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Court Partly Sets Aside Arbitral Award, Orders Re-adjudication of Disputed Sums
Court Partly Sets Aside Arbitral Award, Orders Re-adjudication of Disputed Sums
This case is an appeal involving Power Grid Corporation of India Ltd. and T&T Projects Limited over an arbitral award related to contract payments and a bank guarantee. The High Court found a clear error in the arbitrator’s decision regarding the bank guarantee and ordered that part of the award to be set aside. For other disputed amounts, the court directed payment of admitted sums and sent the remaining disputes back to the arbitrator for fresh consideration. The judgment aims to balance fairness and procedural correctness, ensuring only undisputed amounts are paid immediately while disputed sums are properly re-examined.
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Case Name
Power Grid Corporation of India Ltd. vs. T&T Projects Limited (High Court of Meghalaya at Shillong)
Arb.A.No.2/2024
Date: 23rd April 2025
Key Takeaways
- Patent Illegality Corrected: The court set aside the arbitrator’s award regarding a bank guarantee, as it was based on a clear factual error.
- Admitted Sums to be Paid: The court ordered immediate payment of amounts both parties agreed upon.
- Disputed Sums Remanded: Disputed amounts are to be reconsidered by the arbitrator, not by the court.
- Execution Process Outlined: The court provided a clear process for depositing and disbursing funds related to the award.
- Balanced Approach: The judgment ensures fairness by not enforcing awards based on mistakes or unresolved disputes.
Issue
Did the arbitral award contain errors or unresolved disputes that required the court’s intervention, and if so, how should those be addressed?
Facts
- Parties: Power Grid Corporation of India Ltd. (a government undertaking) and T&T Projects Limited (a private company).
- Dispute: The dispute arose from a contract, leading to arbitration over several claims, including withheld payments and a bank guarantee.
- Arbitral Award: The arbitrator awarded certain sums to T&T Projects, including the value of a bank guarantee and amounts allegedly deducted from contract bills.
- Appeal: Power Grid challenged the award, arguing factual errors and disputing the amounts awarded.
Arguments
Power Grid Corporation (Appellant)
- Bank Guarantee: The bank guarantee was never encashed and was returned after expiry; awarding its value was a mistake.
- Withheld Amounts: Only a certain amount was actually withheld, less than what the arbitrator awarded.
- Willingness to Pay Admitted Sums: The appellant agreed to pay the amounts it admitted were due.
T&T Projects Limited (Respondent)
- Awarded Sums Correct: Maintained that the amounts awarded by the arbitrator were correct.
- No Error in Award: Initially defended the award but later admitted the bank guarantee issue was a mistake.
Key Legal Precedents
Note: The judgment, as provided, does not explicitly cite any previous case law or specific statutory sections/rules. The court’s reasoning is based on general principles of arbitration law, particularly the concept of “patent illegality” (a clear and obvious error on the face of the award) and the court’s power to set aside or remit parts of an arbitral award for re-adjudication. If any specific case names or statutory references were mentioned, they are not included in the provided text.
Judgement
- Bank Guarantee (Claim No. 10): The court found the arbitrator made a clear factual error by awarding the value of a bank guarantee that was never encashed and had been returned. This part of the award was set aside as a “patent illegality”.
- Withheld Amounts (Claims No. 2 & 4): The court ordered Power Grid to pay the admitted amounts (₹22,60,174 and ₹31,17,364) within four weeks. The disputed balances (₹33,50,845 - ₹22,60,174 and ₹47,39,450 - ₹31,17,364) were sent back to the arbitrator for fresh decision.
- Execution of Award: The court outlined a process for depositing ₹95 lakhs with the Registrar General, to be managed by joint special officers (the parties’ lawyers), and used to satisfy the award as upheld. Any balance is to be refunded to Power Grid. Separate execution proceedings may be taken for any supplementary award made after remand.
FAQs
Q1: Why was the bank guarantee claim set aside?
A: Because the arbitrator mistakenly awarded its value even though the guarantee was never encashed and had already been returned. Both parties agreed this was an error.
Q2: What happens to the disputed amounts?
A: The court ordered that only the admitted sums be paid now. The remaining disputed amounts are to be reconsidered by the arbitrator, who must issue a supplementary award within six months.
Q3: How will the payments be managed?
A: ₹95 lakhs will be deposited in a joint account managed by the parties’ lawyers, to be used to pay the amounts upheld by the court. Any leftover funds will be returned to Power Grid.
Q4: What does “patent illegality” mean?
A: It refers to a clear and obvious error in the arbitral award, such as a factual mistake that is apparent on the face of the record.
Q5: Can the court change the amounts awarded by the arbitrator?
A: The court cannot rewrite the award or decide the correct amounts itself. It can only set aside or remit parts of the award for the arbitrator to reconsider.
