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Arbitration

Facts of the case:

This case arose out of a challenge to an arbitral award rendered with regard to a dispute relating to supply of equipment for offshore oil exploration by the Respondent. The case was heard by M.B. Shah and Arun Kumar JJ. The judgment was written by Shah J.

The dispute arose out of the failure of the Respondent in supplying the said equipment as per schedule, due to labour problems in Europe. This led to the Applicant extending the time for delivery with the specific caveat that liquidated damages would be recovered. Liquidated damages to the extent of US $ 3,04,970.20 and Rs. 15,75,559 were later deducted from payments made for goods. The contract itself provided for recovery of a sum equivalent to 1% of the contract price of the whole unit per week for each delay as agreed liquidated damages and not by way of penalty. Such sum was to be deducted from the payment.

The Arbitral Tribunal concluded that the labour troubles would not be covered by the force majeure clause in the contract. However, it considered various decisions of the Hon'ble Supreme Court and concluded that the before the Appellant could recover liquidated damages it had to establish that it had suffered loss because of the breach. Upon appreciation of the evidence the Arbitral Tribunal concluded that such loss had not been proved and hence ordered payment, of the sum withheld as liquidated damages, to the he Respondent along with interest. This award was challenged before the Supreme Court as having been decided contrary to the terms of the contract and prima facie illegal.
Supreme Court’s Jurisdiction Controversy:
In the said appeal the main point in controversy, is the ambit and scope of SC’s jurisdiction in the case where award passed by the Arbitral Tribunal is challenged under Section 34 of the Arbitration and Conciliation Act, 1996 or whether the Court would have jurisdiction under Section 34 of the Act to set aside an award passed by the Arbitral Tribunal which...