Summary
Doubting whether Bharat Drilling & Foundation Treatment v. State of Jharkhand lays down that contractual clauses barring certain claims bind only the employer and not the Arbitral Tribunal, the Court referred that decision to a larger bench for reconsideration. It noted that Bharat Drilling relied on a decision about interest, which stands on a different footing from excepted-claim clauses.
Issues
- Whether Bharat Drilling is authority for the proposition that an excepted clause or prohibited claim in a contract applies only to the employer and not to the Arbitral Tribunal.
- Whether the High Court could restore an award on claims for idle overheads, idle machinery and loss of profit, barred by clauses 4.20.2 and 4.20.4 of the contract, merely by relying on Bharat Drilling without examining the clauses.
Provisions considered
- Section 31(7), Arbitration and Conciliation Act, 1996The Court noted that the arbitrator's power to award interest is sourced from Section 31(7), which yields to the parties' agreement, and that interest decisions such as Port of Calcutta therefore stand on a different footing from contractual clauses excepting or prohibiting particular claims. (¶¶ 10, 11)
- Sections 34 and 37, Arbitration and Conciliation Act, 1996The Civil Court under Section 34 set aside the award on claims 3, 4 and 6 as contractually prohibited; the High Court under Section 37 restored them by relying solely on Bharat Drilling, without discussing the clauses. (¶¶ 2, 6, 8)
Held
- The High Court did not examine the contractual clauses and proceeded as if the issue were concluded by Bharat Drilling, which itself did not examine such clauses or decide in detail the contention that the bar applied only to the department and not to the Arbitral Tribunal. (¶¶ 6, 7, 8)
- Clauses limiting claims rest on freedom of contract and party autonomy. Whether an excepted or prohibitory clause applies depends primarily on the agreement, which is the guiding principle for the Arbitral Tribunal; the Court relied on CORE and Pam Developments. (¶¶ 8, 9)
- Reliance in Bharat Drilling on Port of Calcutta, a decision on pendente lite interest, was not appropriate because interest under Section 31(7) stands on a different footing from clauses excepting claims; its approach is also not in tune with Cox and Kings, CORE and In Re: Interplay Between Arbitration Agreements under the Arbitration Act and the Stamp Act. (¶¶ 10, 11)
- To ensure clarity and consistency, the ratio of Bharat Drilling requires reconsideration by a larger bench. (¶¶ 1, 12)
Result
Bharat Drilling referred for reconsideration; Registry directed to place the matter before the Chief Justice for constitution of a larger bench of appropriate strength.