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Indian Rare Earths Ltd. v. Unique Builders Ltd.

Civil Appeal · Neutral citation not assigned (Civil Appeal No. 3209 of 2007)Decided 5 Aug 2015
Civil Appeal No. 3209 of 2007
Justice M.Y. Eqbal · Justice Arun Mishra

Background

Indian Rare Earths Ltd., a government company, engaged Unique Builders Ltd. for structural steel and cladding work on bulk warehouses. A dispute arose before the work was completed and was referred to arbitration, where the contractor claimed about Rs. 97.5 lakh but the arbitrator awarded only about Rs. 19.5 lakh with interest. Indian Rare Earths challenged the award in the civil court and lost, then lost again before the High Court, and brought the matter to the Supreme Court.

Decision Breakdown

The Supreme Court held that a non-speaking (unreasoned) arbitral award cannot be set aside merely because it lacks reasons, relying on the Constitution Bench ruling in Raipur Development Authority vs. Chokhamal Contractors and the earlier decision in S. Harcharan Singh vs. Union of India. Since the arbitration agreement did not require the arbitrator to give reasons, the Court held it was not permissible to probe into the arbitrator's mental process, especially where the arbitrator had already rejected the bulk of the contractor's claim. Finding no error warranting interference, the Court upheld both the award and the High Court's judgment and dismissed the appeal.

Lesson Learnt

If parties agree to arbitration without requiring the arbitrator to give reasons, courts will generally not second-guess a non-speaking award just because its reasoning isn't spelled out: challenges to arbitral awards succeed only on the narrow grounds actually set out in law.

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

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