Somdatt Builders-NCC-NEC (JV) vs. National Highways Authority of India
Citation: 2025 INSC 113; Civil Appeal No. 2058 of 2012
Bench: Justice Abhay S. Oka, Justice Ujjal Bhuyan
Background
The dispute arose from a contract awarded by the National Highways Authority of India (NHAI) to Somdatt Builders-NCC-NEC (JV) for four-laning a section of National Highway-2 in Uttar Pradesh under World Bank assistance. During execution, the quantity of geogrid material used exceeded the estimate in the Bill of Quantities (BOQ). The central issue was whether this increase constituted a “variation” under contract Clauses 51 and 52, which would entitle the contractor to a revised rate for the additional quantity.
Dispute Resolution History
The matter was first referred to a Dispute Review Board (DRB), which found the increased geogrid quantity was not a “variation” as per Clause 51 and recommended payment at the original BOQ rate.
Dissatisfied, NHAI invoked arbitration. The Arbitral Tribunal, comprising technical experts, upheld the DRB’s view and ruled that the increased quantity did not trigger rate revision under Clause 52.
NHAI challenged the award under Section 34 of the Arbitration and Conciliation Act, 1996. The Single Judge of the Delhi High Court dismissed the challenge and upheld the award.
On appeal, a Division Bench of the High Court set aside the arbitral award, holding that any significant variation in quantity should lead to renegotiation of rates, thus reopening the merits of the contract interpretation.
Supreme Court’s Analysis
The Supreme Court emphasized the limited scope of judicial interference under Sections 34 and 37 of the Arbitration and Conciliation Act, 1996, especially concerning arbitral awards involving technical contract interpretation by expert tribunals.
The Court found that both the DRB and the Arbitral Tribunal had interpreted Clauses 51 and 52 in a plausible and reasonable manner, concluding that the increased geogrid quantity was an adjustment within the original scope and did not amount to a “variation” requiring a new rate.
The Division Bench’s interference was criticized as unjustified, as it amounted to a reappreciation of evidence and contract terms, which is impermissible under Section 37. Expressions like “public policy,” “patent illegality,” or “shocking the conscience” cannot be used as broad grounds to overturn well-reasoned arbitral awards.
The Supreme Court reaffirmed that courts must exercise “great restraint” and cannot substitute their own interpretation for that of the arbitral tribunal unless the award is perverse or contrary to the fundamental policy of Indian law.
Decision
The Supreme Court allowed the appeal, set aside the Division Bench’s judgment, and restored the arbitral award in favor of Somdatt Builders-NCC-NEC (JV). The Court reiterated that judicial review of arbitral awards must be minimal, particularly in technical disputes, and that contract interpretation by expert tribunals should ordinarily be respected.
Significance
This judgment reinforces the autonomy of arbitral tribunals in technical and contractual disputes, limits judicial intervention under Section 37 of the Arbitration Act, and upholds the finality of arbitral awards except in cases of manifest illegality or perversity. It sends a clear message to contracting parties and courts alike regarding the sanctity of the arbitral process and the need for judicial restraint in commercial arbitration matters.
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