Case Name: SOMDATT BUILDERS – NCC-NEC (JV) VS. NATIONAL HIGHWAYS AUTHORITY OF INDIA & ORS.
Case Number: CIVIL APPEAL NO. 2058 OF 2012
Date: January 27 ,2025
Quorum: Hon’ble Justice Abhay s. Oka and Hon’ble Justice Ujjal Bhuyan
FACTS OF THE CASE
This case was due to a dispute that arose between the Somdatt builders and NHAI for the four laning and strengthening of NH-2 near Kanpur and Uttar Pradesh . The contract followed a unit rate contract model with a detailed bill of quantities (BOQ). The dispute arose regarding BOQ item no. 7.07, which related to the reinforced earth structure, including the soil –reinforcement geogrid , fixtures and accessories . and this increase is due to a miscalculation by NHAI at the tender stage , and not due to any design change or instruction from the engineer . The contract included the Dispute resolution process and after the penal inquiry the resolution was in the favour of the appellant , stating that since there was no design change the bitrate should apply on the extra quantity . After being dissatisfied by the Arbitral Tribunal order the same was challenged by the NHAI in the high court . A single judge bench was set up and affirmed the order of the arbitral tribunal . The same was challenged by the NHAI before the divisional bench of the High Court and the divisional bench reversed the earlier rulings .The order of the divisional bench was challenged in the Supreme Court of India .
ISSUE OF THE CASE
- Whether the Engineer has the power to revise the rates for the additional quantities of the Geogrid beyond the BOQ limits ?
- Whether the increase in the quantity constituted a variation under the contract , thereby allowing NHAI to renegotiate the price
LEGAL PROVISIONS
- Section 34 of Arbitration and Conciliation Act ,1996 , (ABC) Act – Application for setting aside an arbitral award
- Section 36 of ABC Act 1996 – Appeal against the order under section 34 of the Act .
ARGUMENTS
Arguments of the Appellant ( Somdatt Builders NCC NEC (JV)) :
The Appellant claimed that the increase in the geogrid quantity was due to NHAI’s miscalculation , not an instructed variation , and also stated that the BOQ rate shall apply because its a unit rate contract , and also stated that the arbitral tribunal and single judge bench ordered in the favour of the appellant and the divisional bench erred in interfering the under its limited jurisdiction under section 37 of the Arbitration Act.
Arguments of the Respondent (NHAI):
The respondent argued that the increased quantity of the geogrid constituted a variation under clause 51.1 of the agreement which gave the engineer power to revise the rates the arbitral tribunal misinterpreted the clause 51 & 52 resulting in the oppose of the award and the intervention of the divisional bench is fair and justified and arbitral award was contrary to the public policy.
ANALYSIS
The court acknowledged that DRB and arbitral tribunal comprises the experts and the increase in the geogrid quantity was an automatic increase due to incorrect BOQ estimated by the NHAI . And the engineer does not have the power to revise the rate under clause 52.2 since there was no instructed variation . The single judge bench upheld the award given by the arbitral tribunal under section 34 , but the divisional bench of the high court reversed the decision by complying with the discovery meaning of the Variation. And the decision of the high court divisional bench was reversed due to error in the literal interpretation of the word variation.
JUDGMENT
The court after analyzing all the matters and after hearing both the parties and the order of the Arbitral tribunal and single judge bench and the divisional judge bench reversed the decision of the divisional judge bench and upheld the decision of the arbitral tribunal and stated that the decision of the arbitral tribunal is plausible and shouldn’t have been interfered with and the limited scope under section 37 of the ABC Act does not allow the reevaluate the factual findings and limits the power of the High Court. And the decision was given in the favour of Somdatt Builders NCC NEC.
CONCLUSION
This judgment reinforces that Courts should not interfere with the arbitral award unless they are manifestly illegal and also uphold the limited jurisdiction of the court under section 34 and 37 of the Arbitration and Conciliation Act,1996 and also stated the tribunal findings were respected because it consists of the tribunal of the experts .
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WRITTEN BY PRINCE KUMAR
