Haldia Development Authority   [petitioner]   Vs.  M/s. Konarak Enterprise  [respondent]

AP-COM No.229 of 2024

(Delivered by Sabyasachi Bhattacharyya, J.)

The Calcutta High Court has reaffirmed the authority of arbitral tribunals to correct computational errors under Section 33 of the Arbitration and Conciliation Act, 1996, even in the absence of a separate application from the parties. The ruling came in the case of Haldia Development Authority v. Konarak Enterprise, where Justice Bhattacharyya emphasized that tribunals can rectify such mistakes on their own initiative when necessary.

The dispute stemmed from a contract awarded by the Haldia Development Authority (HDA) to Konarak Enterprise for road construction and maintenance in Haldia. Disagreements arose over contract execution, leading to arbitration. The arbitral tribunal directed HDA to refund ₹9,06,091.44 to Konarak Enterprise, representing the contractor’s earnest money and security deposit. It also partially upheld HDA’s counterclaim, awarding ₹18,00,163 in risk and cost expenses. However, both parties were dissatisfied—HDA contested the refund and sought an increase in the risk and cost claim due to a calculation error, while Konarak Enterprise disputed the entire risk and cost claim.

A central issue was whether the tribunal had the authority to modify the risk and cost component without HDA filing a separate application. The Court rejected HDA’s argument that the refund was time-barred, highlighting inconsistencies in their position. Additionally, it dismissed HDA’s assertion that the work remained incomplete, pointing out that the contract had never been rescinded, completion certificates were issued, and payments were made accordingly. The Court ruled that Clause 3(a) of the contract, which allows forfeiture of security deposits, was inapplicable in this case.

Regarding HDA’s risk and cost claim, the Court upheld the tribunal’s decision, clarifying that the absence of a penalty did not invalidate the claim under Clause 3 of the contract. It also dismissed Konarak Enterprise’s objections concerning the nature of subsequent contract work and the timing of the tribunal’s award.

However, the Court found merit in HDA’s contention that the tribunal had miscalculated the cost of unfinished work, leading to an incorrect risk and cost assessment. Justice Bhattacharyya ruled that the tribunal’s refusal to correct this error was legally flawed. He emphasized that an arbitral tribunal has a duty to rectify evident calculation mistakes, especially when it has previously amended the award in response to an application under Section 33.

“The refusal of the Arbitral Tribunal to correct the award insofar as the risk and cost element of the award was concerned and to enhance the risk and cost compensation… is patently illegal and perverse, being contrary to its own corrected award and as such, amenable to being set aside under Section 34 of the 1996 Act.”

As a result, the Court ruled in favor of HDA concerning the correction of the risk and cost calculation while upholding the rest of the arbitral award. This decision reinforces the principle that arbitral tribunals have an inherent duty to ensure accuracy in their awards and may rectify calculation errors without requiring a formal request from the parties involved.