Union Of INDIA vs. Swadeshi Civil Infrastructure PVT. LTD.

Held

The Court held that for Claim 1, the Arbitral Tribunal's interpretation of clause 2A, allowing bonus even when time was extended under clause 5.2, was justifiable and equitable. The Court reasoned that clause 5.2 deals with delays due to force majeure or other causes beyond the contractor's control, and the contractor was not seeking damages for such delays, only bonus for early completion. The Court found no patent illegality or illogical interpretation. For Claim 4, the Court held that the grant of interest for claim No. 2 was beyond the scope of arbitration as the claimant had not prayed for it. This portion of the award was found to be invalid and severable. For Claim 7, the Court found no requirement to interfere as the Tribunal directed reimbursement only where GST was payable and did not impose GST on amounts not liable. The Court noted that different claims might have different GST consequences, with compensation for breach of contract potentially falling outside GST. The petition was allowed in part, setting aside the award of interest for claim No. 2.

Facts

The Union of India (petitioner) filed a petition under Section 34 of the Arbitration & Conciliation Act, 1996, challenging an arbitral award dated June 12, 2025. The challenge was limited to claims numbered 1, 4, and 7. The dispute arose from an agreement dated July 30, 2018, concerning the construction of 76 multi-storied flats for Members of Parliament. The parties agreed to adjudicate claims based on pleadings and documents without oral evidence. Claim 1 concerned non-payment of bonus under clause 2A of the agreement. Claim 4 related to interest on awarded amounts. Claim 7 pertained to 18% GST on amounts to be released. The Arbitral Tribunal awarded Rs. 7,46,53,850/- under Claim 1.

Key Issues

1. Whether the Arbitral Tribunal erred in awarding bonus under Claim 1 by considering time extensions granted under clause 5.2 of the agreement, when clause 2A of the agreement stipulated bonus entitlement only for completion ahead of the stipulated date or justified extended date under clauses 5.3, 12, and 15? The petitioner argued that clause 2A did not contemplate extensions under clause 5.2, and the Tribunal rewrote contractual terms. The respondent contended that clause 2A did not prohibit bonus if time was extended under clause 5.2, and the Tribunal rightly considered contractual obligations. 2. Whether the Arbitral Tribunal erred in awarding interest under Claim 4 for claim No. 2, when the claimant had not sought interest for claim No. 2? The petitioner argued this was beyond the scope of arbitration. 3. Whether the Arbitral Tribunal erred in its directions regarding GST reimbursement under Claim 7, particularly concerning the applicability of GST on claims awarded as compensation for breach of contract? The petitioner argued no GST is payable on claims under Section 73 and 74 of the Indian Contract Act, 1872, and no reason was assigned for awarding 18% GST.