Summary
In cross-appeals concerning a hydroelectric project, the Court restored the arbitral award’s interest component and rejected the State’s challenge to liability. Hyder Consulting had overruled the proposition relied upon below that the tribunal could award only simple interest on principal. The earlier memorandum formed part of the implementation agreement, so its disputes were covered by the later arbitration clause. The arbitrator’s reading of the commencement and extension provisions was plausible, and the State had terminated prematurely. Judicial review could not substitute another contractual interpretation.
Issues
- Whether the award’s interest component could be disallowed on the asserted absence of power to award interest on interest.
- Whether the memorandum’s disputes fell within the implementation agreement and whether the State’s termination was premature.
- Whether courts reviewing the award could substitute another plausible interpretation of the contract.
Provisions considered
- Section 31(7), as applicable to the award, Arbitration and Conciliation Act, 1996Applying Hyder Consulting, the sum directed to be paid may include awarded interest; the contrary restriction relied on below could not sustain disallowance of the interest component. (¶ 2-6)
- Sections 34 and 37, Arbitration and Conciliation Act, 1996Judicial review is limited and cannot replace a possible, reasoned contractual interpretation merely because another view exists. (¶ 14-22)
Held
- The appellate court’s reliance on S.L. Arora was misplaced because Hyder Consulting had overruled the restrictive proposition. Post-award interest can operate on the awarded sum inclusive of interest. The award’s interest component was restored to the extent challenged by UHL. (¶¶ 2-6, 23)
- The memorandum was expressly Appendix A to the implementation agreement, whose definition included appendices and annexures. The clause stating that the memorandum lapsed could not be read in isolation. Disputes under both instruments, including expenses and damages, were referable under the implementation agreement’s arbitration clause. (¶ 8-11)
- The contractual clearances and commencement provisions contemplated extensions, capped at twelve additional months. The State could not isolate selected subclauses to insist on termination after the initial year. The finding that it terminated five months before the permissible period expired was upheld. (¶¶ 12-13, 22)
- The arbitrator’s interpretation was both possible and plausible and supported by logic. The Section 34 court exceeded its jurisdiction by reappreciating it as an appellate court; Section 37 review is even more circumscribed. An alternative interpretation alone is insufficient to disturb the award. (¶ 14-22)
Result
UHL’s appeal partly allowed by restoring the award’s interest component; State’s appeal dismissed in full; parties to bear their own costs.