The Tripura High Court has reaffirmed the limited judicial intervention permitted in arbitral proceedings, holding that an arbitral award cannot be set aside merely because key documents are lost from the reconstructed record or because the Commercial Court disagrees with the arbitrator’s factual findings. This judgment reinforces the pro-arbitration stance of Indian law and clarifies the boundaries of judicial review under Section 34 of the Arbitration and Conciliation Act, 1996.
Background & Facts
The Dispute
The dispute arose from a construction contract for the Kailashahar District Jail in Unakoti District, Tripura. The appellant, a private contractor, was awarded the contract following a tender issued by the Public Works Department (PWD) of the State of Tripura on 27.12.2013. An agreement was executed in 2014 for the execution of the works. Disputes emerged on 28.05.2019 regarding payment claims, delay, and contract termination, prompting the appellant to invoke arbitration.
Key Facts
- Contract commencement date: 20.06.2014
- Original completion date: 19.06.2016
- Contract extended by respondents up to 30.09.2018
- Contract rescinded by respondents on 31.01.2019
- Sole Arbitrator appointed on 18.06.2019; reference registered as ARB/SRB/2019(2)
- Arbitral Award dated 17.06.2020 partially in favor of the appellant
- Respondents filed Section 34 application on 24.09.2020 challenging the award
- Commercial Court dismissed Section 34 application on 16.03.2022
- Respondents appealed to Tripura High Court under Section 37(1)(c) of the Act
- High Court, by judgment dated 31.01.2024, allowed the appeal and remanded the matter to the Commercial Court for reconsideration of specific grounds, including Clause 44 of the agreement and payment for Issue No.2
- On remand, the Commercial Court, by judgment dated 31.08.2024, set aside the entire arbitral award
- Appellant filed the present Commercial Appeal No.03 of 2024 challenging the 31.08.2024 judgment
Procedural History
- 27.12.2013: Notice Inviting Tender issued by PWD, Tripura
- 2014: Contract executed between appellant and respondents
- 28.05.2019: Disputes arose; request made for appointment of Arbitrator
- 18.06.2019: Sole Arbitrator appointed and reference registered
- 17.06.2020: Arbitral Award issued - partially in favor of appellant
- 24.09.2020: Respondents filed Section 34 application before Commercial Court (T.S. 04(Arb)/2020)
- 16.03.2022: Commercial Court dismissed Section 34 application
- 2022: Respondents filed Arbitration Appeal No.07 of 2022 before Tripura High Court
- 31.01.2024: High Court allowed Appeal No.07 of 2022, remanded matter to Commercial Court with directions to reconsider Clause 44 and Issue No.2
- 31.08.2024: Commercial Court set aside entire arbitral award
- 01.04.2026: Tripura High Court delivered judgment in Commercial Appeal No.03 of 2024
The Parties' Positions
Appellant (Contractor): Argued that the Arbitrator’s award was based on evidence duly presented, including Annexure R-2 (admitting liability of Rs.39,66,805) and Hindrance Register. Contended that the Commercial Court erred in setting aside the award due to loss of documents during reconstruction, which was not attributable to either party. Asserted that the Arbitrator’s findings on delay, price escalation, and contract rescission were reasonable and within the bounds of the agreement.
Respondents (State of Tripura): Argued that the Arbitrator’s award was flawed due to non-consideration of Clause 44, lack of evidence on price escalation, and incorrect attribution of delay. Claimed that key documents (Annexure R-2, Hindrance Register, design change records) were missing from the reconstructed record before the Commercial Court, rendering the award unsustainable.
Relief Sought
The appellant sought: (1) setting aside of the Commercial Court’s judgment dated 31.08.2024; (2) restoration of the Arbitral Award dated 17.06.2020; (3) payment of Rs.39,66,805 as admitted outstanding balance; (4) payment of price escalation of Rs.1,37,99,630; (5) compensation for loss of expected profit of Rs.34,24,048; and (6) costs.
The Legal Issue
The central question was whether a Commercial Court, under Section 34 of the Arbitration and Conciliation Act, 1996, may set aside an arbitral award on the ground that key documents relied upon by the arbitrator are missing from the reconstructed record, and whether it may re-appreciate evidence or substitute its own view on factual disputes, even when the arbitrator’s findings are plausible.
