LI Network
Published on: 29 January, 2024 at 12:15 IST
In a recent judgment, the Delhi High Court has clarified that a party, having accepted benefits under an arbitral award, is precluded from selectively challenging any aspect of the award.
The Court dismissed a petition challenging Claims No. 4 and 5, pertaining to loss of profits, which were partially allowed in a contract award favoring the petitioner.
Justice Sanjeev Narula, presiding over the bench, emphasized that once the petitioner had received the awarded amount under Claim No. 5 on August 18, 2022, their acceptance of benefits estopped them from challenging the award.
The dispute originated from a Contract Award valued at INR 33,52,66,929, involving the construction of a residential complex in Lucknow.
The petitioner faced obstacles such as delays due to the respondent’s actions and a reduction in project cost approved by the Lucknow Industrial Development Authority.
The petitioner initiated arbitration, claiming substantial losses, and the arbitrator awarded INR 1,42,34,622/- along with an 8% per annum interest rate. The petitioner challenged the award, specifically focusing on Claim No. 5 related to the loss of profit on undone work.
The Court observed that the petitioner initially sought relief to annul a specific segment of the arbitral award concerning Claim No. 4 and Claim No. 5. However, during a court hearing on January 19, 2024, the petitioner clarified that they were no longer contesting the findings regarding Claim No. 4. With Claim No. 5, the petitioner initially limited the challenge to the disallowed portion but later sought to retract this statement.
The Court stressed the impermissibility of altering or modifying an arbitral award, citing the Supreme Court judgment in National Highways Authority of India v M. Hakeem & Anr.
The doctrine of severability was highlighted, and the interconnected nature of the findings and reasoning rendered partial annulment inappropriate.
The Court also evaluated the petitioner’s grounds to set aside the entire award for Claim No. 5 under Section 34 of the Arbitration and Conciliation Act, 1996.
The petitioner contested the awarded damages but the court rejected the arguments, noting that intervention is unwarranted if the Arbitral Tribunal’s view is plausible.
The Court emphasized the high standard required to establish patent illegality and rejected the petitioner’s claims of conflict with public policy or patent illegality.
The Court noted that the tribunal’s decision to assess damages at 5% was reasonable and justified.
The Court reiterated that accepting benefits under an award prevents later repudiation, establishing an estoppel. In this case, the court concluded that the tribunal’s decision under Claim No. 5 was well-considered and did not exhibit any flaws justifying a challenge under Section 34 of the Arbitration Act.
As a result, the court dismissed the petition in the case titled “Ms K S Jain Builders v Indian Railway Welfare Organization” (2024:DHC:575).
