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Saluja Construction Company v. Northern Coalfields Limited

Civil Appeal · 2021 INSC 788Decided 25 Nov 2021
Civil Appeal No. 7041 of 2021
Justice M.R. Shah · Justice Sanjiv Khanna

Background

A construction company had a contract with Northern Coalfields Limited for building quarters at the "Bina Project" and sought arbitration only for a dispute relating to that specific project. However, the arbitrator went beyond this scope and passed an award covering disputes relating to other, unrelated projects ("Amlohri" and "Jhingurda") and even involving the contractor's sister concerns, which were never part of the agreement referred to arbitration. The High Court quashed the arbitrator's entire award for exceeding jurisdiction, and the contractor appealed to the Supreme Court seeking at least the Bina Project portion of the award to be upheld.

Decision Breakdown

The Supreme Court agreed that the arbitrator had clearly exceeded his jurisdiction by deciding claims relating to contracts and parties beyond the Bina Project agreement that was actually referred to him, and upheld the quashing of the award to that extent. However, the Court held that the High Court erred in striking down the award in its entirety, including the portion genuinely relating to the Bina Project, which was within the arbitrator's jurisdiction. It therefore modified the High Court's order, confirming the arbitrator's award of Rs. 5,99,158 for the Bina Project claim while upholding the quashing of everything else, and directed that any excess amount already deposited by the respondent beyond this figure be refunded.

Lesson Learnt

An arbitrator's authority is strictly limited to the dispute actually referred for arbitration; an award exceeding that scope will be set aside only to the extent of the excess, while the part of the award genuinely within the arbitrator's mandate can still be upheld.

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

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