Arguments Presented
For the Appellant
The appellant relied on Somdatt Builders-NCC-NEC (JV) v. NHAI and Ssangyong Engineering v. NHAI to argue that courts cannot interfere with arbitral awards merely because they disagree with the arbitrator’s factual conclusions. It emphasized that the loss of documents during reconstruction, absent fault by either party, cannot be used to invalidate the award. The appellant contended that Annexure R-2 was presented before the Arbitrator, accepted by him, and its absence from the reconstructed record could not be held against the appellant. It further argued that the Arbitrator’s findings on delay, contract rescission, and price escalation were based on documentary evidence and could not be termed as perverse or contrary to public policy.
For the Respondent
The respondents argued that the Commercial Court was justified in setting aside the award because critical documents - including Annexure R-2, Hindrance Register, and design change records - were not available in the reconstructed record before it. They contended that without these documents, the Arbitrator’s findings lacked evidentiary basis and that the award was therefore contrary to the fundamental policy of Indian law under Section 34(2)(b)(ii). They also asserted that the Arbitrator failed to properly consider Clause 44 of the agreement on price escalation.
The Court's Analysis
The Tripura High Court undertook a meticulous review of the Commercial Court’s reasoning and found multiple errors in law. The Court emphasized that Section 34 does not permit a court to act as an appellate forum over the merits of the dispute. As held in Somdatt Builders, courts may interfere only if the award is against public policy, patently illegal, or perverse - not because the court would have decided differently.
"Merely because the respondents did not submit the said Annexure-R/2 before the Commercial Court or merely because it was not found in the reconstructed record, it is not permissible for the Commercial Court to interfere with the relief granted by the Arbitrator to the appellant."
The Court held that the loss of Annexure R-2 - which contained the respondents’ own admission of liability for Rs.39,66,805 - could not be used to nullify the Arbitrator’s award. The document was before the Arbitrator, relied upon in the award, and its subsequent loss was not attributable to the appellant. The Court invoked the principle from Ram Khelwan v. Dy.Director of Consolidation that reconstruction of records must not prejudice a party who had the benefit of the original evidence.
Regarding Issue No.8 (contract rescission and delay), the Arbitrator had meticulously analyzed the Hindrance Register, correspondence, and design change records to conclude that 80% of the delay was attributable to the respondents. The Commercial Court, despite acknowledging that the contract had expired on 30.09.2018, overturned this finding solely because the documents were missing from the reconstructed record. The High Court held this to be a clear error: "The loss of original record cannot be put by the respondents as a point in their favour to doubt the Arbitrator's integrity."
The Court further observed that the Commercial Court’s reliance on its erroneous finding on Issue No.8 to set aside the award on Issues No.7 (price escalation) and No.9 (loss of profit) was legally unsustainable. The Arbitrator’s conclusion on price escalation was directly linked to his finding on delay - a finding that was well-supported and not perverse.
The Court also rejected the Commercial Court’s attempt to re-appreciate evidence on Issue No.2, 3, and 4, where the Arbitrator had already ruled against the appellant. The Court held that the Commercial Court had no jurisdiction to intervene in claims that were not challenged by the appellant and where the respondents had already succeeded before the Arbitrator.
The Verdict
The appeal is allowed. The judgment of the Commercial Court dated 31.08.2024 is set aside. The Arbitral Award dated 17.06.2020 is upheld in its entirety. The respondents are directed to pay the appellant: (1) Rs.39,66,805 as admitted outstanding balance; (2) Rs.1,37,99,630 as price escalation; (3) Rs.34,24,048 as loss of expected profit; and (4) costs of Rs.50,000. All pending applications are disposed of. Payment shall be made within 8 weeks from the date of this judgment.
What This Means For Similar Cases
Lost Documents Cannot Invalidate Arbitral Awards
- Practitioners must argue that if documents were presented to and relied upon by the arbitrator, their subsequent loss during record reconstruction cannot be grounds to set aside the award.
- Courts must presume the existence and consideration of such documents unless there is evidence of fraud or bad faith by the party relying on them.
No Re-Appreciation of Evidence Under Section 34
- Commercial Courts must not substitute their own factual findings for those of the arbitrator, even if they believe the arbitrator erred.
- A plausible view based on evidence - even if debatable - is sufficient to uphold the award.
Section 34 Grounds Are Exhaustive and Narrow
-
Parties cannot use Section 34 to re-litigate claims already decided against them by the arbitrator.
-
Courts must confine review to the five grounds under Section 34(2) and must not expand them through judicial creativity.
-
Always preserve original documents submitted to arbitrators; if lost, file an affidavit explaining the circumstances.
-
In Section 34 applications, focus on patent illegality or public policy - not factual disagreements.
-
When appealing a Section 34 order under Section 37, remember: appellate courts cannot go beyond the scope of Section 34.
