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Harsha Constructions v. Union of India

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 534 of 2007)Decided 5 Sept 2014
Civil Appeal No. 534 of 2007
Justice Anil R. Dave · Justice Vikramajit Sen

Background

A railway bridge contractor disputed payment for additional work whose rates were not specified in the original schedule. The contract reserved that rate-setting dispute to the railway engineering authorities and expressly excluded it from arbitration. An arbitrator nevertheless decided that issue along with other claims, and the courts below set aside the award.

Decision Breakdown

The Supreme Court partly allowed the contractor's appeal by preserving the award on claims that were arbitrable. It quashed only the part fixing rates for the excluded additional work, because the arbitrator could not decide a dispute that the written contract expressly reserved elsewhere. Referral of a dispute or framing an issue did not by itself establish a new agreement to arbitrate it. The contractor remained free to pursue appropriate legal proceedings to recover payment for that additional work.

Lesson Learnt

Before arbitrating a payment claim, contractors should check whether the agreement excludes that category of dispute. An award on other valid claims can survive even when the arbitrator exceeds authority over one separable issue.

Official source (sci.gov.in)View Judgment (PDF)

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