LexINDU ENGINEERING AND TEXTILES LTD versus DELHI DEVELOPMENT AUTHORITY
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A INDU ENGINEERING AND TEXTILES LTD. II. DELHI DEVELOPMENT AUTHORITY JULY 11, 2001 B [A.P. MISRA AND D.P. MOHAPATRA, JJ.] Arbitration Act, 1940 Section 30-Arbitration-Award-lnte1ference by Court-Permissibility C of-Contract to supply hard-coke-Price escalation clause in agreement- Subsequent denial of enhanced rate-Dispute-Arbitration-Award entitling enhanced price-Award made Rule of Court-On appeal, Division Bench of High Court setting aside the Award-Validity of-Held, Award of arbitrator was a plausible one-Does not suffer from any manifest en·or or wholly . D improbable or perverse-Thus, High Court was not justified in setting aside the award. Arbitration Award on facts-/nteiference by Court-Permissibility of- Held, even if erroneous cannot be interfered with. /. E Respondent-Development Authority floated a tender for supply of iiard- F coke. In response, appellant offered to supply the material and the offer letter contained a price escalation clause stipulating that any escalation in price after submission of the tender will entitle the supplier to claim higher price. Subsequently the price escalation clause was modified to the effect that escalation would be payable when there was statutory enhancement in the price of the commodity. However, on submission of bills respondent denied its liability to pay enhanced price for hard-coke. Thus a dispute arose between the parties which was referred to a sole Arbitrator who passed an award accepting the claim of appellant. Single Judge of High Court made the award Rule of Court. However, on appeal, Division Bench of High Court set aside G the award holding that the Arbitrator had no material evidence before it to allow the claim and the price escalation clause agreed had only prospective application. Hence the present appeal. H Allowing the appeal, the Court HELD: i:t. Division Bench of the High Court erred in setting "aside the 916 • .· ·~ INDU ENGINEERING v. D.D.A. 917 award passed by the arbitrator which was made rule of the court by the single A Judge. (924-E) 1.2. An Arbitrator is a Judge appointed by parties and as such the award passed by him is not to be lightly interfered with. The scope for interference by the court with an award passed by the Arbitrator is limited. An arbitration award can be interfered with if it is (i) violative of principles of natural B justice; (ii) there is error apparent on the face of the award; (iii) that the Arbitrator has ignored or deliberately violated a clause in the agreement prohibiting dispute of the nature entertained; (iv) that the award on the face of it is based on a proposition of law which is erroneous, etc. (921-D) 1.3. In the instant case, the only question that arose for consideration C was whether the appellant was entitled to claim the enhanced price of hard coke supplied by it to the respondent. Under the contract a specific quantity of fh:e material was to be supplied during the period fixed under the agreement. Right from the beginning while submitting the tender the appellant had included a price escalation clause in which it was stipulated that any escalation D of the price after submission of the tender will entitle the supplier to claim higher price from the other party. This clause was subsequently revised only to the effect hat the price escalation will be applicable when there is statutory enhancement in the price of the commodity. No dispute was raised before the Arbitrator or the court that the escalated price claimed by the appellant was not the statutorily enhanced price of hard coke. The view taken by the E Arbitrator, in the circumstances of the case, was a plausible one and the same could not be said to be suffering from any manifest error on the face of the award or wholly improbable or perverse one. Thus, it was not open to the court to interfere with the award within the statutory limitation laid down in Section 30 of the Act. So also High Court was not justified in holding that the price p escalation clause in the agreement had prospective operation. [923-C-F] U.P. Hotels and Others v. UP. State Electricity Board, (1989) 1 SCC 359, relied on. 2. The Division Bench exceeded its jurisdiction in entering into the G facts of the case by interpreting the agreement and correspondence between the parties. What was the price of the commodity to be paid by the respondent to the appellant was essentially a question of fact. Even ass
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