Punjab & Haryana HC: Arbitration Award Upheld Granting Price Variation, Idle Labour Costs and Interest Against UHBVNL
Case Name: UHBVNL, Panchkula v. M/s M.N. Conductors & Anr.
Date of Judgment: January 14, 2020
Citation: FAO No. 4050 of 2003 (O&M)
Bench: Hon’ble Mr. Justice Deepak Sibal
Held: The High Court dismissed the appeal filed by UHBVNL under Section 37 of the Arbitration and Conciliation Act, 1996 and upheld the award which had granted compensation for price variation, idle labour costs, and interest to the contractor. It held that there was abnormal delay of 620 days in release of payments by UHBVNL, which had extended the contractual period from 11 to 20 months. The Arbitrator had rightly allowed additional amounts towards price escalation during this extended period and wages paid to idle permanent staff. Further, awarding interest at 18% per annum under Section 31(7) of the Act was valid, as there was no contractual bar to interest. The Court emphasized that a plausible view taken by an arbitrator cannot be substituted unless it shocks the conscience or is patently illegal.
Summary: UHBVNL placed a purchase order in 1994 for supply of ACSR Weasel Conductors. Payment delays by the appellant extended the delivery period, leading to escalation in conductor prices. The Arbitrator’s award of 30.05.2002 granted compensation to the contractor under three heads: (i) price variation due to delayed performance, (ii) idle labour costs, and (iii) interest. UHBVNL challenged the award, arguing that the Arbitrator ignored contractual terms, wrongly granted idle labour wages without proof, and awarded interest contrary to agreement. The High Court referred to Supreme Court precedents including Sutlej Construction Ltd. v. UT Chandigarh (2018), Parsa Kente Collieries Ltd. v. Rajasthan Rajya Vidyut Utpadan Nigam Ltd. (2019), and M.P. Power Generation Co. Ltd. v. Ansaldo Energia SPA (2018), reiterating that interference is permitted only if the award is perverse, contrary to contract, or patently illegal. The Court found that the Arbitrator’s reasoning was supported by evidence and within jurisdiction, as delay was admitted, escalation was proved, and Section 31(7) specifically empowered grant of interest.
Decision: The High Court dismissed UHBVNL’s appeal and upheld the award in favour of the contractor, holding that compensation for price escalation, idle labour, and interest was justified and consistent with law.