The State of Jharkhand & Ors. v. M/S HSS Integrated SDN & Anr.
Background
The State of Jharkhand had engaged a consultancy consortium to supervise construction of the Ranchi Ring Road. After citing performance deficiencies, the State suspended payments and eventually terminated the contract. The consultants challenged the termination as illegal and claimed unpaid dues and losses through arbitration; the State filed a counter-claim for the consultants' alleged poor performance. The Arbitral Tribunal found the termination illegal and awarded the consultants about Rs. 2.1 crore (roughly 41% of their claim) while rejecting the State's counter-claim, and this award was upheld by both a trial court and the Jharkhand High Court.
Decision Breakdown
The Supreme Court dismissed the State's further appeal, reaffirming the well-settled, narrow scope of judicial review over arbitral awards: courts examining an award under Sections 34 and 37 of the Arbitration Act cannot re-assess evidence like an appellate court, and can interfere only if the arbitrator's findings are perverse, contrary to the evidence, or against public policy. Since the Tribunal had given detailed, evidence-based reasons (running to twenty paragraphs) for finding the termination illegal, and had carefully allowed some claims, partly allowed others, and disallowed the rest with a reasoned breakdown, the Court held these were legitimate findings of fact that three forums (Tribunal, trial court, High Court) had already concurrently upheld, leaving no basis for further interference.
Lesson Learnt
Once an arbitration award is based on a reasoned, evidence-backed view of the contract, courts will not re-open or second-guess that view merely because a party disagrees with it: an arbitrator's factual findings are treated as largely final unless they are perverse or violate public policy.