Bombay HC – No Escalation & No Claim Clause Cannot Shield Employer’s Breach – Arbitration Award Upheld
The tender of the respondent / claimant for the works of renovation and restoration of 19 minor irrigation tanks was accepted. After the negotiations, the estimated costs of the works was accepted at Rs.29,40,70,072/-.
Due to prolongation of the work for about 3 years from the date of stipulated date of completion, there was dispute.
In 2012, the claimant filed civil suit for recovery of dues with interest. In 2016, the suit was transferred to the Commercial Court.
On 24.8.2017, the Court referred the dispute to arbitration, with the consent of the parties.
The employer challenged the award on the ground that the Arbitrator has not followed the terms and conditions of the agreement.
No Escalation Clause of price for delay – Award of Escalation of price of material and labour granted
by the Counsel and not by party. However, this objection to the constitution of the arbitral tribunal is not raised in defence 15 CARBA2.2022 statement at the earliest under Section 16 of the Arbitration and Conciliation Act. The tribunal was not called upon to rule on it’s jurisdiction and the appellants have participated in the proceeding before the tribunal.
ordinarily, the parties would be bound by the terms agreed upon in the contract, but in the event one of the parties to the contract is unable to fulfil its obligations under the contract which has a direct bearing on the work to be executed by the other party, the arbitrator is vested with the authority to compensate the second party for the extra costs incurred by him as a result of the failure of the first party to live up to its obligations
The jurisdiction of this court under Section 37 of the Arbitration and Conciliation Act cannot exceed beyond the limit prescribed under Section 34 of the Arbitration and Conciliation Act. This court, while examining an order rejecting to set aside an Arbitral Award cannot examine the award on merits and has to confine itself to ascertaining, whether the court exercising jurisdiction under Section 34 has acted within the boundaries of that provisions.
- The primary contention of the appellants that the arbitrator could have not travelled beyond the terms of the contract, more particularly, that there can be no grant of escalatory price or any amount for idling of machinery and labour, cannot be accepted as there is breach of the contract by the appellants, as such, the liability is fixed by the arbitrator.
Notwithstanding the clauses in the contract, when the party has failed to standby it’s part of the contract, it is not available for the defaulting party to insist upon implementation of the Clauses of the contract providing for no claim for idling of machinery or escalation of price. The argument raised is, thus, rejected.
Judgment dated 29.1.2026 of the Division Bench of the Bombay High Court in Commercial Arbitration Appeal No.2 of 2022 of the Chief Engineer and Chief Administrator and others Vs. Hule Constructions Private Limited and others with connected matters
