HC emphasises that if the arbitrator makes a mistake in contract construction, it is an error within his jurisdiction.

While setting aside the impugned award in the case of Delhi Development Authority vs M/S Watcon Water Specialists Pvt. Ltd. & Anr, Justice Vibhu Bakhru of the Delhi High Court stated that if the arbitrator makes an error in contract construction, it is an error within his jurisdiction.

DDA issued a Notice Inviting Tender ('NIT') to all eligible contractors for three projects ('the Projects'). The respondent ('WWS') submitted bids for implementing the Projects in accordance with the abovementioned NIT, which were accepted after negotiations, and DDA issued three separate Letters of Award ('LoA'). Following that, the parties executed the agreements. DDA agreed to compensate WWS for the service tax due/applicable under the terms of the agreements. The reimbursement, however, was conditional on the submission of proof of payment to the appropriate department. DDA was also compelled to pay WWS the charges for airlifting of equipment as specified in WWS' tender.

In the instant case titled DDA v. Watcon Water Specialists Pvt Ltd the two issues raised before the High Court of Delhi for clarification were:

Whether the Arbitral Tribunal's interpretation invalidates the contested award due to patent infringement
Whether airlifting charges a part of consideration?

With regard to the first issue, it was noticed that the question of contract interpretation falls within the competence of the Arbitral Tribunal, based on specific rulings about whether the Arbitral Tribunal's interpretation vitiates the impugned award on the premise of patent illegality. If the arbitrator makes a mistake in contract construction, that is a mistake within his jurisdiction. With the aforementioned criteria in mind, this Court was obligated to limit its investigation in these proceedings to determining whether the Arbitral Tribunal's position was perverse and one that no reasonable person could accept.

With regard to the second issue, Given that the airlifting charges were included in the evaluation of the bids, and WWS' price was judged to be the lowest, the airlifting charges were included as part of the agreed consideration. Payment was contingent on the production of the required documentation. 'Relevant documentation,' in this case, would be documents proving that the commodities were delivered by air. The Arbitral Tribunal further agreed that because the airlifting charges were included in the bills, it was not possible for WWS to individually mention them. The Court was unwilling to recognise that the Arbitral Tribunal's position was clearly incorrect. As a result, DDA's challenge to the contested award in relation to WWS's Claim nos. 3, 8, and 12 was likely to be dismissed.

The Court categorically held that

"The impugned award to the extent that it relates to WWS’s Claim no.7 and further pendente lite interests on interests awarded against Claim nos. 2, 4, 6, 7, 9, 11 and 13 is, accordingly, set aside. 42."

As a result, the Court dismissed the appellant's appeal.