BATLIBOI ENVIRONMENTAL ENGINEERS LIMITED versus HINDUSTAN PETROLEUM CORPORATION LIMITED AND ANOTHER

Citation: [2023] 12 S.C.R. 441 · Decided: 21-09-2023 · Supreme Court of India · Bench: SANJIV KHANNA · Disposal: Dismissed

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Judgment (excerpt)

[2023] 12 S.C.R. 441 : 2023 INSC 850
441
CASE DETAILS
BATLIBOI ENVIRONMENTAL ENGINEERS LIMITED
v.
HINDUSTAN PETROLEUM CORPORATION LIMITED AND 
ANOTHER
(Civil Appeal No. 1968 of 2012)
SEPTEMBER 21, 2023
[SANJIV KHANNA AND M.M. SUNDRESH, JJ.]
HEADNOTES
Issue for consideration: Whether the Division Bench of the High 
Court was justifi ed in allowing the appeal fi led by the respondents u/s. 37 
of the Arbitration and Conciliation Act, 1996, and thereby setting aside the 
arbitral award. 
Arbitration and Conciliation Act, 1996 – s. 37 – Arbitral award 
– Interference with – Award of turnkey contract to the appellant by 
the respondents for a contract value to be completed within stipulated 
period – Delay in project completion which was extended, and thereafter 
the appellant abandoned the work, only 80% of the work was completed 
– Matter proceeded for arbitration – Arbitral award dismissed the 
respondent’s claim for liquidated damages on the ground that the 
delay was caused by respondent’s omissions and commissions and its 
other claim also rejected since they related to future works – Appeal 
thereagainst allowed by the Division Bench setting aside the arbitral 
award – Justifi cation of:
Held: Computation depends upon attendant facts and circumstances 
and methods to compute damages – Determination of the quantum is a 
matter which would fall within the domain and decision of the arbitrator – 
However, the computation of damages should not be whimsical and absurd 
resulting in a windfall and bounty for one party at the expense of the other 
– Computation of damages should not be disingenuous – Damages should 
commensurate with the loss sustained – Arbitral tribunal gave a complete go 
442
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
by to the principles well in place, overlooked care and caution required and 
took a one-sided view, grossly and abnormally infl ated the damages – No 
justifi cation for computation of the loss is elucidated or can be expounded 
– Even if one were to rely upon the chart given by the appellant, and ignore 
the contradictions in fi ndings, the amount awarded is highly disproportionate 
and exorbitant – Patent fl aws and illegalities emanate from the award, 
like the manifest lack of reasoning in arriving at the conclusions and the 
calculation of amounts awarded, which, in fact, amount to double or part-
double payments, besides being contradictory – Thus, the award rightly held 
to be unsustainable and set aside by the Division Bench of the High Court 
exercising power and jurisdiction u/s. 37 rw s. 34. [Paras 15, 16, 27 and 45]
s. 34 – Post award interference – Scope and ambit of court’s power:
Held: Foundation of arbitration is party autonomy – Parties have the 
freedom to enter into an agreement to settle their disputes/claims by an arbitral 
tribunal, whose decision is binding on the parties – Court must exercise its 
powers when the award is unfair, arbitrary, perverse, or otherwise infi rm in 
law – While arbitration is a private form of dispute resolution, the conduct of 
arbitral proceedings must meet the juristic requirements of due process and 
procedural fairness and reasonableness, to achieve a ‘judicially’ sound and 
objective outcome – If these requirements, which are equally fundamental to all 
forms of adjudication including arbitration, are not suffi  ciently accommodated 
in the arbitral proceedings and the outcome is marred, then the award should 
invite intervention by the court. [Paras 31and 32]
Contract – Computation of damages – Method for – Usage 
of formulae such as Hudson’s, Emden’s, or Eichleay’s formulae to 
ascertain the loss of overheads and profi ts:
Held: Three formulae deal with theoretical mathematical equations, 
but are based on factual assumptions, and thus, can produce three diff erent 
and unrelated compensation/damages – Thus, while applying a particular 
equation or method, the assumptions should be examined, and the satisfaction 
of the assumption(s) ascertained in the facts and circumstances – Hudson’s 
formula like other formulae, which are only rough approximations of the 
cost impact of unabsorbed overhead, should be applied with great care and 
caution to ensure fair and just computation. s. 34 – Public policy test to 
443
an arbitral award - Expression ‘public policy’ u/s. 34 – Interpretation of – 
Elucidated. [Para 21, 25, and 38]
LIST OF CITATIONS AND OTHER REFERENCES
McDermott International Inc. v. Burn Standard Company Limited and 
Others (2006) 11 SCC

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