual obligations under Clause 37.1 and that the adopted SoR-based rates under Clause 37.2 were both procedurally and commercially justified. The majority of the tribunal awarded only ₹77.98 lakhs, rejecting the balance of the petitioner’s claims. The High Court noted that such findings fell squarely within the tribunal’s domain.

“The Court does not exercise appellate jurisdiction under Section 34. Unless the award shocks the judicial conscience or is per se contrary to law, the Court must defer to the arbitral process,” the judgment reiterated, citing the principle of minimal interference.

Additionally, the Court emphasized the conduct of the petitioner in raising the issue of improper rate fixation for the first time only at the arbitration stage, despite receiving due communication and failing to submit substantiating documentation earlier. This conduct, the Court hinted, undermined the petitioner’s bona fides.

No Patent Illegality — Petition Dismissed

In conclusion, the High Court found that the arbitral award was a result of careful application of the contractual clauses and relevant rate schedules, devoid of any perversity or illegality. As Justice Venkatesh succinctly put it, “This Court is not inclined to interfere with the award passed by the Arbitral Tribunal. The award reflects a plausible and well-reasoned view that falls within the boundaries of judicial restraint under Section 34.”

Accordingly, the petition was dismissed without costs.

Date of Decision: 15.12.2025